What is ecommerce?

Every minute, 6 million people shop online.

Given the vast number of individuals that interact with online stores, understanding the definition of ecommerce and its impact on online businesses is essential.

Key takeaways:

• Ecommerce is a business model of selling goods and services through purely digital transactions.

• COVID-19 in proved to be very significant for ecommerce in 2020 as online spending increased 77% over the previous year. Analysts estimated that it would have taken four to six years to reach that kind of growth under normal circumstances.

• Four categories of ecommerce are business-to-business, business-to-consumer, consumer-to-consumer and consumer-to-business.

• Adaptive commerce is the ability of business to continuously transform its model based on current and future customer needs.

What is ecommerce?

Ecommerce is a business model of selling goods and services through purely digital transactions. 

Buyers don’t go to stores or kiosks to purchase digital products. Instead, online shopping is done through an ecommerce platform (electronic commerce or ecommerce for short).

A subsection of ecommerce is m-commerce (mobile ecommerce), which means that customers bypass ecommerce websites and make purchases using mobile apps using devices like smartphones apps or tablets. Currently, m-commerce accounts for 73% of ecommerce transactions.

Ecommerce can apply to organizations of all sizes from entrepreneurs managing small businesses on Etsy to behemoth online marketplaces like Amazon.

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The history of ecommerce

There were several milestones in the history of ecommerce:

• 1979: English inventor Michael Aldrich invented teleshopping, later known as ecommerce. He connected a modified TV to a transaction processing computer via a telephone line, enabling customers to interact with businesses electronically.

• 1982: Boston Computer Exchange became the world’s first ecommerce business. Its goal was to serve as a marketplace for people selling their used computers.

• 1994: Dan Kohn created a website called NetMarket and, on August 11th, sold a music CD to a friend in Philadelphia. Since the friend submitted his credit card information as an online payment, this purchase is the first known ecommerce transaction on an ecommerce site.

• 1995: Jeff Bezos launched Amazon. Initially, the company was an online platform for selling books.

• 1998: PayPal appeared on the scene as an ecommerce money transfer system.

Following these developments, more sales channels for ecommerce companies emerged, namely Alibaba, eBay, Shopify and Etsy. 

COVID-19 proved to be very significant for ecommerce in 2020. With lockdowns in place globally, consumers needed to purchase goods electronically. Online spending increased 77% over the previous year. Analysts estimated that it would have taken four to six years to reach that kind of growth under normal circumstances.

Types of ecommerce

Four categories of ecommerce are business-to-business, business-to-consumer, consumer-to-consumer and consumer-to-business.

B2B

Business-to-business means that a company is a seller and another is the buyer. Typically, wholesale transactions are B2B. The dynamics surrounding business-to-business sales are a little different than selling to individual buyers in that:

• The buying process can take longer due to companies requesting proposals from various sellers and then deliberating which vendor best satisfies the company’s needs and budget.

• A company may request to test products from different vendors on their premises. 

• The purchase quantity and total cost are significantly higher when doing business-to-business transactions than with an individual.

B2C

A company is a seller with business-to-consumer, and an individual is a buyer. Typically, retail transactions are B2C. 

The five most common B2C business models are:

• Direct sellers: These manufacturers sell directly to the customer. The direct seller can also be the online version of a physical storefront.

• Online intermediaries:These businesses don’t have a product to sell. Instead, providers connect buyers with sellers. An example of an online intermediary is Booking.com.

• Advertising-based B2C: A website may provide free content and include digital ads for goods and services. An example of advertising-based B2C is History.com.

• Community-based B2C: Websites that bring people with similar interests together and are a platform for businesses to promote their products or services are community-based B2C sites. An example is Pinterest.com.

• Fee-based: A website that charges for access to content or relies on paid subscriptions is a fee-based B2C site. Examples include Disney+ and National Geographic.

C2C

Consumer-to-consumer (or customer-to-customer) ecommerce sees an individual as the seller and another as the buyer. Offline, you typically see this business model in flea markets and yard sales. 

When selling online as an individual, consider:

• Buyer trust: How does the customer know that the seller will deliver the promised product or service? Having reviews on your site and offering a money-back guarantee will help.

• Payment method: How can a buyer have purchase protection with online sales? The website should offer a secure checkout process with multiple payment methods.

• Marketing: As an individual, you may need to get creative with marketing methods. Depending on the product or service you are selling, you may use Google ads or promote on a particular social media platform.

C2B

An individual is a seller in a consumer-to-business model, and an organization is a buyer. Examples of C2B are:

• Online retailers reach out to influencers to help promote products

• A company requests paid advertisement space on a blogger’s website

• A photographer offers images to a business

Now trending: Adaptive commerce

What is adaptive commerce? Adaptive commerce is the ability of a business to continuously transform based on current and future customer needs. The critical aspect is being in tune with the target audience. Once you understand buyerneeds, your marketing strategy will follow. 

Leverage Optimizely’s solution for ecommerce

The ecommerce space has never been more competitive. Businesses must rapidly adapt to digital trends in the realms of search engine optimization (SEO), customer experience management, product page optimization, email marketing, omnichannel strategies and customer expectations to gain new clients and increase conversion rates. 

Optimizely can help you generate retail sales, build a customer base and maintain a successful online store with user-friendly functionality, integrations, templates, reporting and recommendation tools. Predict your customer’s next steps with artificial intelligence and machine learning. Discover ecommerce solutions that present opportunities to please the buyer at every customer lifecycle stage.

Contact Optimizely today to learn how our product offerings can improve your ecommerce sales.