Electronic commerce, or e-commerce for short, is the term used to describe the exchange of products, services, money, or data using electronic networks, mostly the internet. Business-to-business (B2B), business-to-consumer (B2C), consumer-to-consumer (C2C), and consumer-to-business (C2B)are the four primary transactional categories that are covered by this.
The terms “e-tail” are often used in reference to the transactional features of online retail buying, however “e-business” and “e-commerce” are often used similarly.
The growth of e-commerce giants such as Amazon and eBay has propelled substantial expansion in the online retail sector throughout the last twenty years. The U.S. Census Bureau reports that e-commerce made up 5% of all retail sales in 2011. But after the COVID-19 epidemic hit in the second quarter of 2020, e-commerce took off and now accounts for 16.5% of retail sales. Since actual stores have reopened, this percentage has somewhat decreased to about 15%.
How does e-commerce work step by step
Customers use their own devices to access online businesses, explore products, and place orders in e-commerce, which is dependent on the internet.
The customer’s web browser communicates with the server hosting the e-commerce website to place an order. An order manager, a centralized computer, receives order-related data. Subsequently, the information is routed to many databases that oversee inventory levels, payment processing software (such as Google pay), and bank computers to ensure sufficient supplies and funds.
The order manager alerts the store’s web server and displays a message to the customer confirming the order after it has been validated. The product or service is then prepared for customer dispatch when the order manager forwards the order data to the fulfillment or warehousing department. Ultimately, the customer receives physical things or digital products, or is given access to services.
Online stores such as Amazon, Flipkart software as a service (SaaS) tools for renting online shop infrastructures, and open-source tools run by businesses using developers directly are examples of e-commerce platforms.
The Growth of Ecommerce
Because to the development of the internet and advancements in technology, e-commerce has experienced an important surge in growth in the last few decades. Online shopping is experiencing rapid development as more people accept it for its ease, accessibility, and wide range of product choices.
Global e-commerce sales are expected to reach $4.2 trillion in 2020, according to recent estimates, and this amount will continue to rise in the near future. E-commerce has grown faster due to the increasing popularity of online marketplaces and the growing number of mobile devices, highlighting its importance in today’s retail and commerce environments.
The Different Types of Ecommerce
The main categories of e-commerce business models comprise different exchanges among enterprises, customers, and occasionally governmental entities:
B2B – Business-to-business, or B2B, refers to the online transfer of goods, services, or data between companies. Online directories and exchange platforms that facilitate business transactions are two examples.
B2C – Business-to-Consumer, or B2C, refers to the method of companies selling goods, services, or information to customers directly. Intermediaries managing customer service and logistics are frequently included in this arrangement. Today, this industry is dominated by internet retailers like Amazon, who gained popularity during the dot-com boom.
D2C – Direct-to-Consumer, or D2C, refers to companies who develop or manufacture things and sell them online to customers directly. Traditional retail channels are circumvented by this concept.
C2C – (Consumer-to-Consumer): Using third-party platforms, consumers exchange goods, services, or information with one another online. Online auctions and classified ads on sites like Craigslist and eBay are two examples.
C2B (Consumer-to-Business): Online, consumers sell goods and services to businesses who then place bids and make purchases. This model goes against the conventional B2C strategy. Marketplaces for independent contractors and online stores for digital asset sales are two examples.
B2A Business-to-administration -, or B2A, refers to internet transactions between businesses and government agencies or public administration. Companies give government agencies e-services or products, like fiscal data or legal documents.
C2A consumer-to-administration – Online transactions involving citizens and government agencies are included in the term “consumer-to-administration,” or C2A. Governments do not usually purchase goods from private citizens, but they do frequently utilize electronic means to access government services or file taxes.
Advantages of e-commerce
E-commerce benefits companies, customers, and society at large in a number of ways.
Global Market access: Without need for physical stores, e-commerce allows enterprises to access a global audience. For instance, a little, rural jewelry maker can reach a global consumer base by opening an online store on sites like Etsy or Shopify and selling their one-of-a-kind items.
Cost-effectiveness: Compared to traditional physical shops, e-commerce has lower operating costs. For example, compared to traditional retail chains, online-only shops like Amazon may offer competitive rates because their overhead costs—such as rent and utilities—are lower.
Accessibility: People with limitations in mobility can now shop through e-commerce. To ensure accessibility and equal access to goods and services, visually impaired people can purchase online with the help of text readers and other assistive technologies.
Flexibility and Scalability: Businesses can quickly scale their activities and adjust to the needs of a changing market through e-commerce. Shopify, an e-commerce platform that provides flexible solutions and adjustable pricing options for businesses of all kinds, from startups to multinational enterprises, is a great example.
Simplified Inventory Management: By integrating inventory management systems, e-commerce platforms help businesses avoid stockouts and overstocking by allowing them to track stock levels in real-time. For instance, the WordPress plugin WooCommerce has inventory management capabilities that seamlessly connect stock levels with product listings.
Disadvantages of e-commerce
Limited Customer Service: E-commerce websites could provide a limited number of customer service choices, compared to conventional shops where customers can speak with staff members directly. Online service alternatives may be difficult to use or unable to answer some questions, and support may only be available during particular hours.
Limited Product Experience: Because online buyers do not get the chance to physically handle things before making a purchase, there could be mismatches between what they expect and what they actually get. For instance, it is impossible to recreate online the process of evaluating the picture quality of a television or trying on clothes. This may lead to returns and extra expenses for the client, including return shipping charges.
Wait Time for Delivery: Online shoppers have to wait for their things to be shipped, as compared to buying from a physical store where they may pick them up right away. Compared to in-store purchases, which offer instant pleasure, shipping still takes patience, even though next-day and same-day delivery choices are increasing and decreasing shipping durations.
Security Risks: Sharing private and sensitive financial information online during e-commerce transactions raises security concerns. Hackers might attack authentic e-commerce sites to steal credit card information or develop phony websites to trick customers. Conveniently storing credit card information with shops comes with hazards as well. Credit card information can be stolen due to data breaches, which can harm the reputation of the retailer.