E-Commerce: Definition, Examples and Trends. | Built In

E-Commerce Industry Overview

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E-Commerce Defined

E-commerce refers to the buying and selling of goods and services over the internet. This type of commerce came into popular use in the late 1990s with the rise of Amazon.com and has grown exponentially in recent years, as more people use the internet to purchase items. The prominence of e-commerce is demonstrated by the fact that people now mention Cyber Monday in the same breath as Black Friday during the holiday shopping season.

E-commerce’s ascension is due in part to the increase of convenience and product choice it offers online shoppers, as well as the way it allows new retail businesses to thrive without having to operate a physical storefront.

E-Commerce Definition

E-commerce, or electronic commerce, refers to any type of commercial transaction that takes place over the internet. This can include buying and selling physical goods, as well as digital products and services. Unlike traditional retail stores, e-commerce businesses do not need to have a physical location.

The e-commerce industry’s rise has led to the creation of new online brands, new marketplaces that facilitate transactions between buyers and sellers, new sources of revenue for publishers and social media platforms, and a new burgeoning sector of vendors that service e-commerce businesses.

E-commerce has also profoundly changed the shopping experience for consumers worldwide, as people can literally buy products from home with one click — or a voice command — and have it delivered to their doorstep within hours.

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E-Commerce Growth

About one-fifth of all retail purchases are made online, which amounts to more than $1 trillion in online retail sales. By 2026, that number is forecast to grow to about 25 percent. For some perspective, consider that in 2004, e-commerce sales only made up two percent of purchases in the United States.

History of E-Commerce

On August 11, 1994, Phil Brandenberger of Philadelphia made the first ever credit card purchase using encryption over the internet, ushering in the modern e-commerce era. The purchase? Sting’s 1993 CD Ten Summoner’s Tales, of course. The seemingly mundane $12.48 purchase set off what would eventually become one of the most transformative industries in the world.

By the turn of the century, notable e-commerce giants had emerged, including Amazon, which started as a bookseller but today accounts for 40 percent of the entire e-commerce market, and eBay, a marketplace platform that facilitates peer-to-peer selling of goods, such as electronics, art and clothing.

By the early 2010s, it became clear that social platforms like Facebook and Instagram were the most efficient places for e-commerce brands to advertise their products. These platforms armed retailers with actionable data that allowed them to fine-tune their messaging and convert impressions into sales. Upstart brands took advantage of this landscape and used social media platforms to acquire customers cheaply and efficiently. This helped pave the way for the popularity of so-called direct-to-consumer (DTC) brands.

The steady growth of e-commerce has at least partially disrupted the long-established physical retail industry, with many shopping malls and department stores shuttering due to less foot traffic. Turns out, many consumers would rather browse for products online and discover new brands while scrolling their social media feeds than drive to their destination.

The COVID-19 pandemic provided a surge for e-commerce businesses, as more people did their shopping from home and wanted to buy more things for their homes, since they were spending more time there. According to the Annual Retail Trade Survey, e-commerce sales in 2020 increased by 43 percent. While the pace of online shopping hasn’t quite kept up in the years since, many believe that the pandemic accelerated the upward trend of e-commerce as the primary means of shopping.

Benefits of E-Commerce

E-commerce offers benefits to both buyers and sellers that physical retail stores simply can’t.

Convenience for Consumers

E-commerce provides shoppers with an unrivaled level of convenience. People can buy just about anything they need without getting out of bed — day or night — and it takes just a few mouse clicks or screen taps and a couple of shipping days (sometimes even fewer) for your purchase to arrive at your doorstep.

The sheer ease and convenience of online shopping is no better exemplified than in Cyber Monday, a day dedicated to lower-than-normal deals on the best products the internet has to offer. Many of these purchases are made via mobile device, too, solidifying e-commerce’s spot as the most convenient and easy way to shop.

Wider Selection for Consumers

With e-commerce, shoppers also have access to thousands of crowd-sourced reviews to help verify a product’s quality. They can quickly and easily conduct research and compare products and find the best available price, rather than simply sticking with whatever the local retail store has on its shelves. 

Lower Costs for Businesses

Millions of entrepreneurs can set up their online shops with lower overhead costs than traditional brick-and-mortar stores. There is no need to staff physical store locations, for example.

Wider Reach for Businesses

With the power of the internet, retail stores can now reach customers all over the globe. Prior to the advent of e-commerce, small businesses could only operate in their immediate geographical areas with smaller customer bases. Today, there are many e-commerce platforms that allow the “little guys” to compete with the big box stores on a global scale.

Personalization for Both Consumers and Businesses

E-commerce personalizes the entire shopping experience. This has benefits for both shoppers and merchants alike. On the seller side, e-commerce allows you to programmatically display specific advertisements and products that directly appeal to an individual customer. Using data on what sellers have viewed or put into their online carts, sellers can then gently remind buyers to purchase their recently viewed items. This type of information has streamlined the selling process and has enabled online retailers to grow their profits.

The personalization aspect of e-commerce enables buyers to see exactly what they want and when they want it. Have you ever come across an ad for a pair of shoes you were just looking at five minutes prior? What about hotel deals to a city you were just doing some research on? Personalization refines our choices, introduces us to products we most likely want and helps us to make the most well-informed purchases. The data gathered by e-commerce stores brings the right product to us, saving us the time — and sometimes money — that we normally would spend walking aimlessly around department stores.

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