Visiting a physical store and paying cash for goods is no longer the only way to engage in business in today’s modern world. Customers may now shop the market online from the comfort of their own homes, examine a variety of offers, read customer reviews, buy products, and make payments online.
On the internet, buyers do transactions totaling billions of dollars each day, 24 hours a day, seven days a week.
The business world has moved online through eCommerce, and the internet is now considered the fourth mainstream medium, following television, radio, and print.
What is eCommerce?
Definition: eCommerce is buying and selling over the internet or performing any transaction, such as transferring ownership, rights, or services through a computer network without using paper documents.
The “e” before the hyphen in eCommerce means “electronic.” The proliferation of online businesses is due to the internet. The term “eCommerce” refers to online business between companies and individuals. These deals might come about in a variety of different ways, such as:
- Buying a wristwatch over Amazon.com. All transactions and payments are completed online, and the item is delivered to the mailing address. The same goes for other retail outlets like Shopify, eBay, Jumia, etc.
- A seller has posted an ad on a website like cars.com to sell the car. Prospective buyers view the details and purchase the vehicle.
- A project professional needs training in project management; they visit a site like pmsprout.com and enroll in an online course. After payment, the buyer gets access immediately and completes the training as per their suitability.
These and some use cases of eCommerce.
Transactions of thousands upon thousands every minute are carried out over the internet. According to Valuate’s report, the global eCommerce business is worth USD 7,750,530 Million in 2022 and is expected to grow to USD 20,313,450 Million by 2028 with a Compound Annual Growth Rate (CAGR) of 17%.
History of eCommerce
The early concept of eCommerce was to facilitate the exchange of business documents, such as purchase orders, invoices, etc., electronically using technologies such as EDI (Electronic Data Interchange) and EFT (Electronic Funds Transfer) in the early seventies.
CompuServe was an innovator in the field of online services by combining networking and time-sharing technologies in 1969. They also pioneered the first e-newspaper and airline listings. Later on, in the year 1979, Michael Aldrich developed the concept of online buying by establishing connections through the use of telephone lines.
This was followed by the Boston Computer Exchange, which is recognized as the first online marketplace where individuals visit to sell their used computers, and it was successful on a commercial scale. After beginning as an online bookstore in 1995 and eventually expanding into selling other products, Amazon is now the company with the second-greatest market share in the eCommerce sector, behind only Alibaba.
Types of eCommerce
The four eCommerce models are as follows:
#1. Consumer-to-Consumer
On the site, users sell their previously owned items to other users of various online mediums. A prominent example is eBay, the first online auction service to support transactions between individual users. For instance, if a vendor has an antique artifact that he is looking to unload, he could list it for sale on eBay. Another customer who requires the product does so, buys it, and completes the transaction online.
The seller gets the payment, the buyer gets the product, and eBay earns the commission.
#2. Consumer-to-Business
In this scenario, a customer takes goods to businesses, which then incorporate them into their production processes as inputs to create a final product. An online freelancer who reviews content for websites and gets paid for this service is a typical example. This model is the reverse of business to consumer.
Fiver, Upwork, etc., are examples of this model.
#3. Business-to-Consumer
This is the most common form of eCommerce.
eCommerce gained popularity through this model as individuals shop online and share the experience with peers to encourage them to do the same. Amazon, Apple, CompuServe, Boston Computer Exchange, etc., are a few examples of this model.
In this model, the company avoids the need for intermediaries by selling its products and services directly to end users. Because the website serves as the marketplace, it must be well-designed and packed with alluring features that encourage customers to engage with the various goods and services being promoted. Amazon has utilized data analytics and artificial intelligence to research and forecast the behavior of their customers, allowing them to get one step ahead of them. This demonstrates ongoing progress and a very novel approach.
Such sites provide easier ways of getting buyers to browse products and hassle-free transactions.
#4. Business-to-Business
This is a transaction between companies rather than between companies and individuals. This framework allows companies to establish robust partnerships with their many partners, including suppliers, service providers, distributors, resellers, and so on.
Oracle is a good example of this model. Oracle provides software services to corporates through various enterprise packages such as Oracle Human Resources, Oracle Supply Chain, Oracle Financials, etc. Banks, hospitals, and shopping outlets all use these applications.
The relationship is between businesses.
Examples of eCommerce
Depending on the transaction types, eCommerce can have many forms. Some examples of eCommerce are as follows:
- Retail: This is a B2C model, and a business directly sells to the consumer.
- Wholesale: This is a B2B model where a manufacturer can sell to the distributor or wholesaler, who then sells to the end user.
- Subscription: This is mostly used for the service sector. For example, a website owner subscribes to a web hosting plan.
- Digital Product: This includes selling digital products such as eBooks or software.
Pros of eCommerce
eCommerce is an innovative way of trading, and its benefits are huge. Some benefits of eCommerce are:
- International Trade: It promotes international trade as the internet breaks geographical barriers leading to the globalization of business.
- Cost Reduction: eCommerce innovation offers lower costs due to reduced paperwork, staffing, maintenance of hardware, warehousing space (due to just-in-time delivery), travel, etc. This makes products available to consumers at competitive prices and increases profit for providers.
- Accessibility: Goods and services are accessible globally. The rural population can enjoy online products and services. The 24×7 nature of the internet means customers can make purchases at any time.
- Quality Service Delivery: eCommerce offers a real-time avenue for feedback which achieves better performance by providers and good guidance for intending customers.
- Varieties: Consumers can make informed decisions by comparing and selecting cheaper and better offers. This can be done through a Google search or just a question in online communities. In other words, a market survey is easier.
Cons of eCommerce
A few shortcomings of eCommerce are as follows:
- If the eCommerce platform is not secure, consumer data can be compromised.
- Some users don’t trust sellers unless they see the product physically.
- The absence of touch or feel discourages customers, especially when dealing with groceries.
- Internet connectivity may be a challenge for people in remote and rural locations.
- Sometimes the payment gateway may fail.
Alibaba tried to solve the mistrust issue in its early days in China by inventing Ali Pay, an escrow account where buyers’ money is secured. AliPay will provide a refund to customers who have been scammed or tricked into making a purchase. Ali Pay established partnerships with Chinese banks and carried out the certification process for sellers. This accomplishment demonstrates how a new company can go above and beyond to ease the concerns of its customers.
Conclusion
It is anticipated that there will be an increase in the percentage of people who have access to the internet and disposable incomes. As a result, the eCommerce business is on a constant growth trajectory, and having an online presence is quickly becoming a prerequisite in the modern digital world rather than an elective choice.