What is e-commerce?
E-commerce, also known as electronic commerce, is the exchange of goods and services as well as the sending of money and data over an electronic network, most commonly the internet.
These business dealings can be either B2B (business-to-business), B2C (business-to-consumer), C2C (consumer-to-consumer), or C2B.
E-business and e-commerce are frequently used interchangeably. The transactional procedures that make up online retail shopping are also occasionally referred to as e-tail.
The widespread use of e-commerce sites like Amazon and eBay over the past 20 years has significantly boosted the growth of online retail.
How does e-commerce work?
The internet is what drives e-commerce. Customers use their own devices to access an online store to browse the selection and place orders for goods or services.
The order manager, a central computer, will receive information about the order.
It will then be sent to databases that control inventory levels, a merchant system that controls payment data using tools like PayPal, a bank computer, and a merchant system. Finally, it will circle back to the order manager.
This is done to ensure that there is enough stock in the store and money in the customer's account to fulfill the order.
The order manager will alert the store's web server once the order has been validated.
The customer will see a message stating that their order has been successfully processed.
The order manager will then notify the warehouse or fulfillment department that the product or service can be delivered to the customer by sending order data to those departments.
A customer may receive tangible or digital goods at this point, or access to a service may be granted.
Online marketplaces where sellers register, like Amazon, software as a service (SaaS) tools that let users "rent" online store infrastructures, or open source tools that businesses manage using their in-house developers are some examples of platforms that host e-commerce transactions.
Types of e-commerce
Instead of between businesses and consumers, business-to-business (B2B) e-commerce refers to the electronic exchange of goods, services, or information between businesses.
Online directories and websites that allow businesses to search for products, services, and information as well as start transactions through e-procurement interfaces are two examples.
According to a 2018 Forrester report, B2B e-commerce will reach $1.8 trillion by 2023 and represent 17% of B2B sales in the United States.
Online retail is known as business-to-consumer (B2C) e-commerce. It occurs when companies offer goods, services, or information to customers directly. The phrase gained popularity in the late 1990s dot-com boom, when online stores and sellers of goods were still a novelty.
Today, there are countless online malls and stores that sell all kinds of consumer goods. The most recognizable of these websites is Amazon. In the B2C market, it is king.
Consumers trade goods, services, and information with one another online in a process known as consumer-to-consumer (C2C) e-commerce. These transactions are typically carried out through a third party that offers an online platform for their execution.
Two instances of C2C platforms are online auctions and classified ads. Two well-known examples of these platforms are eBay and Craigslist. C2B2C, or consumer-to-business-to-consumer, is another name for this type of e-commerce because it involves businesses like eBay.
C2C transactions are also possible on platforms like Facebook Marketplace and the fashion reselling platform Depop.
Consumers offer their goods and services for sale to businesses online through a type of e-commerce known as consumer-to-business (C2B).
This goes against the conventional B2C business model.
A market that offers royalty-free photos, images, media, and design elements, like iStock, is a well-known illustration of a C2B platform. An additional illustration is a job board.
Online transactions between businesses and public administration or governmental entities are referred to as business-to-administration (B2A) transactions.
Different kinds of e-services or e-products are required by numerous governmental branches. These goods and services frequently deal with legal records, registers, social security, monetary information, and employment.
Businesses can supply these electronically. As investments have been made in e-government capabilities, B2A services have increased significantly in recent years.
Online transactions between consumers and public administration or governmental entities are referred to as consumer-to-administration (C2A) transactions.
Although the government hardly ever purchases goods or services from people, people frequently do so in the following areas:
- Social security. Distributing information and making payments.
- Taxes. Filing tax returns and making payments.
- Health. Making appointments, providing test results and information about health conditions, and making health services payments.
Mobile e-commerce, also known as m-commerce, describes online purchases made using mobile devices like smartphones and tablets. It includes payments, banking, and shopping on mobile devices. By enabling customers to complete transactions via voice or text conversations, mobile chatbots facilitate m-commerce.
pros and cons of e-commerce
E-commerce has many advantages, including round-the-clock accessibility, quick access, a wide range of products and services, ease of accessibility, and global reach.
- Availability. E-commerce sites are accessible 24/7, allowing users to browse and shop at any time, with the exception of outages and scheduled maintenance. Brick-and-mortar stores frequently have set hours of operation and occasionally close completely.
- Speed of access. While crowds can slow down customers in a physical store, e-commerce sites run quickly due to considerations regarding compute and bandwidth on both the consumer device and the e-commerce site. The loading time of the product and shopping cart pages is under a second. An online purchase can be made in a few clicks and under five minutes.
- Wide availability. "Earth's Biggest Bookstore" was Amazon's original tagline. It was able to make this assertion because it was an online store rather than a brick and mortar establishment that needed to stock every book on its shelves. With the help of e-commerce, businesses can offer a wide range of goods, which are then shipped from one or more warehouses after a customer makes a purchase. Customers will probably find what they're looking for more easily.
- Easy accessibility. Customers looking in a physical store might have trouble finding a specific item. Website users can instantly search for a product using the site's search feature and browse product category pages in real time.
- International reach. Businesses with physical stores sell to customers who come into those locations. Businesses can sell to anyone who has access to the internet using e-commerce. E-commerce has the potential to increase a company's clientele.
- Lower cost. Pure-play e-commerce companies do not have to pay rent, stock, or payroll costs associated with operating physical stores. However, they might be responsible for shipping and storage fees.
- Personalization and product recommendations. A visitor's browsing, search, and purchase history can be tracked on e-commerce websites. They can gather information about target markets and present personalized product recommendations using this data. Examples include the "Frequently bought together" and "Customers who viewed this item also viewed" sections on Amazon product pages.
The perceived drawbacks of e-commerce include occasionally poor customer service, the inability for customers to physically touch or see a product before making a purchase, and the lengthy shipping wait times.
- Limited customer service. Customers can ask a clerk, cashier, or store manager for assistance if they have a question or problem in a physical store. Customer service in an online store may be restricted: The website might only offer support during specific hours, and its online service options might be confusing to use or fail to address a particular query.
- Limited product experience. Although looking at product images on a website can give you a good idea of what it is like, it's not the same as actually using the product, such as when you play a guitar, evaluate the picture quality of a television, or try on clothes. Online shoppers may wind up purchasing goods that fall short of their expectations and need to be returned. In some circumstances, the cost of shipping a returned item to the merchant is borne by the customer. The ability of customers to inspect and test e-commerce goods is anticipated to improve with augmented reality technology.
- Wait time. Customers purchase items in stores, pay for them, and then take them home. Customers who shop online must wait for the product to be delivered to them. Shipping windows are getting smaller even though next-day and even same-day delivery are becoming more common.
- Security.Hackers with the right skills can make websites that look real and sell well-known products. Instead, the website either steals credit card information from customers or sends them fake or imitation versions of those products. Even legitimate e-commerce websites have risks, particularly when customers save their credit card details with the merchant to facilitate future purchases. Threat actors might steal that credit card information if the retailer's website is breached. A retailer's reputation may be harmed as a result of a data breach.
E-commerce applications
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Online marketing strategies are used by many retail e-commerce apps to entice users to the platform. Email, online shopping carts and catalogs, file transfer protocol, web services, and mobile applications are some of these.
Both B2C and B2B activities as well as other forms of outreach use these strategies. They include sending mobile devices SMS texts and targeted emails with advertisements and e-newsletters to subscribers.
Sending unwanted emails and texts is typically referred to as spam. With the help of tools like digital coupons, social media marketing, and targeted advertisements, more businesses are now making an effort to attract customers online.
Security is another area on which e-commerce companies are concentrating.
Administrators and developers should think about the security and privacy of user data, when creating e-commerce systems and applications, consider data governance-related regulatory compliance requirements, personally identifiable information privacy laws, and information protection protocols.
While some security features are incorporated into an application's design, others need to be updated frequently to address evolving threats and discovered vulnerabilities.
E-commerce platforms and vendors
A tool for managing an online store is called an e-commerce platform.
The sizes of e-commerce platform options range from those for small businesses to those for large corporations.
These e-commerce platforms include online markets like Amazon and eBay, which only call for user account registration and minimal IT implementation.
SaaS, which allows store owners to essentially rent space in a cloud-hosted service, is another e-commerce platform model.
Neither internal development nor on-site infrastructure are necessary with this strategy.
Open source platforms are another type of e-commerce platform that need to be manually implemented and maintained or hosted in a cloud or on-premises environment.
The following are a few instances of e-commerce marketplace platforms:
- Alibaba
- Amazon
- Chewy
- eBay
- Etsy
- Overstock
The following vendors provide e-commerce platform services for customers hosting their own online store websites:
Government regulations for e-commerce
The Federal Trade Commission (FTC) and the Payment Card Industry (PCI) Security Standards Council are two of the main organizations that oversee e-commerce activities in the United States.
The FTC keeps an eye on things like content marketing, online advertising, and customer privacy.
The PCI Security Standards Council creates guidelines and rules, such as PCI Data Security Standard compliance, that specify how to handle and store financial data about customers in a secure manner.
Businesses should authenticate business transactions, restrict access to resources like webpages for registered or chosen users, encrypt communications, and use security technologies like Secure Sockets Layer and two-factor authentication to ensure the security, privacy, and effectiveness of e-commerce.