Electronic commerce is also known as e-commerce. “E-commerce” describes companies and individuals who buy and resell goods and services online. It can be conducted on tablets, computers, cellphones, and other smart devices and is available in a variety of market segments.
E-commerce transactions can now be used to buy almost any good or service imaginable, including books, airline tickets, music, and financial services like stock trading and online banking.
Types of E-commerce
An e-commerce company can choose to run in a variety of ways, depending on its products, services, and organizational structure. There are following popular business models.
Business to Consumer (B2C)
Direct-to-consumer e-commerce companies market their goods to customers. A business-to-consumer company deals directly with the customer who will ultimately use the product as opposed to distributing it to an intermediary.
A website for your neighborhood sporting goods store might use this type of business model to sell things, while a mobile app for lawn care might be used to book landscaping services.
Business to Government (B2G)
Some businesses specialize in working as contractors for agencies or government administrations. Just like in a B2B relationship, the firm produces valuable commodities and transmits those goods to an entity.
B2G e-commerce companies frequently have to meet extremely stringent product or service standards, request bids for projects, and adhere to government requests for proposal criteria.
Business to Business (B2B)
E-commerce companies can sell products directly to customers, much like B2C companies. However, that user can be another business as opposed to a consumer. B2B transactions usually involve greater quantities, more stringent requirements, and longer lead times. If the order requires repeated production processes, the company placing the order may additionally need to set recurring goods.
Consumer to Consumer (C2C)
The only organizations capable of making sales are well-established corporations. Digital marketplaces, an example of an e-commerce platform, connect customers with other customers who can list their products and carry out their sales.
These C2C platforms could be listings in the form of auctions (like eBay auctions), or they might call for further conversation about the good or service being offered (like Craigslist ads). Technology-enabled C2C e-commerce platforms let customers buy and sell products independently of companies.
Consumer to Government (C2G)
Consumers can communicate with administrations, organizations, or governments through C2G partnerships, which differ from standard e-commerce relationships. Instead of a trade of services, these partnerships usually involve an obligation-based transaction.
Uploading your Federal tax return to the IRS’s online portal would be an example of an information exchange e-commerce transaction. You can also pay your university’s tuition online or mail your property tax payments to the county assessor.
Consumer to Business (C2B)
Modern platforms have made it simpler for customers to interact with businesses and provide their services, particularly temporary jobs, gigs, or freelance opportunities. Consider the job postings on Upwork, for example. Customers can get in touch with companies looking for certain employees or ask them for estimates.
To provide clients with greater choice over how their needs in terms of timing, cost, and employment are met, the e-commerce platform links businesses with independent contractors in this manner.
Types of E-commerce Revenue Models
A firm must pick how it wants to make money in addition to deciding what kind of e-commerce company it wants to be. The business has a few alternatives for how it wishes to handle orders, keep inventory, and distribute goods because of the distinctive features of e-commerce.
Drop Shipping
Drop shipping, which is sometimes regarded as one of the simpler e-commerce models, enables a business to set up an online shop, earn revenues, and then rely on a supplier to deliver the product.
The e-commerce business collects money when the sale is made using a credit card, PayPal, bitcoin, or another type of digital currency. The dropship supplier receives the order from the e-commerce store after that. This provider oversees the warehouse of items, manages the inventory, packages the goods, and delivers the finished goods to the customer.
Wholesaling
Wholesaling, a more capital-intensive method of conducting business online, requires managing stock levels, monitoring client orders, storing shipping information, and frequently owning the warehouse space needed to store goods.
Retailers may be charged unit prices by wholesalers or bulk pricing. However, the general strategy for wholesaling is to establish connections with purchasers of a comparable, standardized product in large quantities or numerous smaller buyers.
White Labeling
White-label e-commerce businesses make use of popular products offered by other businesses. The e-commerce business receives the existing product after a consumer puts in an order, repackages it with their packaging and label, and then ships the product to the customer. Although the e-commerce business has little to no control over the products it gets, it often has few to no manufacturing limitations.
Private Labelling
For businesses that do not have significant up-front capital or do not have their own manufacturing space to make items, private labeling is a more suitable e-commerce strategy. A contracted manufacturer receives ideas from private-label online retailers, who then produce the goods. The manufacturer can also be able to deliver a product directly to a client or a recipient business. Companies that might get on-demand orders with quick turnaround times but are unable to handle the capital expenditure needs are best suited for this type of e-commerce.
Types of E-commerce Websites
They all have the internet in common, regardless of the customer base you sell to or the revenue model you select. You also need a website to be visible online. Consider the following examples of several sorts of eCommerce websites:
Online Retailers
Large stores that wholesale goods from other brands frequently operate online retail websites. Walmart and Target are the two most prevalent instances of online businesses. An online retailer purchases goods from other companies at wholesale discounts and resells them to consumers from a personal website at the maximum retail price (MRP).
Single Brand Websites
This website facilitates the sale of goods and services by small enterprises and individuals. It’s a typical style of eCommerce website, and if you’re new to the market, odds are good that you’ll start with a single-brand website. The likes of Nike, Apple, and Audi are a few typical examples.
You could also choose to create separate websites for each brand even if your company owns several. Despite having websites of their own, Ferrero Corporate, the parent corporation, owns Nutella, Mon Cherie, and Hanuta. This segmentation ensures that Ferrero takes up the most space on the sweet shelves in your neighborhood store, provides each brand its unique personality, and reduces the risk for the parent corporation.
Affiliate Websites
The only method to earn money online isn’t by selling goods on your website. You can make your non-commercial website into an affiliate website and receive a commission from other companies if it has a large readership.
An affiliate website is a popular, non-profit website (like a blog or a personal website) that promotes the goods and services of other companies. You get a cut of the sale when a customer clicks through from your affiliate website to the company’s website and makes a purchase.
A few great examples:
A wirecutter: A website dedicated to tech journalism that reviews the greatest equipment.
Money Saving Expert: An online financial counselor.
This Is Why I’m Broke: A website that sells bizarre and unique gifts.
Marketplaces
A marketplace comes to mind when talking about eCommerce for the average person. Similar to internet shopping portals, it offers a variety of brands under one roof. However, the business strategy is very different. By purchasing goods from external brands at a discount and reselling them at MRP, they do not make any money.
Customers can conduct business with one another in a C2C environment created by marketplaces. The listing and transactional fees that clients pay to showcase and sell their goods are their main sources of income. Amazon, eBay, Etsy, and Alibaba, are the largest examples of online marketplaces.
Advantages of E-commerce
Consumers can benefit from e-commerce in the following ways:
Convenience
E-commerce is possible every day of the week, around the clock. Even though e-commerce can be time-consuming, it is still feasible to make sales while you sleep or make money away from your store.
Potentially Less Expensive Startup Costs
E-commerce businesses typically don’t need a physical storefront, but they may need a warehouse or manufacturing facility. Digital operations frequently cost less than paying insurance, rent, building maintenance, and property taxes.
A Wider Selection
Many retailers carry a larger selection of goods online than they do in their physical locations. In addition, many online-only businesses could provide their clients with a special product that is unavailable elsewhere.
International Sales
An online retailer is not constrained by physical boundaries and can sell to anyone on the globe as long as they can transport their products to the buyer.
Customer Retargeting is Simpler
It is simpler to draw clients’ attention to strategically positioned adverts, targeted marketing initiatives, or pop-ups with a clear purpose as they peruse a digital marketplace.
Disadvantages of E-commerce
- Insufficient client service
You can’t just ask a salesperson to show you a certain model’s features in person if you buy a computer online. Additionally, even while some websites let you chat with staff members online, it’s not that typical.
- Technology dependence
Your company is shut down until the e-commerce shop is returned if your website breaks, receives an excessive amount of traffic, or needs to be temporarily taken down for whatever reason.
- Inability to handle goods
E-commerce purchases might be disappointing if the items obtained do not live up to expectations because online photos do not always accurately portray an item.
- No immediate gratification
You must wait for the delivery of an online purchase to your house or place of business. However, by offering same-day delivery as a premium option for a select few products, e-tailers like Amazon alleviate the misery of waiting.
- Increased competition
Having a low entry barrier makes it easier for competitors to enter the market, which is a benefit even though it is also a drawback. E-commerce companies need to be cautious with their marketing strategies and watchful with SEO optimization to make sure they have a digital presence.
Challenges of e-commerce
Due to difficulties like these, some businesses may try to avoid online commerce.
- Minimal face-to-face communication.
- Technical problems.
- Data protection.
- Difficulties in shipping and completing large-scale orders.
