Before going into the details of e-Commerce, let’s answer the most basic question.
E-Commerce or electronic commerce is a business platform that involves online transactions through the Internet. Businesses or stores that sell their products on an online platform are known as e-Commerce.
For example, Amazon, Walmart, and IKEA, all of these are e-Commerce companies that sell numerous products online worldwide.
In this blog, we will tell you about the history of e-commerce, e-commerce statistics, popular e-commerce sites, and much more.
Difference between e-commerce and e-business
People often get confused between e-commerce and e-business but both of them are poles apart.
E-commerce includes a direct transaction between the seller and the buyer whereas e-business is a broader idea which covers many aspects like, inbound marketing, sales promotions, stock control, SEO, e-mail marketing, etc.
History of e-commerce
The ARPANET is used to arrange a sale between students at the Stanford Artificial Intelligence Laboratory and the Massachusetts Institute of Technology.
On 14 August 1994, Phil Brandenberger of Philadelphia did the first ever online transaction using his credit card to buy Sting’s “Ten Summoners’ Tales” for $12.48 plus shipping.
In 1994 only, Jeff Bezos founded Amazon, one of the biggest e-commerce today. However, the store was launched to sell books online and, later it emerged as an online store to buy almost anything.
The emergence of PayPal in December 1998 brought revolution in the field of online payment. The histogram below shows that by the end of the third quarter of 2018, there were 254 million accounts active worldwide, representing a 15% year-on-year growth.
• The retail sector e-commerce sales are expected to reach up to $27 trillion by the year 2020, which makes it the most profitable industry.
• Women tend to spend more money than men in online shopping. For every 10$ spent online, women spend 6$ while men spend only 4$.
• The US expects to have 224 million online shoppers by 2019! Well, that is a huge target audience, which means high profits and that is why you must know the pros and cons of e-commerce.
• Mobile shopping hit $2 billion on Cyber Monday while U.S. shoppers spent $5 billion online during 2017’s Black Friday.
• Amazon accounted for 44% of all U.S. e-commerce sales in 2018.
• Around 96% of Americans have made an online purchase in their life, 80% in the past month alone.
Now you know that E-commerce statistics provide important insights that you can use to manage your e-commerce marketing strategies.
Types of e-commerce merchants
You can categorise the e-commerce industry into three classes:
1. The products they sell or the services that they offer:
• Websites that sell physical goods:
These are the retailers that sell their products online through a website. It can include everything from as small as a needle to as large as a washing machine!
They sell Clothes, Accessories, Grocery, Home Decor Essentials, Gifts, and packed food items.
You can then add things in your virtual cart and pay for them through online transactions such as Credit Card, Debit Card, PayPal, and Internet Banking.
However, some of these dealers even allow Cash on Delivery services. Yes, we are talking about your favourite Amazon, Walmart, IKEA, e-bay, Alibaba, The Fone Stuff etc.
• Services based retailers:
Today, you can even sell and buy services online. Online tutors, astrologers, psychologist, and freelancers are the most common service providers. On some of these websites, you can avail services directly and pay accordingly after the work is complete.
Few of the sites that deliver such services are Upwork, Fiverr, and Freelancer. You can work as a freelancer on these websites or you can even hire people to work for you.
• Digital Products:
Digitalisation and Electronic commerce go hand-in-hand quite understandably. There are a few traders who sell and buy virtual products such as e-books, logos, graphic designs, online courses, and software. Examples of merchants dealing with this kind of business include Shutterstock (for photos), Amazon Kindle (to read e-books), and many more.
2. The parties that they do business with:
Figure 1: B2C e-commerce
• Business to Consumer (B2C):
These types of sales include direct selling of goods to the customers or the end-users. If you own an online store, you will sell your products to people rather than to businesses.
Examples of B2C industries include Walmart and IKEA.
Figure 2: B2B e-commerce
• Business to Business (B2B):
The industries that sell to each other fall under this category. Say, a shopkeeper when sells something offline, he buys it from a wholesaler at much lower prices. This particular trade between the wholesaler and the shopkeeper is B2B.
We have a similar transaction online also. Alibaba, one of the largest e-commerce, sells its goods at wholesale prices to small businesses.
Figure 3: C2B e-commerce
• Consumer to Business (C2B):
As the name suggests, these transactions include a customer who sells his/her services to a company. It can be as small as a photographer selling his photographs to a company or as big as a crowdsourcing campaign.
Figure 4: C2C e-commerce
• Consumer to Consumer (C2C):
These types of business take place between two consumers. One such platform that allows two customers to sell and buy from each other is – eBay.
Many people on Facebook and Instagram sell goods to other users. These transactions fall under the C2C category.
• Government / Public Administration E-commerce
Except for the primary e-commerce retail structures, there are some government administration e-commerce businesses also.
1. Government to Consumer (G2C): The e-commerce activities that take place between the government and its citizens or consumers, including paying taxes, registering vehicles, and providing information and services are G2C transactions.
2. Business to Government (B2G): Such transactions include a business providing services to public administration. One such example is Synergetics Inc. in Ft. Collins, Colorado, which provides contractors and services for the government agencies.
3. Consumer to Government (C2G): It includes individuals paying their government taxes or tuition fees to the Universities.
3. Types Of E-commerce Business Revenue Models
In any business, revenue consists of the total amount received by the company for selling their goods during a specific period. Companies generate revenue from multiple sources like affiliate marketing, advertising, subscription, etc.
Let’s understand five basic revenue models of e-commerce.
• Advertising Revenue Model:
Advertisers pay huge money to showcase their content to the visitors. Whenever we search anything on Google, everything from news to images is free of cost because of the advertisers paying Google for the same.
Google earns 59% of its revenue from advertising, including Adwords, Adsense etc.
• Sales Revenue Model:
The money earned by the company by selling its goods, products, or services to customers falls under this model. For example, Amazon earns revenue by selling books, music at a particular downloading price.
• Subscription Revenue Model:
In such a model, the company provides its services after the consumer has subscribed for the same. For example, the New York Times has 1.1 million online paid subscribers.
Some of the Android and iOS apps also contain in-app purchases that are also the example of a subscription revenue model.
• Transaction Fee Revenue Model:
A few of the companies earn money by providing the facility to transact online. E-bay, one of the biggest e-commerce, provides its platform for auction by charging specific transaction fees.
• Affiliate Revenue Model:
This model works on commission. If you own a website with significant traffic, you can resell the products of other businesses and gain commission.
There are several methods under this model through which revenue generation takes place like, Pay per Click, Pay per Impression, Pay per Lead, and Pay per Sale.
4. Platforms on which they operate:
The pie-diagram below shows the statistics for the websites using e-commerce technologies.
• Online Storefront/Drop Shipping:
This is the most simplistic form of conducting e-commerce. The merchant creates a storefront and uses it to sell products. The consumer places the order online and it is then passed on to the supplier.
You don’t have to manage the inventory, warehousing stock, or the packaging as the supplier takes care of everything. However, the quality of the products, the delivery related issues all of these are your responsibility.
Some of the top e-commerce platforms include Magento, Demandware, Oracle Commerce, Shopify, WooCommerce, Volusion, and Drupal Commerce.
• Wholesaling and Warehousing:
This requires a lot of investment and management at the beginning. You are required to manage the inventory and stock, keep track of customer orders and shipping information, and invest in the warehouse space also.
Costco is an example of this business model.
• Online Marketplaces:
These markets include certain websites that allow merchants to sell their products to customers. A few of these websites don’t own inventory. They act as a bridge between the merchant and the buyer.
Some of the most famous online marketplaces are Amazon, Walmart, Alibaba, Etsy, and Upwork.
• Social Media Marketplace:
You might have seen the latest update of Facebook that includes a separate tab for Marketplace. There are two ways to turn social media into e-commerce. One, it can redirect the links to the e-commerce websites.
Two, you can sell products directly to the customers.
Facebook and Instagram are one of the most preferred social media marketplaces.
Unlike Instagram, Facebook provides you with a much-devoted marketplace user interface that lets you manage your customers, payment from them, and orders quite smoothly.
What is the secret to a successful e-commerce store?
Running an e-commerce store is not a day’s work. It demands patience, strategy, planning, and investments. We all know the successful e-commerce businesses like Amazon and e-Bay but, there are a lot more stores that were unsuccessful and suffered losses.
A UK-based clothing and cosmetics e-tailer that failed just two years after its launch.
An online toy retailer. It launched in 1997 and then filed for bankruptcy in 2001.
These are the few points to make your story a successful one:
• Take your business seriously:
E-commerce businesses take time to flourish and to generate profit. Do not consider it as a hobby and take it seriously if you want to make it a huge success.
• Figure out a right Software:
Many of the e-commerce businesses fail just because they don’t own software which is user-friendly, reliable, scalable, and secure. The wrong software is sure to kill your business.
• Know your audience:
The first and the foremost thing is to know what your customers want. Understanding your target audience enables you to figure out their needs and the products you need to focus on.
• Test in your locality:
You can test your business with your friends and family. They can help you with the honest reviews so that you can improve.
• Think Smartly:
People nowadays are using mobiles more than the PCs for online shopping. Build your business in a way that it is mobile-friendly.
• SEO and PPC:
SEO and PPC drive traffic to your store so missing out on them will be a blunder. Find a good consultant or a digital market agency if you have the budget.
• Research. Improve. Repeat:
The more you analyse and research, more your business will be enhanced. Try to think out of the box and attractive ways to lure your customers.
This was all about the e-commerce business. Whether you already run an e-commerce business or are planning to start one, we hope this guide helped you.
Be patient and plan your business well in advance to get the maximum profits out of it.