What is e-commerce in 2023? Definition, benefits, examples

E-commerce is the buying and selling of goods or services via the internet, and the transfer of money and data to complete the sales. It’s also known as electronic commerce or internet commerce.

Online selling has changed tremendously since it began; the evolution and history of e-commerce is fascinating – and it’s advancing at an even quicker pace today.

Today, questions about e-commerce usually center around which channels are best to execute business online, but one of the most burning questions is the appropriate spelling of e-commerce. The truth is, there isn’t any one that’s right or wrong, and it usually comes down to preference.

Here’s a few of the variations of how e-commerce is spelled: 

• e-commerce

• E-commerce

• ecommerce

• Ecommerce

• eCommerce

• e commerce

(In other words, “what is e-commerce” is far easier to answer than how to spell it, so we may have to agree to disagree on the proper spelling).

“Molton Brown beat its 2022 Black Friday – Cyber Monday forecast expectations, yielding ~430k units across all channels amounting to £ 6.5m. 60% of our sales are from our webshops based on SAP Commerce Cloud.” – Anjun Murari, VP of Global Sales Channels & Strategic Development, Molton Brown Global

How does e-commerce work?

E-commerce, or electronic commerce, is the exchange of goods and services, or the transaction of funds or data, over the internet. This process of buying and selling goods and services online typically consists of the exchange of data or currency to process a transaction involving more than one entity or individual.

The customer places the order at the online store using a web browser; the order details are then relayed to a central backend system – an e-commerce platform, which facilitates or performs several tasks, including:

• Receive the order
• Update stock or inventory levels and confirming if there’s sufficient stock
• Process the payment for the order
• Confirm adequate funds were received to fulfill the order
• Notify the customer that the order was successfully processed.
• Notify the shipping department for the order to be shipped to the customer, or access to the service to be granted.

What are the most common types of e-commerce businesses?

As commerce continues to evolve, so do the ways that it’s conducted. Following are the most common types of e-commerce businesses and examples of what they mean:

1. Business to Consumer (B2C):

   B2C e-commerce is the most popular e-commerce model. Business to consumer means that the sale is taking place between a business and a consumer, like when you buy something from an online retailer.

2. Business to Business (B2B):

   B2B e-commerce refers to a business selling a good or service to another business, like a manufacturer and wholesaler, or a wholesaler and a retailer. Business to business e-commerce isn’t consumer-facing, and usually involves products like raw materials, software, or products that are combined. Manufacturers also sell directly to retailers via B2B ecommerce.

3. Direct to Consumer (D2C):

   Direct to consumer e-commerce is the newest model of ecommerce, and trends within this category are continually changing. D2C means that a brand is selling directly to their end customer without going through a retailer, distributor, or wholesaler. Subscriptions are a popular D2C item, and social selling via platforms like InstaGram, Pinterest, TikTok, Facebook, SnapChat, etc. are popular platforms for direct to consumer sales.

4. Consumer to Consumer (C2C):

   C2C e-commerce refers to the sale of a good or service to another consumer. Consumer to consumer sales take place on platforms like eBay, Etsy, and Fivver.

5. Consumer to Business (C2B):

   Consumer to business is when an individual sells their services or products to a business organization. C2B encompasses influencers offering exposure, photographers, consultants, freelance writers, etc.

6. Business to Government (B2G):

   Also known as business-to-administration (B2A), business to government involves the sale of goods and services between the business sector as a supplier and a government entity as a customer. For example,  government agencies may orders goods or services from external third-party contractors for cleaning and maintaining of public spaces like parks.

7. Consumer to Government (C2G)

   : Also called consumer-to-administration (C2A), consumer to government enables consumers to provide feedback or request information regarding public agencies directly to the government administration or authorities. Examples include paying an electricity bill or taxes through a government website.

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The type of goods you can sell through an e-commerce business

It’s plainly understood that in order to run an e-commerce business, you must have something to sell. Unlike brick-and-mortar businesses, an ecommerce store can take on a number of forms, where the economic exchange involves a variety of products and services. Here are three type of goods you can sell online.

Sale of physical goods

The sale of physical goods is the exchange of monetary value for the purchase of goods that are tangible and have physical mass, for example, merchandize. Physical goods include both durable ( e.g., cars, TVs, furniture) and non-durable goods  (e.g., food and beverages).

Sale of digital goods

The sale of digital goods involves the exchange of monetary value for purchase of good that are intangible and exist in digital form, such as digital media like audio files, video files, and e-books.

Sale of services

The sale of services involves the exchange of monetary value in return for value to customers that want to achieve specific outcomes. Put another way, a service is a means of delivering value to customers by facilitating specific outcomes that customers expect to achieve. Examples of a service include transportation, healthcare, and education.

What are the most common types of e-commerce business models?

Everyone from independent freelancers to small businesses to the largest of corporations can benefit from the ability to sell their goods and services online at scale.

Following are some the most common types of e-commerce business models:

Retail: Retail e-commerce is the sale of products or services through an online store directly to a consumer without an intermediary. This ecommerce delivery model is also referred to by other terms such as online retail, e-tail, electronic retail, or e-retail

Drop shipping: Drop shipping is the sale of products that are manufactured and shipped to consumers via a third party. The key difference from the retail ecommerce delivery model is that the selling party doesn’t stock or own inventory.

Digital products: These are downloadable items like templates, courses, e-books, software, or media that must be purchased for use. Whether it’s the purchase of software, tools, cloud-based products or digital assets, these represent a large percentage of ecommerce transactions.

White labeling: The white label business model involves a company selling products with its own branding but manufactured by others. After a customer places an order, the ecommerce company receives the white labeled product, applies their branding and packaging, then delivers the product to the customer.

Wholesaling: Wholesaling involves products sold in bulk. Wholesale products are usually sold to a retailer, who then sells the products to consumers.

Private labeling: Private labeling is a suitable approach for companies that may not have upfront capital or don’t have their own manufacturing space to produce goods. Typically, private label ecommerce businesses send their plans to a contracted manufacturer, which manufactures the product. The manufacturer, also referred to as Original Equipment Manufacturer (OEM), may also have the ability to ship directly to a customer or ship directly to the company receiving the order.

Services: These are skills like coaching, writing, and influencer marketing, that are purchased and paid for online.

Subscription: A popular D2C model, subscription services are recurring purchases of products or services on a regular basis.

Crowdfunding: Crowdfunding allows sellers to raise startup capital in order to bring their product to the market. Once enough consumers have purchased the item, it’s then created and shipped.

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Top e-commerce companies

• Alibaba:

  Launched in 1999, the Chinese company Alibaba is by far the world’s most successful e-commerce company and retailer, hosting the largest B2B (Alibaba.com), C2C (Taobao.com), and B2C (Tmall) marketplaces across the globe. Their online profits have surpassed all US retailers combined – including Walmart and Amazon –

  Launched in 1999, the Chinese company Alibaba is by far the world’s most successful e-commerce company and retailer, hosting the largest B2B (Alibaba.com), C2C (Taobao.com), and B2C (Tmall) marketplaces across the globe. Their online profits have surpassed all US retailers combined – including Walmart and Amazon – since 2015

• Amazon:

  Amazon is the largest e-commerce retailer in the US, and has changed the face of retail so much that a burning question for most retailers is

  Amazon is the largest e-commerce retailer in the US, and has changed the face of retail so much that a burning question for most retailers is how to beat Amazon

• Walmart:

  Once the top retailer in the US,

  Once the top retailer in the US, Walmart has focused mightily on their online business, with great results, offering traditional retail sales, as well as grocery delivery and subscription services.

• eBay:

  One of the first e-commerce sites, eBay still dominates the digital market space, allowing for businesses and individuals to sell their products online.

• Wayfair:

  This home furnishing e-tailer is a drop-shipper, carrying hardly any inventory. They manage suppliers, orders, and fulfillment, and credit their success on personalization — meaning they study how their customers engage and offer products they believe consumers most want.

Advantages and disadvantages of an e-commerce business

E-commerce offers some amazing benefits, but it also comes with some disadvantages. Let’s dive into them here.

Convenience & accessibility. E-commerce can occur 24/7; for this reason, it provides customers with the best in both convenience and accessibility. They can find what they need, when they need it, and directly from their mobile or desktop devices. This level of convenience and access translates into sales and revenue opportunity round the clock for ecommerce businesses.

Increased selection of products. Retail brands have the flexibility to offer a wider selection of products through their online store online compared to their physical brick-and-mortar stores. Many retail brands also offer consumers access to exclusive inventory and promotional offers that aren’t available elsewhere.

Lower start-up cost. Compared to traditional retail stores, pure-play e-commerce businesses can avoid a lot of upfront start-up costs associated with running physical stores such as rent, inventory, and in-store headcount. However, they can have warehouse costs and shipping costs.

International or cross-border sales opportunities. As long as a customers can place an order online and the e-commerce store can capture the revenue from the sale, then ship the product or service to the customer’s location, online stores aren’t limited by geographic location as brick-and-mortar stores are. An ecommerce store allows your business to reach more customers, globally — maximizing selling potential.

Easily retarget customers online. E-commerce stores regularly use retargeting as a way to attract and retain existing customers, or acquire new look-a-like customers. With retargeting, you can either target your existing customers, or your most profitable customers with products that are similar to the ones they love, or complement their past purchases. Retargeting is also a strategy used by online stores to recover abandoned carts.

Scalability with lower operational costs: As the customer base grows, brick-and-mortar retail operations are forced to either relocate to a larger location or expand their physical store footprint, all of which comes with significant costs. In contrast, an e-commerce platform can be equipped to handle high traffic volume and sales spikes, enabling an e-commerce businesses to scale with increased inventory and order fulfillment.

Delivery personalized experiences.  E-commerce businesses can personalize everything from onsite search to dynamic pricing and curated product recommendations. With an AI-powered e-commerce platform, you can upsell, cross-sell, and present products that customers are most likely to be interested in, thereby increasing revenue-per-customer

Access to new technologies: With progressive enhancements to e-commerce platforms and technologies, you can always find ways to streamline your e-commerce business operations to save time and money. In contrast, there are limitations to what technology can do to streamline physical stores. E-commerce has the upper hand in its ability to leverage technology to streamline operations, market products, improve team collaboration, and provide faster customer service.

Some of the disadvantage of an e-commerce business in comparison to a brick-and-mortar store include:

Limited interactions with customers. If customers have questions or an issue with a product they purchased, they can visit a physical store and speak directly with a store manager or customer-service rep to address their issue by returning or replacing the product. E-commerce business are can’t provide direct in-person customer service and support. Some e-commerce websites employ online chat or click-to-call features to reach a live person, but it’s not a standard practice.

No ability to try-and-buy. Visual representation of products on e-commerce stores using images or video cannot deliver the full experience a physical store is able to provide its customers. For example, at a departmental or a footwear store you have the ability to try it and then buy it.

Lack of instant gratification.  With e-commerce, you must wait for the product to be shipped to you. While e-commerce businesses like Amazon have made significant investments to improve last-mile delivery by offering same-day delivery for some of its products, they can’t offer the instant gratification physical stores provide customers.

Unreliable technology and security breaches. E-commerce businesses are susceptible to website crashes, or websites needing to be taken down, especially in the event of a security breach compromising personal customer data. This leads to loss of sales and revenue while the e-commerce store is down.

Stiff competition. Due to low barrier to entry and low start-up costs, competitors can easily enter the market selling the same or competing products at lower costs, thereby cutting into your margins and revenue. As a result, e-commerce business must be hyper-diligent in their marketing strategies to remain competitive.

The future of e-commerce evolution

Transcending boundaries and distance, e-commerce digitalized the world into a single platform. From the initial spark in 1969 with the founding of CompuServe, e-commerce’s story is one of astounding growth fueled by incredible innovation.

Today, the online shopping experience not just replicates, but can sometimes exceed, the one offered by traditional brick-and-mortar shops.

Three innovations are key to e-commerce growth:

1. Personalization:

   AI and machine learning made it possible to collate massive amount of data, make sense out of it and provide personalized shopping experiences. Feedback loops and dynamic adaptation to ever-changing consumer behavior enhance the whole customer experience.

2. Omnichannel:

   The rise of the internet enabled the emergence of social networks, which was further boosted by mobile devices. Social media is embedded in our daily activities. According to a Google report, almost 85% of the consumers begin their buying journey on one device and continue on another. That trend mandated seamless integration between online and offline sales channels.

3. Secure payment:

   Digital wallets and seamless electronic fund transfers have paved the way for a hassle-free payment experience. Paypal is the pioneer but Google Wallet, Apple Pay and many other mobile wallets are now on user devices. Increasingly, blockchain technology is making these transactions safer and faster.

E-commerce evolution: B2C led the way

In the early days, e-commerce was mainly driven on by the B2C model with retail as one of the early adopters. Apart from novelty, convenience played a major role in driving demand. Multiple players entered the field, intensifying the competitive landscape. Companies started to distinguish themselves through wider product selection and more innovative services.

After retail, the service sector was the next driver of e-commerce growth. There’s a wide range of services currently offered through the internet, including banking, insurance, travel and hospitality, education, media and entertainment, jobs and career sites, real estate, and broker services.

B2C e-commerce will continue to skyrocket. The global B2C e-commerce market, valued at USD 3.67 trillion in 2020, is expected to expand at a compound annual growth rate of 9.7% from 2021 to 2028. Growing digital dependency, the convenience of online shopping and a fast-growing digital population will drive growth.

In 2022, the number of internet users worldwide stood at 5.3 billion, which means that more than half of the global population is connected to the web. This isn’t just changing consumer behavior; it’s shaping the world economy at large.

B2C businesses today need an e-commerce solution with AI capabilities, which allow them to launch online stores in a flash. Plug-and- play with minimum coding and low maintenance are key requirements, along with a progressive web store optimized for mobile, tablet and desktop, which enables companies to create their own intuitive mobile apps in one click.

COVID sent e-commerce into hyperdrive  

The early days of global pandemic caused massive disruption in global supply chains, putting e-commerce to the test. With steep demand for essential goods such as groceries and personal care, online retailers answered the call.

By May of 2020, e-commerce transactions reached $82.5 billion — a 77% increase from 2019.

Under normal circumstances, it would have taken four to six years to reach that number. As we continue to fight the pandemic, supply of essential goods is the least of the concerns for most of us, largely thanks to e-commerce.

Evolution of B2B e-commerce 

The pandemic forced B2B companies, which have historically relied on in-person sales, to use digital options. This gave rise to more B2B e-commerce solutions, which redefine buyer-seller interactions. B2B e-commerce is now much more transparent, efficient, and swift.

The other major factor in B2B e-commerce growth is that 44% of millennials make buying decisions, while 33% make recommendations or otherwise influence the purchase process. The technologically adept millennial B2B buyer is calling the shots.

The market potential of B2B e-commerce is huge. Globally, the B2B ecommerce market was worth $12.2 trillion in 2019, having grown from $5.8 trillion in 2013, according to Statista. Double-digit growth is predicted for B2B ecommerce sales through 2024.

For B2B e-commerce to fulfill its potential, companies need an e-commerce platform with these capabilities:

1. Robust and flexible:

   Many companies operate in multiple business models, from B2C to B2B to B2B2C and various  combinations. The solution should address all such scenarios in a single platform, providing flexibility to opt for headless commerce and traditional e-commerce and the ability to scale up without having to upgrade.

2. Integration:

   Easy, seamless and real-time integration with existing cloud and on-prem, legacy applications.

3. Omnichannel personalization:

   An omnichannel platform with cloud-native architecture to provide personalization through context-driven services to help define customer segments based on intuitive conditions.

Full steam ahead with voice commerce, AR, and blockchain

As they say, what got you here won’t get you there. E-commerce is still fairly new, yet the future holds endless opportunity. Success will depend on how an e-commerce business adapts to ever-changing buyer preferences.

This is only possible through continuous innovation. Some of the trends that will drive these innovations in the future include:

1. Voice search & zero UI:

   With more and more households adopting voice assistants, voice commerce is on the horizon. This has created a new gateway to consumers and offers the opportunity to establish and integrate a company into the consumer’s everyday life. Contact-less designs will become a preferred channel.

2. Augmented and virtual reality:

   In order for e-commerce to fully replace brick-and-mortar buying, the whole shopping experience needs to be more intuitive, friendly, and satisfying. This is where immersive technologies like augmented reality and virtual reality (AR/VR) — which are fueling the metaverse — will help.

3. Blockchain:

   Blockchain technology offers a range of capabilities that provide a lot of transparency in the financial and logistical aspects of business, but also allows consumers to have more control over their transactions. That helps build trust between the buyer and seller, which is essential for e-commerce success over the long run.

Direct to consumer e-commerce: DTC is breaking barriers and driving BIG results in e-commerce

Direct to consumer (D2C or DTC) surged during the pandemic and brands who didn’t embrace D2C e-commerce were caught scrambling to adapt.

From CPG to wholesale to automotive and more, every industry is now paying attention, hoping to better engage customers and deliver what they want.

Direct to consumer e-commerce is the newest model of ecommerce. D2C means that a brand is selling directly to their end customer without going through a retailer, distributor, or wholesaler.

Subscriptions are a popular D2C item, and social selling via platforms like InstaGram, Pinterest, TikTok, Facebook, SnapChat, etc. are popular platforms for direct-to-consumer sales.

DTC business models are being adopted by consumer brands that are hoping to improve their bottom lines with a direct-to-consumer (D2C) strategy, including:

1. Direct sales
2. D2C with redirection to the channel
3. Marketplaces
4. Social commerce
5. D2C with retailer support

What’s poppin’: The e-commerce trends in 2023 that are changing how we buy, sell, and consume

The top e-commerce trends that are here to stay, no matter what: 

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Frequently asked questions (FAQs):

Define online

Online refers to a state or mode of being connected to the internet. The internet is a global network of interconnected computers that allows for the exchange of information, data, or communication through various digital channels. These channels can include websites, mobile apps, social media platforms, and other digital tools that enable people to access, share, and interact with content and services from around the world.

What is an e-commerce business?

An e-commerce business is a company or enterprise that conducts commercial transactions online. This means that they sell products or services to customers through the internet, rather than through a physical storefront or other traditional channels. E-commerce businesses may operate exclusively online, or they may have a physical presence as well. Some examples of e-commerce businesses include online retailers, subscription services, digital marketplaces, and B2B companies that sell products or services to other businesses.

What is an ecommerce website?

An e-commerce website is a digital platform that facilitates online transactions between businesses and consumers. These websites typically include product catalogs, shopping carts, payment processing systems, and other features that allow customers to browse, select, and purchase products or services. E-commerce websites may be designed for a specific niche or market, such as clothing, electronics, or home goods, or they may offer a wide range of products across multiple categories. Examples of popular e-commerce websites include amazon.com, walmart.com, and target.com.

What is an ecommerce store?

An e-commerce store is a type of online retail store that specializes in selling products or services directly to consumers through an e-commerce website. These stores may be operated by a single vendor or by multiple vendors, and may offer a wide range of products or specialize in a particular niche. E-commerce stores typically offer a user-friendly shopping experience with easy navigation, detailed product information, customer reviews, and secure payment options. Examples of e-commerce stores include Amazon, eBay, Etsy, and Shopify. E-commerce stores have become increasingly popular in recent years due to the convenience and accessibility they offer to customers, as well as the lower overhead costs for business owners compared to traditional brick-and-mortar stores.