Ecommerce (or electronic commerce) is the buying and selling of goods (or services) on the internet. It encompasses a wide variety of data, systems, and tools for online buyers and sellers, including mobile shopping and online payment encryption.
Most businesses with an ecommerce presence use an ecommerce store and/or an ecommerce platform to conduct online marketing and sales activities and to oversee logistics and fulfillment.
To fully understand ecommerce, let’s take a look at its history, growth and impact on the business world. We will also discuss some advantages and disadvantages to ecommerce, plus predictions for the future.
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Generally, there are six main models of ecommerce that businesses can be categorised into:
Let’s review each type of electronic commerce in a bit more detail.
B2C ecommerce encompasses transactions made between a business and a consumer. B2C is one of the most popular sales models in the ecommerce context. For example, when you buy shoes from an online shoe retailer, it’s a business-to-consumer transaction.
Unlike B2C, B2B ecommerce encompasses sales made between businesses, such as a manufacturer and a wholesaler or retailer. B2B is not consumer-facing and happens only between businesses.
Business-to-business sales often focus on raw materials or products that are repackaged before being sold to customers.
C2C is one of the earliest forms of ecommerce. Customer-to-customer relates to the sale of products or services between customers. This includes C2C selling relationships, such as those seen on eBay or Amazon.
C2B reverses the traditional ecommerce model, meaning individual consumers make their products or services available for business buyers.
For example, the iStockPhoto business model in which stock photos are available online for purchase directly from different photographers.
B2A covers the transactions made between online businesses and administrations. An example would be the products and services related to legal documents, social security, etc.
C2A is similar to B2A, but consumers sell online products or services to an administration. C2A might include online consulting for education, online tax preparation, etc.
B2A and C2A are focused on increased efficiency within the government via the support of information technology.
Ecommerce was introduced about 40 years ago in its earliest form.
Since then, electronic commerce has helped countless businesses grow with the help of new technologies, improvements in internet connectivity, added security with payment gateways, and widespread consumer and business adoption.
Founded by electrical engineering students Dr. John R. Goltz and Jeffrey Wilkins, early CompuServe technology was built using a dial-up connection.
In the 1980s, CompuServe introduced some of the earliest forms of email and internet connectivity to the public and dominated the ecommerce landscape through the mid-1990s.
English inventor Michael Aldrich introduced electronic shopping by connecting a modified TV to a transaction-processing computer via telephone line.
This made it possible for closed information systems to be opened and shared by outside parties for secure data transmission — and the technology became the foundation for modern ecommerce.
When Boston Computer Exchange launched, it was the world’s first ecommerce company.
Its primary function was to serve as an online market for people interested in selling their used computers.
Charles M. Stack introduced Book Stacks Unlimited as an online bookstore. Originally, the company used the dial-up bulletin board format. However, in 1994 the site switched to the internet and operated from the Books.com domain.
Marc Andreessen and Jim Clark co-created Netscape Navigator as a web browsing tool. During the 1990s, Netscape Navigator became the primary web browser on the Windows platform, before the rise of modern giants like Google.
Jeff Bezos introduced Amazon primarily as an ecommerce platform for books.
Originally introduced as Confinity by founders Max Levhin, Peter Thiel, Like Nosek and Ken Howery, PayPal made its appearance on the ecommerce stage as a money transfer tool.
By 2000, it would merge with Elon Musk’s online banking company and begin its rise to fame and popularity.
Alibaba Online launched as an online marketplace with more than $25 million in funding. By 2001, the company was profitable and it went on to turn into a major B2B, C2C, and B2C platform that’s widely used today.
Google introduced Google Adwords as a way for ecommerce businesses to advertise to people using Google search.
With the help of short-text ad copy and display URLs, online retailers began using the tool in a pay-per-click (PPC) context. PPC advertising efforts are separate from search engine optimisation (SEO).
After trying to open an online snowboarding equipment shop, Tobias Lütke and Scott Lake launched Shopify. It’s an ecommerce platform for online stores and point-of-sale systems.
Amazon launched Amazon Prime as a way for customers to get free two-day shipping for a flat annual fee.
The membership also came to include other perks like discounted one-day shipping and access to streaming services like Amazon Video and members-only events like Prime Day.
This strategic move helped boost customer loyalty and incentivise repeat purchases. Today, free shipping and speed of delivery are the most common requests from online consumers.
Etsy launched, allowing crafters and smaller sellers to sell products (including digital products) through an online marketplace. This brought the makers community online — expanding its reach to a 24/7 buying audience.
Eddie Machaalani and Mitchell Harper co-founded BigCommerce as a 100% bootstrapped ecommerce storefront platform.
Since 2009, billions of dollars in sales have been processed through the platform, and the company now has headquarters in Austin, San Francisco, London and Sydney.
Google Walletwas introduced as a peer-to-peer payment service that enabled individuals to send and receive money from a mobile device or desktop computer.
By linking the digital wallet to a debit card or bank account, users can pay for products or services via these devices.
Today, Google Wallet has joined with Android Pay for what is now known as Google Pay.
Facebook’s early advertising opportunities were offered to Business Page owners via sponsored stories. With these paid campaigns, ecommerce businesses could reach specific audiences and get into the news feeds of different target audiences.
As online shoppers began using their mobile devices more frequently, Apple introduced Apple Pay, which allowed users to pay for products or services with an Apple device.
Jet.com was founded by entrepreneur Marc Lore (who sold his previous company, Diapers.com, to Amazon.com) along with Mike Hanrahan and Nate Faust.
The company competes with Costco and Sam’s Club, catering to folks looking for the lowest possible pricing for longer shipping times and bulk ordering.
Instagram Shopping launched with ecommerce partner BigCommerce. Since then, the service has expanded to additional ecommerce platforms and allows Instagram users to immediately click an item, and go to that item’s product page for purchase.
Ecommerce set a new record when online sales broke $6.5 billion (£4.7 billion) on Cyber Monday — a 17% increase from the prior year.
COVID-19 outbreaks around the globe pushed consumers online to unprecedented levels. By May of 2020, ecommerce transactions reached $82.5 billion — a 77% increase from 2019. It would have taken four to six years to reach that number looking at traditional year-on-year increases.
Consumers have moved online to make purchases normally made in physical stores, such as food and household items, apparel, and entertainment. Many consumers say they’ll continue to use online storefronts until a COVID-19 vaccine is available.
Ecommerce has come a long way since the CompuServe launch in 1969. Changes in technology have certainly driven ecommerce growth, along with global circumstances. Today, ecommerce must meet consumers’ expectations for safety and convenience.
For many retailers, the growth of ecommerce has expanded their brands’ reach and positively impacted their bottom lines. However, for retailers who have been slow to embrace the online marketplace, the impact has been different.
Retailers that fall into the middle ground are the ones feeling the biggest changes in response to the impact of ecommerce.
In February of 2019, online sales narrowly surpassed general merchandise stores for the first time, including department stores, warehouse clubs and supercenters. This is probably because Amazon Prime took away the price of shipping and so more consumers are comfortable with online shopping.
For many small businesses, ecommerce adoption has been a slow process. However, those who’ve embraced it have discovered ecommerce can open doors to new opportunities.
Slowly, small business owners are launching ecommerce stores and diversifying their offerings, reaching more customers and better accommodating customers who prefer online/mobile shopping.
Pre-pandemic, small businesses were working to expand their ecommerce presence. Today, 23% of small business owners feel they’ll have to strengthen their ecommerce capabilities in order to survive in a post-pandemic world. Another 23% of small business owners have created a website or updated their existing one since COVID-19 lockdowns began.
B2B companies are working to improve their customer experiences online to catch up with B2C companies. This includes creating an omnichannel experience with multiple touchpoints and using data to create personalised relationships with customers.
Ecommerce solutions enable self-service, provide more user-friendly platforms for price comparison, and help B2B brands maintain relationships with buyers, too.
By 2026, B2B transactions are expected to reach $63,084 billion (£45.4 billion).
Ecommerce marketplaces have been on the rise around the world since the mid-1990s, with the launch of giants we know today, such as Amazon, Alibaba, and others.
In this chart, we can see that Amazon is the outlier with regards to ecommerce marketplace growth, but we can see that others are making headway.
By offering a broad selection and extreme convenience to customers, they’ve been able to quickly scale up through innovation and optimisation on the go.
Amazon in particular is known for its unique growth strategy that has helped them achieve mass-adoption and record-breaking sales.
But Amazon doesn’t do this alone. As of 2020, 52% of products sold on Amazon were sold by third-party sellers (i.e. not Amazon).
Those sellers also make high profits from the sales on the marketplace, though they are required to follow strict rules enforced by Amazon.
Survey data shows that one of ecommerce’s main impacts on supply chain management is that it shortens product life cycles.
As a result, producers are presenting deeper and broader assortments as a buffer against price erosion. However, this also means that warehouses are seeing larger amounts of stock in and out of their facilities.
In response, some warehousers are now offering value-added services to help make ecommerce and retail operations more seamless and effective.
These services include:
Jobs related to ecommerce are up 2x over the last five years, far outpacing other types of retail in regard to growth. However, growth in ecommerce jobs is only a small piece of the overall employment puzzle.
A few quick facts on how ecommerce has impacted employment:
The flip side of this, however, is that upticks in efficiency paired with a shift away from traditional retail may lead to some job losses or reductions in workforces as well.
As with any major market shift, there are both positive and negative impacts on employment.
Ecommerce (and now omnichannel retail) has had a major impact on customers. It is revolutionizing the way modern consumers shop.
Not only do customers frequently use ecommerce sites to shop but 51% of Americans now prefer to shop online rather than in-store.
Millennials are the largest demographic of online shoppers (67%), but Gen X and baby boomers are close behind at 56% and 41% participating in online shopping activities respectively.
Researchers have discovered that ecommerce has made an interesting social impact, especially within the context of social media.
Today, ecommerce shoppers discover and are influenced to buy products or services by recommendations from friends, peers and trusted sources (like influencers) on social networks like Facebook, Instagram and Twitter.
If you’ve ever been inspired to buy a product you saw recommended on Facebook or featured in an Instagram post, you’ve witnessed this social impact as it relates to ecommerce.
In 2018, an estimated 1.8 billion people worldwide made an online purchase.
The Chinese platform Taobao is the biggest online marketplace with a gross market value (GMV) of $484 billion (£348.5 billion). For context, Tmall and Amazon ranked second and third with $458 billion (£330 billion) and $339 billion (£244 billion) GMV in annual third-party global market value respectively.
Ecommerce has many different advantages — from faster buying to the ability to reach large audiences 24/7.
Let’s take a look in detail at some of the top perks it has to offer.
For customers, ecommerce makes shopping from anywhere and at any time possible.
That means buyers can get the products they want and need faster, without being constrained by operating hours of a traditional brick-and-mortar store.
Ecommerce also makes it easier for companies to reach new, global customers. An ecommerce store isn’t tied to a single geographic location — it’s open and available to any and all customers who visit it online.
With the added benefit of social media advertising and email marketing, brands have the potential to connect with massive relevant audiences who are in a ready-to-buy mindset.
Without a need for a physical storefront (and employees to staff it), ecommerce retailers can launch stores with minimal operating costs.
As sales increase, brands can easily scale up their operations without having to make major property investments or hiring a large workforce. This means higher margins overall.
With the help of automation and rich customer profiles, you can deliver highly personalised online experiences for your ecommerce customer base.
Showcasing relevant products based on past purchase behaviour, for example, can lead to higher average order value (AOV) and makes the shopper feel like you truly understand them as an individual.
Although modern ecommerce is increasingly flexible today, it still has its own set of disadvantages.
Here are some of the downsides to ecommerce retail.
Without being face-to-face, it can be harder to understand the wants, needs and concerns of your ecommerce customers.
There are still ways to gather this data (surveys, customer support interactions, etc.), but it does take a bit more work than talking with shoppers in person on a day-to-day basis.
If your ecommerce website is slow, broken or unavailable to customers, it means you can’t make any sales.
Site crashes and technology failures can damage relationships with customers and negatively impact your bottom line.
For customers who want to get hands-on with a product (especially physical goods like clothing, shoes and beauty products) before adding it to their shopping cart, the ecommerce experience can be limiting.
By 2022, ecommerce revenue in the U.S. alone is expected to reach $479 billion (£345 billion), with the toys, hobby and DIY vertical seeing the largest growth.
And it’s no passing trend, either.
It’s also interesting to note that looking ahead, ecommerce expert Gary Hoover’s data predicts that ecommerce retail sales will eventually even out with that of brick and mortar.
This means that even though the online sales trend will continue to grow, there’s plenty of business to go around.
However, that’s not all.
Soon, most ecommerce interactions will be an omnichannel experience for shoppers.
This means they’ll expect to be able to research, browse, shop, and purchase seamlessly between different devices and on different platforms (like a standalone web store, an Amazon presence, etc.).
Other trends to watch for in the future of ecommerce include:
Overall, we have to remember that ecommerce is still fairly new in the big picture of retail.
The future holds endless opportunities, but its success and continuation will depend largely on buyers’ preferences in the future.
We’ve looked at all corners of ecommerce, including its different types, the history, how it's grown over the years, and its impact on consumers and how business is conducted.
There are certainly advantages and disadvantages to ecommerce, but the future has many opportunities for even greater expansion.
Most customers look for a few key features when evaluating an ecommerce website. These are elements that improve the overall online shopping experience by making it highly functional and user-friendly.
Yes, ecommerce is safer than ever before.
With the help of multi-layered ecommerce security, monitored transactions, regular PCI scans, SSL certification, protection against DoS/DDoS attacks, and hosting solutions that are PCI-compliant, ecommerce stores can offer shoppers the peace of mind that their online purchases are made in a safe and secure environment.
Ecommerce fulfillment encapsulates the entire process of receiving an order and shipping it to the customer.
This includes all of the operational and logistical steps that are part of this process, such as inventory management, warehouse organisation, order oversight, packaging and shipping, and customer communication regarding order fulfillment.
An ecommerce marketplace is a type of site where products or services are sold and then processed by the marketplace operator.
These include selling platforms like Etsy, Amazon and eBay, for example, which are often part of an omni-channel sales strategy.
What are some examples of popular online marketplaces?
An ecommerce platform is a software tool that allows retailers to build and customise digital storefronts and to manage their website, sales, and ecommerce operations from a central hub.
BigCommerce is an example of an ecommerce platform.
A hosted ecommerce platform is one that handles all website hosting responsibilities rather than requiring the individual to do so via a third-party solution.
This removes much of the complexities around managing the software of your ecommerce operation and is often cheaper than self-hosting.
In hosted ecommerce platforms, the platform handles updates, security, and other related tasks for the store owner. BigCommerce is an example of a hosted (SaaS) platform.
Yes, ecommerce is growing. Pre-pandemic, ecommerce was growing year-over-over, but lockdowns around the globe put online efforts into overdrive.
The United Nations Conference on Trade and Development reported that global ecommerce sales grew 13% in 2017, hitting an estimated $29 trillion.
The B2B ecommerce market was expected to grow to $6.7 trillion in gross merchandise value by 2020, making it twice the size of the B2C market.
The costs of running an ecommerce site depend on many factors, from the size of the business to the platform you chose.
Many ecommerce platforms have different plans and subscription models depending on your business needs.
There are different ways to start an ecommerce business, but we recommend taking these steps:
Your ecommerce platform will serve as the base of your store and integrations will provide additional services to help your online store succeed. Here are some of the integrations you should consider for your ecommerce store: