Faarvo What is eCommerce?

In this article, we’re going to cover all essential ecommerce basics every retailer needs to know, but before we do that, let’s answer this fundamental question:

What is eCommerce?

Ecommerce, also known as electronic commerce or internet commerce, refers to the buying and selling of goods or services using the internet, and the transfer of money and data to execute these transactions. Every time individuals and companies are buying or selling products and services online they’re engaging in ecommerce. Ecommerce is often used to refer to the sale of physical products online, but it can also describe any kind of commercial transaction that is facilitated through the internet.

How ecommerce came to be

The history of ecommerce begins with the first ever online sale: on the August 11, 1994 a man sold a CD by the band Sting to his friend Phil Brandenberger through his website NetMarket, an American retail platform. This is the first example of a consumer purchasing a product from a business through the World Wide Web—or “ecommerce” as we commonly know it today. This particular transaction made history and signaled to the world that the “internet is open” for ecommerce transactions. Why? Because it was the first time that encryption technology was used to enable an internet purchase.

Since then, ecommerce has evolved to make products easier to discover and purchase through online retailers and marketplaces. Independent freelancers, small businesses, and large corporations have all benefited from ecommerce, which enables them to sell their goods and services at a scale that was not possible with traditional offline retail.

Global retail ecommerce sales are projected to reach $27 trillion by 2020.

Types of Ecommerce Models

There are many ways to classify ecommerce websites. You can categorize them according to the products or services that they sell, the parties involved as well as different transactional relationships between businesses and consumers.

Classifying ecommerce businesses according to what they sell

1. Stores that sell physical goods

These are your typical online retailers. Clothing, furniture, tools, and accessories are all examples of physical goods. Shoppers can buy physical goods through online stores by visiting the stores’ websites, adding items in their shopping cart, and making a purchase.

Once the shopper has made a purchase, the store delivers the item(s) right at their doorstep. There are also online stores where customers can make an online purchase but go to the store themselves to pick up the products.

Some examples of these ecommerce stores include Alvidae Collection, Zando, and Superbalist.

2. Service-based e-tailers

Aside from products, services can also be purchased online. Everytime you hire educators, freelancers, and consultants through online platforms, you’re doing business with service-based e-tailers. The buying process for services depends on the merchant. Some may allow you to purchase their services straightaway from their website or platform. An example of this comes from Fiverr.com, a freelance marketplace. People who want to buy services from Fiverr must place an order on the website before the seller delivers their services.

Some service providers, on the other hand, require you to get in touch with them first (i.e. book a consultation) to determine your needs. For example, companies that create digital strategies for large businesses, asking clients to contact them by filling in an online form first where they should describe their business needs.

3. Stores that sell Digital products

Ecommerce transactions are conducted via the internet which is why, in the ecommerce realm, products are usually referred as “e-goods”. The term digital products refers to all items that are in a digital format including ebooks, online courses, software, graphics, and virtual goods.

Examples of retailers that sell digital products are Coursera (a platform for online learning) and Audiobooks (a website where you can buy audio books).

Classifying ecommerce businesses according to the type of transaction involved.

1. Retail:

The sale of a product by a business directly to a customer without any intermediary.

2. Wholesale:

The sale of products in bulk, often to a retailer that then sells them directly to consumers.

3. Dropshipping:

The sale of a product, which is manufactured and shipped to the consumer by a third party.

4. Crowdfunding:

The collection of money from consumers in advance of a product being available in order to raise the startup capital necessary to bring it to market.

5. Subscription:

The automatic recurring purchase of a product or service on a regular basis until the subscriber chooses to cancel.

Classifying ecommerce businesses according to the parties involved

Looking at the parties participating in the transaction is another way in which ecommerce sites can be classified. There are four main types of ecommerce models that can describe almost every transaction that takes place between consumers and businesses.

1. Business to Consumer (B2C):

The B2C ecommerce model represents a transaction between businesses and individuals (e.g. You buy a pair of jeans from an online retailer). B2C ecommerce is the most common business model among both physical and online retailers.

Nike, Takealot and Showmax are all examples of companies that engage in B2C ecommerce.

2. Business to Business (B2B):

When a business sells a good or service to another business (e.g. A business sells software-as-a-service for other businesses to use) In the B2B ecommerce model both parties involved are businesses.

3. Consumer to Consumer (C2C):

C2C ecommerce happens when the two parties involved are consumers that trade with one another. When a consumer sells a good or service to another consumer (e.g. You sell your old furniture on Gumtree to another consumer). Other examples include OLX, Amazon, eBay, Ananzi.

4. Consumer to Business (C2B):

When a consumer sells their own products or services to a business or organization (e.g. An influencer offers exposure to their online audience in exchange for a fee, or a photographer licenses their photo for a business to use).