What Is E-commerce? (Is It Right for Your Business)

E-commerce, also known as electronic commerce or internet commerce, is a big business. With online retail sales reaching nearly five trillion dollars worldwide in 2021, several industry analysts expect it to grow over the next few years [1]. A recent report revealed that 58.4 percent of internet users buy something online weekly [2]. 

E-commerce isn’t just for well-known brands. A variety of businesses, from start-ups to medium-sized companies and big multinationals, use e-commerce, taking advantage of the opportunity to sell directly to customers or corporations. Before you jump into e-commerce, you may find it helpful to understand its fundamentals and examine the pros and cons. 

What is e-commerce?

E-commerce is buying and selling goods via the internet and transferring money and data to complete the transactions. All stores that sell products online can be classified as e-commerce. This could be anything from a small online store on Etsy to big brand sites like Amazon and everything in between. 

Technology is changing how we do business at a phenomenal pace, and e-commerce trends continue to grow and evolve. During the pandemic, brick-and-mortar businesses suffered while-commerce companies boomed. Huge names like Amazon made record sales, and statistics show that despite being able to return to the shops, online grocery shopping trends are still rising [4].

With simple tools to set up e-commerce websites and e-commerce platforms like Shopify, Etsy, and eBay, anyone can set up an e-commerce store quickly. 

Rise of e-commerce

The e-commerce business has grown exponentially over the last few years, increasing from the Covid-19  pandemic when people couldn’t go to stores in person. What started in 1994 when the first internet sale was made (a CD through a company website), now has a global reach of 12 to 24 million e-commerce stores [3]. 

Read more: How to Start an E-commerce Business: A Guide

4 types of e-commerce 

E-commerce businesses typically fall into one of four main groups, depending on their customers. Additional e-commerce business models exist, but they tend cater to specialized businesses and niches. Understanding the key differences between these models can be beneficial for organizations preparing to launch an e-commerce site.

1. Business to consumer (B2C)

In a B2C model, the business sells directly to a consumer. If you (the customer) buy a product from a retailer like Amazon (a business), you're purchasing from a B2C company. Similarly, if you set up a Shopify store and sell directly to consumers, you use the B2C model. 

2. Business to business (B2B)

The B2B model involves selling products or services from one business to another. An example would be a wholesale company selling parts to another business that uses its items. Sometimes the purchasing business buys products at a wholesale rate and sells them for a profit. 

3. Consumer to business (C2B)

The C2B model includes individuals who sell their products or services to a business through an online format. Social media influencers and bloggers can fall under this category if they receive money from businesses to promote the brand. 

4. Consumer to consumer (C2C)

C2C e-commerce models typically involve online sites that allow people to sell goods and services directly to others. An example of this might be someone selling unwanted items on eBay to someone else. Other platforms include Facebook Marketplace and Etsy.

Advantages and disadvantages of e-commerce

E-commerce has been so successful that many physical businesses now implement omnichannel sales strategies, including e-commerce sites. However, you may find it helpful to consider the challenges associated with online sales as you plan to take your business online.

Advantages of e-commerce

• Reduced operating cost: Compared to a physical store, an e-commerce store is typically cheaper to set up and operate. You can avoid spending money on costly items like building rent or a mortgage, fixtures, signs, etc.

• Extended opening hours: An e-commerce store never needs to close. Customers can access the site and complete purchases anytime, even when you're not monitoring what's happening.

• Larger international audience: Physical stores are limited to their location and the customers who enter. With an e-commerce store, you can sell to customers worldwide, massively expanding your market.

• Increased sales conversions: The internet creates additional marketing opportunities and personalized experiences to reach customers when they're ready to buy your product. Social media, SEO, and more allow you to connect with customers actively searching for goods and services like yours and can even let them complete a purchase with a single click.

Read more: Digital Marketing: What It Is and How to Get Started 

Disadvantages of e-commerce

• Rising advertising costs: Crowded markets in the e-commerce space have increased the need for digital marketing and increased marketing fees. These advertising costs decrease your profit.

• Increased competition: With e-commerce becoming accessible and popular, there’s more competition within your target market. This includes the giants with big budgets and expert marketing teams.

• Customers can't physically touch the product: Consumers who can’t try on or touch products may find it more challenging to make a choice. This can lead to an increased number of returned items. Some companies are adding augmented virtual reality to compensate, but this can increase your operating costs.

• Potential site crashes: If the power goes out in a physical store, you may still be able to sell products to your customers. When an e-commerce site goes down, no one can complete a purchase.

Signs e-commerce is right for your business 

As you evaluate your plans to offer your products or services online, you may find it helpful to consider whether it's the right option for your business. The ultimate decision to adopt e-commerce is a personal one, and these indicators can help you determine whether it’s a good option for you.

You want to keep up with competitors.

During the Covid-19 pandemic, the businesses that were able to adapt and move online were more likely to survive and stay profitable. Usually, businesses that have adapted to online sales have kept online and physical sales channels alive. If you’re worried about keeping up with competitors, e-commerce may be the boost you need. 

You want to avoid renting storage space for physical products. 

Buying and storing physical products can be costly but moving to an e-commerce business model means you can adopt the dropshipping method. With dropshipping, a third party manufactures, stores, and ships products to the customer, so you never have to handle any stock. 

You offer a niche product or service.

If you have a niche product, you may benefit from e-commerce for its wider audience t and expanded marketing opportunities. Not only can you reach an international audience, but you also can take advantage of online marketing strategies to connect with your target audience. 

You're looking for new ways to scale.

If you have reached a point where you’re looking to scale your business, e-commerce offers a way to make that happen. You can quickly add new lines without building a bigger store or renting new premises. If you choose a dropshipping model, you can expand without having to hold stock and set up multiple stores.

Get started in e-commerce

If you think e-commerce is for you, consider the course  Create Your E-Commerce Store with Shopify for a step-by-step guide to setting up your first online store. If you already have an online store up and running, discover ways to market and build it through the Google Digital Marketing and E-Commerce Professional Certificate. You'll find both programs and more on Coursera.

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Article sources

1. Ecommerce Guide. “Ecommerce Statistics for Retailers and Online Shopping in 2022, https://ecommerceguide.com/ecommerce-statistics/.” Accessed June 24, 2022. 

2. DataReportal. “Digital 2022: Global Overview, https://datareportal.com/reports/digital-2022-global-overview-report.” Accessed June 24, 2022.

3. Digital In The Round. “How Many Online Stores Are There?, https://digitalintheround.com/how-many-online-stores-are-there/.” Accessed June 24, 2022. 

4. Mercatus. “Understanding The Drivers Of eGrocery Success, https://info.mercatus.com/online-grocery-shopper-consumer-behavior.” Accessed June 24, 2022.