What is ecommerce? Let’s find out!
The future of ecommerce is set to revolutionize consumer behavior. Whether you’re a curious shopper or someone who wants to start an online business, it affects your life in various ways.
In this guide, we’ll share everything you need to know about ecommerce, from the types of ecommerce to relevant stats.
Let’s get into it.
In This Article
- 1 What is Ecommerce?
- 2 The History of Ecommerce
- 3 What Are the Different Types of Ecommerce
- 4 What are the Advantages of Ecommerce?
- 5 Ecommerce Stats Worth Knowing
- 6 Summary: What is Ecommerce?
- 7 Want to Learn More?
What is Ecommerce?
Ecommerce – also known as e-commerce, eCommerce, or internet commerce – refers to the buying and selling of products and services using the internet.
The term ‘ecommerce’ is often used to refer to online shopping – the sale of physical products via the internet. However, it also applies to any type of online commercial transaction, such as auctions, banking, and software services.
The History of Ecommerce
To understand what ecommerce is, it helps to know a little about how it industry came to be. So, let’s take a quick look at the history of ecommerce.
It all started back in 1994 with a man named Phil Brandenberger.
Brandenberger made history by becoming the first person to make a purchase using the internet. Specifically, he used his Mastercard to buy a CD of the album Ten Summoners’ Tales by Sting, for $12.48.
This was the first time that encryption technology was used to facilitate a purchase on the internet. The New York Times shared the groundbreaking news in an article titled, “Attention Shoppers: The Internet is Open.”
In the same year, Jeff Bezos founded Amazon, an online store where customers could purchase books from more than one million titles.
This ecommerce business has grown to be one of the world’s largest companies – making Jeff Bezos the richest man in the world in the process.
The industry was fuelled by the rapid development of personal computing technology.
Way back in 1980, Bill Gates, the co-founder of Microsoft, shared his dream with the world: “A computer on every desk and in every home.” And in the mid-90s, that dream started to become a reality.
Alongside Gates, other notable innovators like Steve Jobs, who co-founded Apple, helped to make computers accessible to the average Joe.
Up until then, ecommerce still required consumers to post checks to purchase goods. However, in 1998, four years after Brandenberger’s online purchase, PayPal was founded. PayPal provided a secure and straightforward way to use credit cards to make payments on the internet.
In 2006, the floodgates opened with the launch of Shopify and other electronic commerce platforms.
These services made it easy and inexpensive for small businesses to create online stores. From this point on, anyone with a computer and an internet connection could buy and sell online.
Fast forward to 2014, and worldwide online sales reached a whopping 1.33 trillion U.S. dollars. Since then, the industry has continued to grow at an exceptional rate – global ecommerce retail sales amounted to 3.53 trillion U.S. dollars in 2019.
Today, the ecommerce industry is part of everyday life for many. One-day delivery and competitive costs make online shopping convenient for consumers. It’s also easier than ever to start an online business.
What Are the Different Types of Ecommerce
We can classify the types of ecommerce by the goods being sold, the parties involved, or the platforms used.
In this article, we’ll break down all three of these aspects so that you can get a rock-solid understanding of what ecommerce is.
The Types of Ecommerce Classified by What’s Sold
First, we’ll look at types of ecommerce with examples, classified by the products and services sold.
#1. Physical Products
This is what most people think of when they hear the term ‘ecommerce.’
It encompasses retailers selling products online, such as clothing, toys, furniture, and food products.
Let’s look at an ecommerce example from Gymshark (screenshot below) – a business that sells sports clothing.
Consumers can head to online stores like Gymshark to browse products, add items to their cart, and pay for them on the website.
Then, the business will ship the products to customers. Alternatively, some companies allow customers to purchase online and arrange to collect products in-store.
#2. Digital Products
Some ecommerce businesses sell digital products such as ebooks, software, music, and online courses.
RetroSupply (screenshot below) is an ecommerce business that sells graphic design templates and tools.
Consumers can browse and buy services online and receive the end product via email, or post.
#3. Physical Services
Many businesses use the internet to sell physical services. This category includes services from educators, freelancers, consultants, and agencies. For example, you can use the internet to hire math tutors, freelance writers, realtors, and plumbers.
Stretch Tents (screenshot below) based in Australia, uses its website to sell their tent rental and set up services.
You can rent a tent on their website, and they will deliver the tent to your location, and set it up for you.
#4. Digital Services
This next type of ecommerce covers all exchanges of digital services using the internet, such as subscriptions to digital marketing tools, website hosting, or accounting software.
You can find plenty of digital service examples on the Shopify app store, such as Omnisend Email Marketing (screenshot below). This app provides a way for companies to use email marketing to grow their businesses.
Another type of digital service is ‘affiliate marketing.’ It’s the process of referring consumers to a business and receiving a commission for every customer you help create.
For example, Website Builder Expert (screenshot below) is a Shopify affiliate. The website has articles that promote Shopify’s online store builder with links to sign up for the service. In this arrangement, Shopify pays Website Builder Expert a small fee whenever one of the website’s readers becomes a Shopify customer.
The Types of Ecommerce Classified by The Parties Involved
Here are four main types of ecommerce with examples when classified by the parties participating in the transaction.
#1. What is B2C Ecommerce?
B2C stands for ‘business to consumer.’ Any time a business sells to an individual using the internet, it can be considered B2C ecommerce.
For example, eco-friendly shoe brand Allbirds (screenshot below) sells products to consumers via its online store.
This type of ecommerce encompasses a large proportion of online transactions.
#2. What is B2B Ecommerce?
B2B stands for ‘business to business’ and is the name given to transactions between two or more businesses, whether products or services.
For example, Shopify (screenshot below) sells ecommerce solutions to other businesses. When small businesses want to start selling online, they can purchase a subscription to Shopify’s platform to build a website.
#3. What is C2C Ecommerce?
C2C stands for ‘consumer to consumer.’ This type of ecommerce refers to individuals selling to other individuals.
eBay (screenshot below) plays host to many examples of C2C ecommerce transactions. Individuals can sign up to sell items to other people.
#4. What is C2B Ecommerce?
C2B stands for ‘consumer to business.’ It refers to instances when individuals sell to businesses.
It’s fair to say that this type of ecommerce isn’t as widespread as the others mentioned. However, there are plenty of examples of C2B commerce out there.
Here’s an example from Decluttr (screenshot below).
This online business buys products from consumers, such as DVDs, video games, smartphones, and lego. The company then resells these products to consumers in B2C transactions.
The Types of Ecommerce Channels
Finally, let’s take a look at some of the common types of ecommerce channels used.
#1. What is an Ecommerce Store?
A common type of ecommerce channel is individual stores. For example, Beardbrand (screenshot below) sells men’s grooming products through its website.
#2. What is an Ecommerce Platform?
Ecommerce platforms are what powers individual stores.
#3. What is an Ecommerce Marketplace?
There are also plenty of niche ecommerce marketplaces online. Upwork connects freelancers with businesses and individuals looking for services. And Exchange Marketplace (screenshot below) is used to buy and sell websites and online businesses.
#4. What is Social Commerce?
Another common way to do business online is social commerce. This term refers to any transaction that takes place through a social media platform.
Many large social media platforms have made special features to facilitate this type of ecommerce, such as the Facebook Shop feature.
#5. What is Mobile Commerce?
Mobile commerce – also known as m-commerce – refers to any transaction made through mobile devices, such as smartphones and tablets.
Mobile commerce often takes place through mobile responsive websites and marketplace apps, such as Amazon Shopping or Shopify’s Shop app (screenshot below).
What are the Advantages of Ecommerce?
Understanding the benefits of ecommerce can make it easier to learn what it is and why it’s growing so quickly.
Here are nine advantages of ecommerce over traditional commerce.
1. Unlimited Reach for Businesses
Ecommerce allows businesses to enter almost any market, anywhere in the world. This provides an immense amount of opportunity as businesses have access to countless potential customers.
2. Wider Selection for Consumers
Simply put, you can purchase pretty much anything online! So, if your local town doesn’t have a dedicated anime comic book store, don’t worry – the internet has plenty.
3. Opportunities to Scale Niche Stores
It would be pretty difficult for someone in rural Montana to build a successful brick-and-mortar sriracha hot sauce store. The market just wouldn’t be big enough.
However, the internet provides a way for niche businesses to reach diehard fans wherever they are. Which is the reason Sriracha2Go (screenshot below) was able to become so successful.
4. Ecommerce Happens 24/7
Consumers don’t have to wait for stores to open, they can shop whenever they like!
Plus, businesses don’t ever have to close – ecommerce allows them to make sales all hours of the day. Even when customers in New York, U.S. are going to sleep, other customers in Sydney, Australia, are just about to take their lunch break.
It also allows consumers to save time. There’s no need to travel or walk around a store looking for the item they came for – a quick search is all it takes. Plus, many businesses offer same-day or next-day delivery.
6. Low Costs
With so much competition online and the ability to shop for better prices easily, consumers are often able to save money on purchases.
Many businesses pay thousands of dollars each month to rent a physical storefront. In contrast, Shopify (screenshot below) starts at just $29 per month.
7. Automated, Data-Driven Marketing
The internet provides businesses with some very advanced marketing tools. For example, Facebook’s ad pixel allows businesses to track website visitors and then automatically retarget them with ads on Facebook and Instagram.
8. Personalized Shopping Experiences
Thanks to technology and algorithms, it’s easier than ever for businesses to deliver personalized shopping experiences to individual consumers.
As a result, businesses can create more effective marketing campaigns, and consumers get to spend more time on items and services they find interesting.
9. Ecommerce Has a Low Barrier to Entry
Anyone with a computer and an internet connection can start an ecommerce business. It’s that simple. With free dropshipping tools like Oberlo (screenshot below), new entrepreneurs don’t even need to purchase inventory upfront.
Plus, there are tons of free resources online to help, and many marketing methods are free, such as social media marketing and SEO.
More Ecommerce Advantages and Disadvantages
To learn more about the pros and cons of ecommerce, check out this video from Oberlo.
Ecommerce Stats Worth Knowing
The scale and impact of the ecommerce industry can be challenging to grasp.
Here are 16 ecommerce statistics to help illustrate what it is and why it’s important.
Stat #1. Ecommerce is a Large Part of the Retail Industry
According to Statista, 14% of all retail sales worldwide are ecommerce sales. Plus, this figure is expected to reach 22% by 2023.
Stat #2. The Ecommerce Industry is Growing Quickly
In 2019, worldwide ecommerce retail sales amounted to 3.53 trillion U.S. dollars. And, revenues are expected to grow to 6.54 trillion U.S. dollars by 2023.
Stat #3. The Number of People Shopping Online is Growing
A massive 2.14 billion people worldwide are expected to make online purchases in 2021. In 2016, there were 1.66 billion global ecommerce consumers.
Stat #4. Amazon is the Largest Ecommerce Marketplace
The graph below shows the visitor market share of the top ecommerce marketplaces in the United States in 2018. Amazon received 56.1% of the segment’s traffic.
Stat #5. Mobile Commerce is Taking Over
In 2018, mobile commerce made up 63.5% of total ecommerce sales. By 2021, mobile commerce is expected to account for a whopping 72.9% of total sales.
In U.S. dollars, mobile commerce is expected to generate a staggering $3.55 trillion worldwide in 2021.
Stat #6. Consumers Value Mobile Shopping Experiences
According to Google, people who have a negative experience on a mobile shopping website are 62% less likely to purchase from the company in the future.
Stat #7. Page Load Speed Matters in Mobile Commerce
The likelihood of a consumer leaving a mobile webpage increases by 32% when the page takes one to three seconds to load (compared to pages that take less than a second to load).
What’s more, the chances of users leaving increases by 90% if the page takes between one and five seconds to load.
Stat #8. Younger People Spend the Most Time Shopping Online
In a 2016 US survey, BigCommerce found that on average, younger people spent the most time shopping online. Here’s how much time different generations spend shopping online, per week:
- Millennials and Gen Xers: 6 hours
- Baby boomers: 4 hours
- Seniors: 2.5 hours
Stat #9. The Key Benefit to Ecommerce is Convenience
The ability to shop 24/7 is the number one reason people shop online. Other benefits to shopping online include the ability to compare prices and save time.
The graph below shows the reasons consumers shop online.
Stat #10. Most Online Shoppers Conduct Research Before Purchasing
According to Salesforce, 85 percent of consumers research online purchases before buying.
Stat #11. Ecommerce Directly Affects Brick-and-Mortar Stores
While in a physical store, 65% of consumers use their mobile devices to compare prices.
Stat #12. Consumers Don’t Trust Online Advertisements
According to Hubspot, 65% of consumers don’t trust advertisements, and 71% don’t trust sponsored social media ads.
Stat #13. Consumers Want Ecommerce Businesses to be Transparent and Open
The graph below shows that consumers are more likely to trust businesses when they:
- Make it easy to contact people at the company (51%)
- Are open and honest about negative news or events (43%)
- Let consumers control how their data is used (41%)
Stat #14. Only a Small Number of Ecommerce Website Visitors Make a Purchase
On average, 2.86% of people who visit an ecommerce website make a purchase. In other words, roughly 1 in 35 people buy something.
Stat #15. The Majority of Ecommerce Shopping Carts are Abandoned
According to Statista, 69.57% of ecommerce shopping carts are abandoned.
To put it another way, for every 100 people who go online, find something to buy, and add it to their cart, almost 70 don’t go through with the purchase.
Stat #16. Consumers Want a Smooth Ecommerce Checkout Process
Online shoppers abandon ecommerce carts because:
- They were hit with extra costs like shipping fees and tax they felt were too high (60%)
- The website wanted them to create an account to be able to checkout (37%)
- They found the process too long or complicated (28%)
Summary: What is Ecommerce?
Ecommerce refers to any type of transaction that takes place using the internet.
The industry was born in 1994 when Phil Brandenberger became the first person to make a purchase using the internet. And entrepreneur Jeff Bezos started Amazon in the same year.
Many different things are sold in the ecommerce industry, such as:
- Physical products like clothing and tools
- Digital products like ebooks and online courses
- Physical services like freelance photography and plumbing services
- Digital services like digital marketing and website hosting
There are also many different channels, such as ecommerce marketplaces, platforms, dedicated stores, social commerce, and mobile commerce.
In summary, here are some of the advantages of ecommerce:
- Unlimited reach for businesses
- A wide selection for consumers
- Opportunities to scale niche stores
- Ecommerce happens 24/7
- Convenience for businesses and consumers
- Low costs for businesses and consumers
- Automated, data-driven marketing
- Personalized shopping experiences
- A low barrier to entry
Finally, while no one knows what the future of ecommerce will be, one thing’s for sure: It will continue to change the world as we know it.