What Is Ecommerce | Ecommerce Definition

What Is Ecommerce?

In 2020, it’s estimated that nearly 227.5 million shoppers will buy products online.[1] Shopping online has been on the rise year over year, and with the impact of the coronavirus, online shopping is more crucial than ever.

This online shopping phenomenon creates large demand and opportunities for businesses looking to expand their product base beyond brick-and-mortar stores. Ecommerce allows business owners to expand their companies and start selling their products where customers are already buying—online.

What Is Ecommerce?

If you’ve heard the word ecommerce thrown around, you might have wondered, “What is ecommerce, exactly?” By definition, ecommerce refers to electronic commerce, or rather, selling products online.

For example, if you’ve ever purchased a product through Amazon, you’ve engaged in ecommerce. Likewise, if you’ve booked hotel rooms or plane tickets through an online vendor or platform, you’ve also participated in ecommerce.

Ecommerce sales first began via desktop but have evolved through the years. Now, ecommerce transactions take place over a variety of mediums. You can easily order products through your smartphone or tablet and can even use social media apps like Instagram and Facebook to place ecommerce purchases.

Types of Ecommerce 

There are also various kinds of ecommerce transactions that you should be aware of as a business owner. Understanding which area your business best falls into can help you better make marketing decisions and identify potential risks.

1. B2C (Business to Consumer)

B2C transactions are arguably the most common form of ecommerce, or at least the type of transaction most people are familiar with. A B2C transaction takes place when a business sells their product, experience, or service, to the end user, or customer.

If your business sells directly to consumers, you’ll be looking at a shorter buy cycle, since the consumer generally already knows what they’re looking to buy or spends a short amount of time making a purchasing decision. This means you can usually spend less on marketing to make a sale, but should expect to make less money off of each sale than you would with B2B purchases.

B2C Ecommerce Examples

There are numerous B2C ecommerce examples that exist in today’s online marketplace. Some of the top competitors include Amazon, Wayfair, Walmart, Groupon, Etsy, and Apple.

2. B2B (Business to Business)

B2B purchases are those made when a business sells products or services to another business. In most cases, these products are then resold to end users, but not always. For example, if your business sells beauty products under your own label, but first buys the initial product from another business, you’re participating in a B2B sale, but ultimately selling using a B2C model.

If you create products that other businesses want to sell through their own ecommerce storefronts, you’re a B2B supplier. You’ll typically need to spend more in marketing to attract buyers, but businesses typically place larger orders than end users, so you’ll end up making more than you would with a B2C model.

B2B Ecommerce Examples

Some notable B2B ecommerce examples include Amazon Business, Alibaba, GE (General Electric), and Polycom. Many ecommerce platforms can accommodate both B2C and B2B sales, so some websites might fall into both categories.

3. C2B (Consumer to Business)

C2B ecommerce transactions take place when a consumer sells to a business. The best example of this can be found among freelance service websites that allow individuals to sell services to companies.

For example, if you’re a sole proprietor of a design company and you sell your services to companies, you’re primarily a C2B ecommerce seller.

C2B Ecommerce Examples

A few notable C2B ecommerce examples include Fivrr, Upwork, Elance, Aquent, and Freelancer.

4. C2C (Consumer to Consumer)

Last but not least, C2C ecommerce transactions are consumer-to-consumer purchases. Most C2C transactions are labeled as exchanges of goods (which can be products for money). Reselling products is traditionally the model for C2C sales.

C2C Ecommerce Examples

A few of the main C2C ecommerce examples include eBay, Poshmark, and Facebook Marketplace.

While there are other even more specified types of ecommerce sales, these four are the most common and cover just about all ecommerce situations your business is bound to encounter.

Examples of Ecommerce Models

In addition to the different types of ecommerce transactions, there are also a few different business models to keep in mind. Here are some of the most popular ecommerce business ideas.

1. Retail

In a retail ecommerce model (usually B2C, but also B2B), a company will sell a product directly to a consumer. For example, a pet supply company will sell dog food to a pet owner. A business retail sale could be a power cord company selling multiple cords to a small business.

2. Wholesale

This model can also be B2C or B2B, though it’s typically B2B. With wholesale ecommerce, businesses sell retail products in bulk quantities to buyers or companies, who often later resell them to end consumers.

3. Subscription

In this model, the consumer signs up for a recurring purchase that is billed on a predetermined cadence, such as weekly, monthly, or quarterly. Signing up for Netflix is an example of a subscription purchase. A physical subscription purchase could be signing up for a makeup subscription box.

4. Crowdfunding

This model encourages individuals or companies to submit money to a crowdfunding platform to support the development of a new product or service. Often, depending on the amount of money paid, consumers will receive a tier of products or services once the product or company launches.

5. Dropshipping

With dropshipping, a company sells products to consumers, but enlists a third-party distributor to actually produce, pack, and ship the products once an order is placed, so they aren’t responsible for storing inventory or shipping products..

Benefits of Ecommerce

There are many benefits to forming an ecommerce business versus a traditional brick-and-mortar company. A few top benefits include:

  • Eliminate the cost of office or showroom space. When you run an ecommerce business, you likely won’t need to rent or buy office space or a storefront, which significantly cuts down on your fixed expenses.
  • Gain access to a wider selection of customers. Many brick-and-mortar stores have a limited pool of customers, simply because of their location. With an ecommerce business model, you can market to customers all across the globe, as long as you have a shipping system that can reach them.
  • Earn more money on digital products. If you sell any digital products, such as ebooks, videos, or online courses, you can offer them to your customers with very little legwork, offering you a higher return on investment (ROI).
  • Grow your business more easily. If you decide to expand into a new market or create new product or service lines, you won’t need to find physical real estate for the expansion. Using an online marketplace makes growing much more cost effective.
  • Easily leverage data. Traditional stores may have some data on who their customers are and which products are a hit, but the information runs dry after that. Ecommerce stores can track how customers reach their storefront, which products they add to their carts, how long they linger on certain pages, and much more, to help improve their website layout, enhance marketing efforts, and boost future sales.
  • Customers can shop 24/7. Another benefit for your consumers is that they’re able to shop your online store at their convenience, instead of being limited to your store’s hours.
  • Access to more inventory. There’s nothing more frustrating than finding the perfect item in the wrong size or color. Ecommerce platforms allow customers access to more options, rather than limiting their selections to one particular location’s stock.

Drawbacks of Ecommerce

Of course, there are also some key drawbacks specific to ecommerce businesses. A few of the most common disadvantages include:

  • Lack of personal shopping experience. Although ecommerce stores have come a long way in recent years and can offer a pretty incredible shopping experience, they still can’t match in-person shopping experiences for many consumers, particularly those with special needs.
  • Site maintenance. Ecommerce depends on a successful ecommerce platform that is both easy to navigate and visually appealing, as well as one that can securely process payments and collect important data. Creating your ecommerce website and continuing to maintain it will take time.
  • Managing returns. Since customers can’t touch or try on the products they’re buying before purchasing them, there’s always the risk of an item needing to be returned. While including free return packages and labels can be helpful, not every small business can afford to do so, which could steer customers away.
  • Online payment security. When shopping online, consumers also pay online. While there are many services designed to keep customers’ credit card information protected and secure, online breaches still occur. This fear makes some buyers less likely to purchase from ecommerce companies.
  • More easily compare prices. With just a few clicks, a consumer can easily check if a product you’re selling can be found for less money elsewhere. When pricing your products, be sure to check out the competition as well.
  • Shipping delays. Many consumers shop for instant gratification, and clicking the “add to cart” button just doesn’t do it for everyone. While fast shipping times can improve consumers’ likelihood of making a purchase, if a consumer needs a product fast, they might opt out of ecommerce options.
  • Customer service issues. All ecommerce stores should offer some type of customer service, whether it’s a helpline, email system, or online chat option. No matter how great your customer service is, however, it often can’t beat the experience and expediency of going to see someone in person to resolve an issue.

Article Sources:

  1. Statista.com. “Number of Digital Shoppers in the United States from 2016 to 2021

Courtney Johnston

Courtney Johnston is a freelance writer, specializing in finance, real estate, and small business. Her writing has appeared in The Chicago Tribune, Benzinga, Rocket Mortgage, BestReviews, Mashvisor, and MoneyGeek. She also teaches writing instruction at the University of Indianapolis. Courtney enjoys condensing complex topics into easily digestible content for readers.

Read Full Author Bio
Disclaimer
JustBusiness strives to keep information up-to-date but, at times, information may be different on a product or service provider’s website. Additionally, while we are compensated by some marketing partners, these partnerships do not influence our opinions of the products and services available to small businesses. All partner products and services are provided without warranty from JustBusiness. Please review a product or service provider’s terms and conditions when evaluating such products and services.