What Is Ecommerce: Definition & Electronic Website Business Ideas, Statistics, History, Types (Advantages & Disadvantages)

on Blog November 20th, 2020

The electronic commerce (ecommerce) industry has grown exponentially over the past two decades and this trend shows no signs of slowing down. Millions of Americans rely on ecommerce businesses to purchase the best products and services at the most affordable prices. But, successfully establishing an ecommerce business takes a lot of dedication and hard work. Furthermore, some business owners are not familiar with this relatively new concept and many still ask themselves “what is ecommerce?” before beginning.

At Fannit, we’ve developed dozens of online stores for clients in a variety of industries. As a leading ecommerce SEO company, we’re very familiar with the definition of digital commerce, strategies that make consumers want to buy, and the steps on how to start an ecommerce business from the ground-up. Although the concept of starting an ecommerce website may seem simple, there are hundreds of variants you need to get just right in order to increase your chances of success.

In this article, we’ll go over the definition of an electronic commerce business and discuss the different types of online stores you can establish. We’ll also over the various platforms you can choose, pros and cons of running an online store, and everything else you need to know about owning an ecommerce business.

What is Ecommerce?

Before going any further, let’s take a moment to answer the question “what is ecommerce?”

Electronic commerce, which is often shortened as e-commerce or simply ecommerce, is a business activity that focuses on selling products or services through the internet. This umbrella term covers a huge variety of business models, as long as these include the exchange of money for physical or intangible solutions.

The term “ecommerce” is incredibly wide, but remember that all of the companies that fall in this category are a type of electronic business or ebusiness. We’ll go over the different types of online stores shortly, just remember that you can sell almost any product online, so you should evaluate the different ecommerce business ideas you have and work with the one that has the most potential.

A Brief History of Ecommerce

Now that we’ve covered the ecommerce definition, let’s take a brief look at the history of ecommerce. The first online commercial transaction occurred in 1994 and it showed businesses that the internet was ready to become their newest sales channel.

Electronic commerce sites have evolved a lot since. Giants like Amazon and eBay have established innovative ecommerce business models, which in turn inspired individual businesses to open their own online stores.

Even small businesses that serve a local audience can now set up powerful online stores that help reach more customers and generate a higher number of sales. This is possible thanks to ecommerce platforms like Shopify that allow local businesses to set up a digital store with safe payment gateways, which allows for the sale of products online.

Ecommerce Business Types and Categorizations

We’ve discussed the ecommerce meaning, but we still need to cover the different business models that ecommerce stores can adopt.

Although Amazon may be the first thing that springs to mind when you hear the word “ecommerce”, there are many different types of ecommerce business models out there. Every entrepreneur is different and some of the most popular models emerged from a combination of innovative ecommerce business ideas.

While the core structure remains the same in all types (selling online goods or services), the business model you choose affects virtually every other part of your online store. Ecommerce businesses can be categorized based on a variety of characteristics, including the type of product sold, the audience that’s being targeted, and the platform that’s being used to conduct the transactions, just to name a few.

Let’s go over some of the most popular types of ecommerce business.

By Type of Product

Ecommerce businesses can sell any type of products, but these usually fall in one of three categories, which are:

  • Physical goods
  • Services
  • Digital products

In some cases, an ecommerce business can fall into more than one of these categories, so look at your company and determine the type of product you want to sell. If you’re in the process of starting a business, you should learn more about the different nuances that come with each product type.

Physical Goods

Physical products are perhaps the easiest to sell because consumers feel rewarded when their order arrives. However, selling physical goods also means having to set up an order fulfillment process that includes shipping and other logistic elements.

Intangible Services

Services are also relatively easy to sell online. But, business owners need to deliver outstanding services or work as a middleman between the service provider and the customer.

Digital Products

Finally, digital products are solutions that consumers and companies can purchase, but they don’t need to be shipped to customers. Instead, digital goods are made available as soon as the purchase is complete, which usually happens through a download link or by providing login credentials for a specific platform.

Remember, an online store can sell a combination of products, services, and digital goods, so there is no reason to limit yourself if your ecommerce business idea includes a hybrid structure.

By Target Audience

As we mentioned earlier, most people think about companies like Amazon when they hear the phrase “ecommerce company”, which implies that the products are being sold to consumers. However, the target audience of an online store can vary as much as any other business and it can include consumers, companies, and even government organizations.

In simple terms, the audience you target will help determine the type of online store you have and allow you to streamline the ecommerce business planning process at the same time. There are many variations, but the main types of ecommerce businesses are business-to-consumer (B2C),  business-to-business (B2B), consumer-to-business (C2B), consumer-to-consumer (C2C), and business-to-government (B2G), government-to-business (G2B), and consumer-to-government (C2G).

B2C

B2C businesses specialize in selling products to final consumers, so this category includes retail, fashion, technology, and all other industries that offer goods to the wider public. B2C industries are ruled by consumer trends, so you need to pay close attention to your audience as well as environmental factors that affect the behavior of your potential customers.

B2B

B2B companies aim to sell different types of goods and services to other businesses. For example, manufacturers that provide parts to smartphone and computer manufacturers. This also includes companies that sell software-as-a-service solutions and other intangible goods.

C2B

In the consumer-to-business model, individuals sell products and services directly to companies. Products usually take a different shape in these cases, but the idea is the same. For example, an individual may sell social media exposure to a company by sharing a post that includes the business’ products and/or branding.

C2C

C2C is one of the oldest ecommerce business models out there. These types of ecommerce businesses allow the sales of products or services from one consumer to another. eBay is perhaps the most popular C2C ecommerce website out there, but it’s worth noting that this online commerce site also allows other types of sales.

B2G

B2G organizations attempt to sell solutions to local, regional, and national government institutions, which usually translates to high-cost products with superb quality and security standards.

G2B

As with C2B, government-to-business transactions may look a bit different because the products or services in this model can consist of learning resources, databases, and other resources that companies may want to get from governments.

C2G

While consumer-to-government may not be as well-known as business-to-consumer or business-to-business, it’s actually a pretty common ecommerce business model. For example, when individuals pay taxes, insurance bills, or public sector expenses, they are participating in a C2G electronic commerce situation.

By Store Structure

In addition to the type of product sold and the audience being targeted, ecommerce businesses can also be categorized by their store structure. Entrepreneurs can opt for different store structures and sell products or services in slightly different ways. There are some variations, but the most common structures to start an ecommerce business include:

Retail

If you look up the definition of commerce online, you’ll probably find results that talk mostly about retail sales. In simple terms, retail sales occur when a company sells its products directly to the final consumers, without the intent of reselling these goods later on. Retailers can leverage a variety of channels to help sell their goods and services. For this reason, setting up an ecommerce store is the perfect way to connect to internet users and generate sales with the highest profit margins.

Wholesale

What is an ecommerce website that specializes in wholesale? In simple terms, wholesale ecommerce stores sell items in bulk and at a discounted price. These ecommerce businesses usually sell items to retailers, but they can also sell goods to consumers, government organizations, and other entities.

Dropshipping and Drop Surfing Ecommerce

What is drop surfing ecommerce? And what about dropshipping?

In simple terms, dropshipping is a model where sellers run an ecommerce website, but don’t keep their own inventory. Instead, these entrepreneurs collect orders and payments via their ecommerce platforms. Then, the order is sent to a provider or manufacturer, which then ships the product to the customer who placed the order. This model is extremely flexible because it allows entrepreneurs to establish ecommerce stores and focus on creating a great experience without having to maintain a warehouse full of products.

Drop surfing ecommerce is a variable of dropshipping. But, instead of working with one set supplier per product, drop surfing allows sellers to compare all potential providers and choose the best one whenever each individual order comes in. Drop surfing maximizes profits because it allows ecommerce stores to find the most affordable providers. But, these may also require some additional work because entrepreneurs have to interact with different shipping companies among other variables.

Crowdfunding

Finding investors is one of the best ways to get a product off the ground, but there are some instances where this affects the integrity of the project itself. Crowdfunding offers a fresh alternative for companies that develop their own products and want to make them available to customers online.

In simple terms, crowdfunding is a structure where sellers collect payments for products and use them to fund the manufacturing of the goods being sold. This is a common ecommerce example structure for innovative startups that specialize in sustainable products and similar goods. But, it can be used in any instance, as long as the proposed product is attractive enough for users to pay in advance.

Subscription

Today, consumers and companies around the world follow a routine that includes certain specific products. Rather than purchasing these products every month, some ecommerce store owners offer subscription services. Customers get charged on a set date every month, but receive a set of products, access to services, or tools as long as the subscription is active.

For instance, any apps you pay for on a monthly basis are ecommerce examples, regardless if they’re for commercial or residential purposes.

Helpful reading: https://www.fannit.com/blog/visual-content-improve-ecommerce-user-experience/

Advantages and Setbacks of Running an Ecommerce Business

In order to truly understand the electronic commerce definition, you have to learn about the advantages as well as the setbacks this type of business offers. And, even though it has some disadvantages, ecommerce statistics suggest that this trillion-dollar industry isn’t going anywhere for the time being.

But, altering your site functionality to support online shopping capacities isn’t an automatic recipe for success. Understanding the pros and cons of this setup will help you gauge your chances of success and determine whether it’s a suitable alternative for your business.

Pros of Running an Ecommerce Business

Selling products online may be challenging, but there’s no denying that running a digital store gives you a huge amount of freedom. Unlike unpredictable experiences that occur inside of a physical store, having your business online means that you have control over all website variables. This includes the loading speed, the content that customers have access to, and the quality of the customer service tools available.

Additionally, some of the benefits of entering the ecommerce industry include:

Ideal for Building a Business from Scratch

It doesn’t matter if it’s B2B, retail ecommerce, or the selling of goods among consumers, electronic commerce stores are ideal to start a business from the ground-up.

Store owners can start a simple ecommerce website and sell goods to internet users around the world with a relatively small investment. Ecommerce shops are also extremely scalable, so increasing your inventory usually results in increased sales, as long as the right marketing strategy is in place. Plus, buying and selling products online have become common practices for consumers, companies, and official organizations around the world, so digital stores are suitable for virtually all industries.

Global Audience Reach

Besides being available to users from all countries and regions, an ecommerce website also allows you to reach almost every demographic on the planet. Even older customers leverage the web to find the best deals and create the ultimate shopping experience. Online retailers and other digital stores can potentially reach billions of customers, exponentially increasing their sales in the process.

Businesses that target a global audience need to make sure that their third-party ecommerce services providers support traffic from different regions.

Professional Flexibility

How does ecommerce work? Despite the fact it’s an innovative business approach, online retailers and similar digital stores share a lot of similarities with conventional shops. For instance, setting up a brick and mortar store requires a solid marketing strategy that helps create the best shopping experience for users, just like an ecommerce business.

However, because it doesn’t rely on a brick and mortar location, an ecommerce store offers a lot more flexibility in terms of professional activities. Online marketplaces create a fully digital shopping experience that doesn’t require a physical store manager, so you can invest time into other parts of your company while your ecommerce site generates sales for you.

Suitable for Any Niche or Business Model

There are so many types of ecommerce that this selling approach is suitable for all types of niches and business models. Online stores allow you to create a unique user experience that makes customers feel both engaged and appreciated, a combination that usually results in higher sales numbers.

Stores like Amazon specialize in retail ecommerce sales, but you can build an online shopping site that caters to consumers, other businesses, official institutions, and any other organization. And, online marketplaces can be tailored to match your specific business model or sales flow.

Works as a Side-Project or Main Job

Thanks to dropshipping, secure internet banking, and other innovative resources, businesses can now opt to run their ecommerce sites as a side-project or treat them as their main source of income.

There are several ecommerce tutorial guides you can find on YouTube that can teach you how to start an ecommerce business with a minimal investment. If you don’t have enough time to run a full-blown store, you can manage a simple version and treat it as an additional project until you’re ready to take the leap.

Alternatively, you can always partner with a company like Fannit that can help manage your store and ensure that you get as many customers as possible out of your digital stores.

Cons of Owning an Ecommerce Store

According to some estimates, more than 90% of all transactions will take place via online stores by 2040. But, this doesn’t mean that selling products online is a flawless idea. As a matter of fact, there are many limitations that come with online shopping, so every business needs to adjust its ecommerce store to ensure that these potential disadvantages are addressed properly in order to increase its chances of success.

Some of the disadvantages that ecommerce businesses face include:

Customers Can’t Evaluate Products in Person

When visiting a brick and mortar store, customers can pick up and evaluate products closely before purchasing them. However, then purchasing items online, customers have to rely on the images, videos, and descriptions that sellers provide in order to determine whether they like a product or not.

While some customers don’t like shopping without examining products first-hand, having descriptive text about your products, providing high-quality images, and developing other types of rich media resources can result in a higher number of sales.

Lack of Sales Personnel

Some customers may see this as a positive on the surface. But, the truth is that not having sales personnel available can negatively affect the experience that your customers have on your site. So, since your customers can’t ask for help from someone in person, you need to have chat agents as well as other customer service channels readily available.

Not all companies have the ability to provide 24/7 customer support, but social media and similar channels have empowered ecommerce businesses to deliver excellent support without breaking the bank. Just make sure to study your customers and decipher which support channels you should invest in.

Stiff Competition

A decade or so ago, having an independent ecommerce store was not very common, especially for small companies. Today, a large percentage of businesses attempt to generate ecommerce sales and entice customers to shop at their digital stores.

If you’re planning and creating an ecommerce store for your company, you’ll likely face stiff competition. Depending on your niche, you may even have to compete against online shopping giants like Amazon, so make sure that you constantly remind customers what makes your digital store special.

Minimum Budget Requirements

Establishing an electronic commerce platform is more attainable than ever before, but you still need to invest in a series of tools as well as quality hosting in order to get the best results. Not only this, but digital commerce businesses should also be able to invest resources into SEO and other effective forms of marketing in order to improve exposure and generate more sales.

Extended Learning Time

Like all business tools, you’ll have to invest time into learning how to use the ecommerce platform you choose. While some solutions are user-friendly, the most affordable options tend to have a slightly more complicated interface, which may extend learning time and delay growth for a bit. That said, if you work with a reliable ecommerce marketing agency like Fannit, you’ll be able to focus on other areas of your business while the rest is handled by a team of experienced professionals.

Defining the Top Ecommerce Platforms

What is the difference between ecommerce and ebusiness? There are a few differences between the two, but one of the main ones is that online stores are always powered by an ecommerce platform.

In simple terms, an ecommerce platform is a solution that allows digital store managers to create a safe and efficient environment to sell their products. Ecommerce platforms can consist of fully tailored solutions, out-of-the-box software that’s ready to use right away, or a combination of the two.

The ecommerce platform you choose is crucial because it works as the engine that powers your online shop. In some cases, the ecommerce platform you choose will even affect how your site looks, which impacts the way customers interact with your content.

There are dozens of different ecommerce platforms available today. Each one has a unique set of benefits, plus these solutions come in a variety of formats. There is no silver-bullet solution for choosing the best alternative, so you have to examine your specific requirements and make a decision based on what your customers need.

Some of the most popular solutions available in the digital commerce market include:

Shopify

Shopify may not be the most popular ecommerce platform in terms of the number of clients, but this solution is perhaps the most well-known alternative for entrepreneurs running their own digital store.

This solution is a popular choice for startups and small businesses because it has a user-friendly interface and a great support team. If you have a brick and mortar location, Shopify may even be able to provide physical tools to process card payments and other awesome tools.

WooCommerce

WooCommerce is used by more than 3 million ecommerce sites, making it the most popular solution in the electronic commerce market. This platform is highly customizable and it can be implemented into almost all websites, regardless of the structure. Additionally, there are thousands of plugins that are designed specifically to improve WooCommerce functionalities, which results in a better experience for customers.

BigCommerce

If you’re looking to leverage multiple digital sales channels through one robust platform, then BigCommerce may be the perfect alternative for your online shop. BigCommerce allows you to develop powerful websites and interactive pages that keep customers engaged.

Not only this, but this comprehensive solution also includes powerful reporting features, integrations with other popular solutions, and order fulfillment automation capacities. And, if you’re looking to conduct business with other companies, BigCommerce also has a set of B2B features designed specifically for these cases.

Volusion

Volusion has emerged as one of the best alternatives to the leading brands because it’s extremely flexible, user-friendly, and cost-effective. When using Volusion, members have access to a site builder, shopping cart software, security features, and the ability to process online payments.

Additionally, you’ll also have access to advanced marketing tools within the platform. The best part is that Volusion still provides an intuitive face with a relatively short learning curve.

Magento

Along with WooCommerce, Magento may be the most comprehensive solution in terms of customization. This advanced digital commerce solution is used by almost one million sites and it’s a favorite among medium-sized companies looking to take the next step and fuel exponential growth. This solution is ideal for companies that have a solid technology team or a knowledgeable partner, such as a marketing agency with ecommerce expertise.

Which Are the Leading Ecommerce Businesses?

We’ve extensively answered the question “what is an ecommerce site?”, but we still have to discuss the leading digital stores out there. The success of a digital store depends on a variety of elements, but these mostly boil down to creating a great customer experience from all angles, including the customer support feature in place as well as the product price range.

Let’s take a look at some of the leading ecommerce businesses out there and the features that make them special.

Amazon

Amazon is the most popular ecommerce platform in the US and other parts of the world. The online retail giant doesn’t have a single specialty, but offers a wide variety of goods and services that are suitable for consumers and businesses alike. Amazon strives to create a superb customer experience by providing a combination of:

  • A huge inventory
  • Affordable prices
  • Promotions and offers on a regular basis
  • A user-friendly interface
  • Strategic pop-ups that promote additional products and drive more sales

eBay

eBay made a name for itself as a C2C platform, but it has transformed into a comprehensive ecommerce store that offers products to a variety of audiences. The platform features billions of products and had almost 200 million active users by the end of last year, making it one of the only global companies that can compete with Amazon.

  • Allows online auctions as well as immediate sales
  • Caters to consumers as well as businesses
  • Like Amazon, it works like a marketplace that other companies can use as well
  • Has strong security features in place
  • Accepts Paypal payments

Etsy

Etsy was developed as a digital commerce site for independent creators to promote and sell their products on. While the company itself doesn’t sell products, it facilitates transactions by providing a secure environment for both sellers and buyers. Still known for being small business-friendly, consumers love this store because it allows them to purchase unique goods directly from the creative people that crafted them.

  • Specialized in unique and handcrafted items
  • Soothing and relaxing interface
  • Heavy focus on products, rather than advertising around the pages
  • Used by people who love vintage items and like supporting small businesses
  • Relatively low costs for sellers

AliBaba

AliBaba has almost one billion customers every year, and its client list includes consumers, NGOs, official institutions, businesses, and other audiences. Arguably the biggest marketplace on the planet, AliBaba has been the most prominent ecommerce business in the Asian market for years. Promoting products through this ecommerce is a great way to access a bigger audience, but like Amazon, they also have relatively high costs for sellers.

  • Comprehensive platform that millions of products available
  • Dominates Asian market
  • Ideal for dropshipping and similar digital commerce models
  • Similar to Amazon in terms of seller costs
  • Viewed as a low-cost alternative by consumers

Fiverr

While the other four ecommerce stores in this list focus on selling physical goods, Fiverr is a marketplace where users can find reliable professional services. Whether it’s consumers that need a quick one-time job or enterprises that need to outsource certain activities, Fiverr allows its members to find the best alternative in terms of service quality as well as price.

  • Great for tracking down freelancers
  • Low-cost solution for businesses
  • Can also be accessed by consumers that need to hire one-time services, like design
  • Available in multiple languages
  • Features a freelancer review and rating system

The Relationship Between Ecommerce and Social Media

Identifying the best ways to promote your ecommerce business requires research, but there’s a strong chance that social media will be part of the mix.

Social media channels like Facebook, LinkedIn, and Instagram are great places to promote your digital commerce platform because these allow you to focus on giving your brand personality while delivering your marketing message in a friendly way.

Additionally, customers now use social media channels to research brands and products before completing a purchase. So, successful digital commerce businesses leverage social networks to their advantage by establishing a strong presence and publishing quality content that’s readily available to customers.

There are two ways you can use social channels to compliment your ecommerce store, which are:

Promoting an Ecommerce Business Through Social Channels

The most common way that ecommerce businesses use social media channels is as simple promotional tools. Facebook, Instagram, and other leading networks are built to showcase images and similar content. So, you can promote your products through posts and drive more traffic to your product pages, which can result in increased sales as long as the right strategy is in place.

Selling Products Directly Through Social Channels

Social media channels now allow companies to sell goods directly through the network interface, which has the potential to change the way digital commerce businesses operate. Companies now have the ability to showcase their products and let customers process orders without having to leave the social network being used.

In most cases, a shorter buyer’s journey results in higher conversion rates, but it’s also worth noting that customers behave differently on social media. To succeed, you need to monitor the performance of your products and make the right adjustments to connect with your audience.

What Makes Some Ecommerce Platforms Extremely Successful?

It’s no secret that some ecommerce companies are much more successful than others, but this isn’t always due to simple elements like budget size or location. That said, there’s a set of characteristics that leading ecommerce sites share, so it’s safe to assume that these are some of the ingredients for a successful digital commerce store.

These include:

Customer-Centric Approach

Amazon and other leading companies tend to take a customer-centric approach whenever they implement new updates or change the way they conduct business. Being customer-centric goes beyond creating a user-friendly interface. Digital commerce companies also need to find popular products, create an ultra-safe environment, and offer top-notch support to make customers feel truly appreciated.

Creativity

Out of all the elements that make Amazon a leading digital commerce platform, the company’s creativity may be the most notable variable. Rather than forcing consumers to think or act a certain way, Amazon sends out questionnaires to its customers and makes changes according to their feedback.

Focus on Experience

Keeping customers engaged and active is a vital part of the selling process and the best way to maintain high user interest is to create a great customer experience. For instance, eBay and other platforms often offer the ability to review purchases. This allows other customers to make decisions based on feedback and improves the experience for all users.

Continuous Improvement

Establishing an ecommerce platform isn’t a one-time job. As with other digital channels, businesses need to continuously monitor their results and improve the performance of their campaign via adjustments.

The Impact of Ecommerce

The impact of electronic commerce may not always be obvious, but the truth is that this practice has forever changed the way companies conduct business. Some of the biggest changes that have been fueled by the adoption of ecommerce include:

Adoption of Digital Channels

Whether it’s for marketing or sales purposes, electronic commerce platforms promote the adoption and usage of digital channels. While this may represent an initial investment, switching to ecommerce usually helps lower expenses and may result in a much more profitable setup.

Small Businesses Get a Boost

In the early days of ecommerce, small business owners didn’t have many options if they wanted to promote their products online. Today, digital commerce platforms and innovative site designs can help you set up a digital store in a few hours and give your small business a huge boost in sales.

Blurring of the B2B and B2C Lines

Before the days of ecommerce, consumers and businesses sourced their products from completely different places. Now, Amazon and other platforms allow businesses and consumers to purchase goods from the same place, partially blurring the lines between the two.

Ecommerce Marketplaces

As we’ve covered in this article, there are dozens of marketplaces like AliBaba that allow companies to sell their products in exchange for a commission. In these setups, companies don’t need to run their own electronic commerce site, so they can get started as soon as they finish building their strategy.

Supply Chain Expectations

The global health crisis has produced some disruptions in terms of the ecommerce supply chain. Luckily, the adoption of online sales has taught companies how to manage their expectations and have alternative ways to source their products readily available.

New Job Creation

It’s true that traditional retail jobs have suffered due to ecommerce, but jobs related to online commerce have doubled in number over the last few years. These jobs are located in large cities and metropolitan areas, but the industry also fuels job creation in smaller locations as well.

Change in Consumer Behavior Patterns

Having the ability to compare products online has also altered the way consumers behave. In addition to getting items delivered straight to the comforts of their homes, consumers are now used to conducting research and tracking down the lowest prices or the companies that provide the best conditions, for example, free shipping, additional discounts, and more.

Consumer Empowerment

A combination of social media, ecommerce, and the ability to review purchases has empowered consumers, allowing them to dictate how their favorite brands conduct business as well as the products they offer.

Understanding the Future of Ecommerce

Understanding what is ecommerce today doesn’t guarantee that the concept will remain the same. With almost two billion people making online purchases at least on a yearly basis, the future of ecommerce is bright. But, it’s always important to monitor the leading platforms and stay updated with the latest changes to make the right adjustments to your site.

Learn More About Starting and Promoting an Ecommerce Business

A decade or so ago, setting up an online store wasn’t a priority of small businesses. Today, small companies have all the tools at their disposal to take advantage of digital channels and sell their products through the internet without paying a small fortune.

We hope that the article above helped answer the question “what is ecommerce?” and “what is an ecommerce business”. If you want to learn more about setting up a successful store online, contact Fannit today and our team will be glad to help.