What Is E-commerce? Types, Benefits, and More

E-commerce, also known as electronic commerce or internet commerce, is a big industry with a bright future ahead. With online retail sales reaching nearly $5.8 trillion worldwide in 2023, industry analysts expect it to grow in the coming years [1]. Reports reveal that 56 percent of internet users buy something online every week [2]. 

E-commerce isn’t just for well-known brands. From start-ups to big multinationals, businesses leverage e-commerce to sell directly to customers or other businesses. Before you jump in, here's what you need to know about e-commerce.

What does e-commerce mean?

E-commerce is buying and selling goods using the internet and transferring money and data to complete those transactions. All stores that sell products online can be classified as e-commerce. This could be anything from online marketplaces such as Amazon and Etsy to food delivery platforms and B2B services.

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 e-commerce companies boomed. Despite being able to shop in real life now, online grocery shopping continues to rise [3].

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. 

A brief history of e-commerce

E-commerce traces back to 1994 when the first internet sale was made (a CD sold to a friend through a website). Now a global phenomenon bolstered by the likes of Amazon and Alibaba, e-commerce has a global reach of over 30 million e-commerce stores [4]. In the last few years, e-commerce has grown exponentially due to the COVID-19 pandemic, during which many businesses pivoted their models to satisfy customers.

Types of e-commerce 

E-commerce businesses typically fall into one of four main groups. The model is typically determined by who is selling and who it's being sold to.

• Business to consumer (B2C): In this e-commerce model, the business sells directly to a consumer. If you buy a product from a retailer like Amazon, you're purchasing from a B2C company. Setting up a Shopify store to sell your wares to customers is considered B2C. 

• Business to business (B2B): The B2B model involves selling products or services to other businesses. For example, a wholesale company that sells car parts to factories is B2B.

• Consumer to business (C2B): With C2B, individuals sell their products or services to a business through an online platform. Social media influencers and bloggers fall under this category if they receive money from businesses to promote the brand. 

• Consumer to consumer (C2C): C2C e-commerce models typically involve online websites where people sell goods and services directly to others. Examples include eBay, Facebook Marketplace, and Etsy.

Benefits of e-commerce

E-commerce has been so successful that many physical businesses now implement omnichannel sales strategies, including selling online. Here are some more benefits.

• Reduced operating costs: E-commerce stores are typically cheaper to set up and operate than physical brick-and-mortar stores. You can cut costs and avoid paying for rent, furnishings, signs, and more.

• Extended opening hours and global reach: An e-commerce store never closes its doors to customers. Customers can purchase products at nearly any time of day, from anywhere in the world. Because they're not limited by opening hours or proximity, your business could exponentially increase sales.

• Increased sales conversions: Within the online marketplace, there are many ways to enhance the customer experience and reach consumers with digital marketing. Social media and SEO allow you to connect with customers actively searching for goods and services like yours. Track your customers' behaviors and habits, such as monitoring their shopping carts and improving your checkout processes.

The future of e-commerce

Growth in e-commerce is evident in the coming years. Revenue is expected to grow at a compounded annual growth rate (CAGR) of 8.02 percent per year for a projected market volume of $5.89 trillion by 2029 [5]. It shows no signs of stopping as our culture and landscape of acquiring goods and services shifts.

These are the trends shaping the e-commerce landscape:

• Automation: Supply chain and logistics are crucial for picking, packing, shipping, and sending items around the world. The use of customer relationship management (CRM) tools and robots to automate and speed up this process has been a game-changer and will continue to improve.

• Personalized customer experience: Machine learning is now being used to optimize the shopping experience, offering a more personalized approach. With so many options for clothing, furniture, and other goods, it can be increasingly difficult for customers to find the right product. Algorithms can help track buying history and preferences to suggest the right items for customers, while chatbots can help drive better customer service.

• Social shopping: Online shopping targets customers where they are: Instagram and TikTok are huge drivers for brands to acquire new sales because they can purchase directly from those sites or be redirected in a few seconds to the item's page.

How to start an e-commerce business

E-commerce is an important consideration for the future. In fact, it's becoming a crowded space with many businesses competing for customers' attention. As an entrepreneur or business leader, you'll want to make sure your e-commerce business stands out using digital marketing and other targeted marketing strategies.

Read our comprehensive guide: How to Start an E-commerce Business

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