In this guide we’ll cover what ecommerce is, how it differs from other similar areas, along with some of the key concepts you’ll hear when talking about ecommerce – for example ‘b2b’ and ‘b2c’, ‘marketplaces’ and other types of platform – and a little about the history of ecommerce.
If you are looking for a copy & paste definition, here you go:
Ecommerce (electronic commerce) is the buying and selling of goods or services via an electronic network, or the transmission of funds or data, over an electronic network, primarily the internet.
In more simple terms: Ecommerce, of course, stands for “electronic commerce”. In general it refers to selling (and buying) products and services digitally, usually through the internet. Every time you purchase a product online, you’re participating in the ecommerce economy.
Currently, the 3 largest ecommerce companies in the world are:
- JD.com (‘Jingdong’ – the Chinese ecommerce giant)
- Alibaba (Another ecommerce business, better known than JD outside China)
Each of these sell products to millions of customers, from selections of hundreds of thousands of products, but ecommerce can be much smaller than this: Many sites sell just a handful of products, often using tools such as Wix or Shopify, and many also sell through marketplaces (such as Etsy or Vinted).
The word ‘ecommerce’
The term ‘ecommerce’ is quite broad and flexible, as it not only includes physical product sales from sites like Amazon or eBay, but online banking, software services, remote service providers, or online course platforms (basically, any transaction made online). Usually it is possible to judge from context, however, in the absence of other information, the term “ecommerce” is most usually used to refer to typical online equivalents of physical stores, for example a website that sells shirts to end consumers.
“Over the years, ecommerce businesses are growing and becoming more common than ever.”
“I wanted to build a SaaS business first, but instead, I think I’m going to open an ecommerce site to sell pizza ingredients.”
Ecommerce or E-commerce or eCommerce?
A common question is “is it ecommerce or e-commerce or eCommerce?” – in reality, any of these is fine. But, just as ’email’ is so widely recognised people no longer feel the need to call it ‘e-mail’ or ‘eMail’, the most used version today is simply ‘ecommerce’.
As said before, ecommerce is a broad and flexible term. This means there’s no consensus on what it means exactly or what counts as an “ecommerce business” or not.
So let’s explore different definitions. First, there’s the definition you get when googling “what’s ecommerce,” where it simply refers to any transaction made on the internet:
Then, if you look at Investopedia, their definition seems to refer to a “business model” that allows online transactions to happen from any device. So it’s not only a type of transaction but a type of business:
As for Amazon’s definition, ecommerce is a brick-and-mortar store transformed into online storefronts to trade goods and services over the internet. It specifies that it can be either a business model or a distribution channel, depending on its strategy. As it is what allows businesses to reach customers worldwide.
But does an exact definition matter? According to Alexander Graf and Holger Schneider in their ecommerce book, ecommerce’s definition has been pretty unclear, stating that:
What happens (with ecommerce) is that when people try to adapt a definition to their role, their company, or their overall professional environment, they find it hard to describe precisely what has changed as against the situation ten years ago. E-commerce seems to be everywhere, in every process, channel, and tool.Alexander Graf & Holger Schneider
Graf and Schneider are somewhat sceptical about the various add-ons that often surround the word “ecommerce”, for example explaining that:
Over the last decade, words like ‘multichannel ecommerce’ or ‘omnichannel commerce’ have emerged to back up questionable strategies(…) The result is little more than new buzzwords to describe failing approaches. Even as e-commerce experts, though, we have trouble formulating an exact definition of this term.Alexander Graf & Holger Schneider
So if ecommerce experts can’t formulate an exact definition, what should you settle for? Maybe, you should keep it simple and stay with the first sentence of this article as your official definition (“Ecommerce stands for “electronic commerce” and refers to a digital platform, and a business model, where you can buy or sell products online.”)
Difference Between Ecommerce and E-Business
By its definition, it might sound like ecommerce involves every business transaction made online—but as previously mentioned many use it more narrowly.
One way of looking at ecommerce is that it is a subset of “ebusiness”. Though the term is less used today, ‘ebusiness’ was a term that covered the full online sales and commerce processany online business – online banking, signing contracts, and so on – and ‘ecommerce’ was seen as one part of it.
While the term “ebusiness” is less used today, as so much of our business activity takes place in a mix of online and offline activity that the two have merged, the online sales part of it (“ecommerce”) is still unique enough that people continue to talk about and study and work in ecommerce.
Why Ecommerce is So Important and Talked About: The Stats
The simple ability to make purchases online has changed our lives forever. And despite having unclear definitions, ecommerce is here to stay.
The ecommerce industry is growing exponentially, more ecommerce businesses are emerging, and the digital economy is continuously expanding while reaching every corner of the world that has internet access.
If you’re still skeptical about the impact of the ecommerce industry, here’s some data:
- By January 2022, there were around 4.95 billion internet users worldwide, which is 62.5% of the global population (while the urbanization rate is 57%).
- In 2021, retail ecommerce sales amounted to 4.9 Trillion U.S dollars worldwide. And it’s forecast to grow over 50% within the next four years. People are buying products online, and they’ll only buy more.
- Google reports that more than 80% of customers conduct their research online before making a purchase decision. Which means most of Google searches are made with a purchase intention.
- In 2021, $3.56 Trillion in retail sales were made from mobile devices. Ecommerce businesses have been optimizing for mobile commerce for several years.
- More ecommerce statistics.
We’re living in an era where there’s more people with a smartphone than people living in urban areas, and where the internet has developed strong roots in your personal life.
This means, ecommerce is an industry that’s reaching almost any person in the world with internet access—offering both conveniences to buy products and opportunities to start a business.
The Origin of Ecommerce and Its Evolution
Some modern historians will tell you: The first ecommerce transaction was made in 1994. Phil Brandenberger used his Mastercard to buy Sting’s Ten Summoners’ Tales via the internet for $12.48. This particular transaction made history and signalled 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.
Jane Snowball, 1984
Looking further back, there were much earlier examples using television systems, rather than the internet. For example, the story of Jane Snowball, a 72 year old woman from the UK, who made an “ecommerce” purchase with Tesco in May of 1984.
Since then, ecommerce has grown by leaps and bounds.
The Rise of Big Tech
The rise of ecommerce giants like Amazon and Alibaba in the mid -1990s changed the face of the retail industry. They essentially capitalized on the global internet penetration and digitalization of the financial system, which contributed to the decline in retail sales for many brick-and-mortar stores.
After that, Google’s growth in the West and its massive traffic made it possible for business owners to pay for ads, carry out performance-based marketing with more data than ever, and attract customers organically through search engine optimization (SEO) to make their websites rank for high-valuable keywords.
Plus, the rise of social media brought the attention of business owners, too, replicating the same phenomenon as Google but with a social layer and making the online experience more interactive and targeted.
Ecommerce has also impacted the retail workforce. The U.S Bureau of Labour Statistics (BLS) has revealed that from 1997 to 2016, employment in the ecommerce sector increased by 80%. And today, in 2022, there are already 787,104 U.S employees in the ecommerce space.
Today, anyone can start an ecommerce business from scratch using platforms like Shopify or BigCommerce without coding or having any technical skills at all, or by building a business on top of Amazon or another marketplace. And if you know how to code, there are plenty of open-source platforms you can use to build any business you want.
In the future, ecommerce might simply become “commerce” if it becomes the default method to buy groceries for your home—offline commerce will become a different experience.
Types of Ecommerce Businesses
You can categorize ecommerce businesses according to the products or services that they sell, the parties they transact with, or even the platforms on which they operate.
We’ll look at all three aspects to give you a clear picture of the types of ecommerce sites out there.
Classifying Ecommerce According to “Who” is Selling: B2C, DTC, & B2B
Looking at the parties participating in the e-commerce transaction is another way in which ecommerce sites can be classified. These typically include:
1. Business to consumer (B2C)
As the name suggests, the B2C model represents a business that sells products or services to individual consumers. B2C ecommerce is the most common business model among both physical and online retailers, as the number of potential customers is larger and scalability is higher.
An example of a B2C business is Cocokind. A B2C ecommerce brand that sells skin care products online to the people who are going to use them. Thus, you can see them enhancing their customer experience with quizzes, routine builders, and blogs to incentivize their target audience to purchase their products for personal use.
2. Direct to consumer (D2C, or DTC)
Whereas ‘B2C’ covers every type of business selling to consumers, ‘D2C’ (more commonly written ‘DTC’) is a particular type of B2C business: The popular D2C brands are those businesses that own their own brand, and sell that brand ‘direct to consumers’ —cutting out intermediaries between the brand and the end consumer. Whereas in the past most brands would sell through someone else’s store – for example Nike shoes selling at Foot Locker, the dawn of ecommerce enabled many companies to launch and sell their own products direct to consumers across the world. Companies like Allbirds and Warby Parker are often referenced as excellent ‘D2C’ brands.
The key here is that these brands can interact and build relationships with the people who are using their products, get feedback, build an audience, and make shipping more efficient.
JOI is an excellent example since they offer a “unique” product for making plant-based milk that isn’t 98% water.
Instead of recurring to intermediaries or amazon to sell their product, JOI builds its brand and owns its distribution so they can sell directly to the people they’re trying to help in the first place.
And if you take a look at their website, you’ll notice that they’ve built a very particular brand that no intermediary would’ve ever done justice to.
3. Business to business (B2B)
In the B2B model, both parties involved are businesses. Here, one company provides the other with products or services.
A simple example is Avery Dennison’s store. It sells labelers and attachers for business customers who are often packaging stuff. Its catalog is extensive enough to cover everything you might need as a busy retailer.
B2B ecommerce is often much more complex than B2C. For example, if you think of the average business, they often need to buy many times per year, for hundreds of different people, shipping to different locations. Sometimes they may need various people within the business to approve purchases, or to be able to purchase in advance and pay after delivery. Some B2B ecommerce companies offer tools to allow businesses to handle all of that complexity electronically, offering great time saving for their customers, and greater loyalty as a reward.
4. Consumer to business (C2B)
The C2B business model is far less common, and it’s a term you will very rarely here in reality. ‘C2B’ represents a transaction in which individuals create for businesses. Unlike the traditional business-to-consumer model, consumers provide companies with products or services, co-operate on projects, and ultimately help companies increase their profits.
Shutterstock comes to mind as a great C2B example. It allows photographers to sell royalty-free photos that businesses might use for their marketing efforts.
This model allows regular individuals to make money by helping businesses with high-quality media that might result in greater productivity.
5. Consumer to consumer (C2C)
C2C is another phrase you won’t hear so often, although it is much more common than ‘C2B’. C2C ecommerce happens when the two parties involved are consumers that trade with one another. They typically are marketplace platforms, and you will far more frequently hear them referred to as ‘marketplaces’ than you would ‘c2c’ businesses, where individuals can communicate and agree on deals with each other.
eBay and Depop are the most basic examples, as their platforms allow any individual to sell or buy to anyone in the world in one place without having to purchase from a business.
Classifying Ecommerce Businesses According to “What” They Sell
Now, let’s go over “what” and “how” ecommerce businesses can sell online. And these include:
1. Retailers selling physical goods
These are your typical online retailers selling clothing, furniture, tools, and accessories. Shoppers can buy a physical product through online stores by visiting the stores’ websites, adding items to their shopping cart, and checkout.
Most of these are B2C or D2C brands selling products. But they can also be B2B vendors.
A good example is H&M’s ecommerce store and the clothes they sell on their website. They’re entirely focused on attracting customers to add products to their cart and make a purchase.
H&M owns multiple physical stores throughout the world, but their website allows anyone to buy from them without problems.
2. Service-based businesses
You can also purchase services online. And they can include people who offer specialized services to businesses, such as freelancers, agencies, and consultants.
Due to how services can vary, the buying process for services depends on the merchant. Depending on the service, some may allow you to purchase their services straightaway from their website, or require you to get in touch with them first (i.e., book a consultation) to determine your needs.
Most service-based businesses are B2B, offering specialized marketing, coding, or design work for other brands, such as Contently, as it offers content marketing for your business and has its own platform for the payments, the onboarding, and so on.
Digital B2C services still exist too. If you go to Fiverr, you’ll find people offering all kinds of services, going from the most professional side, such as relationship therapy, to the most mundane, like coaching for online games like League of Legends.
3. Digital products
Digital products refer to all items that are in a digital format, including ebooks, online courses, graphics, and virtual goods. Businesses selling these types of products fall into this category.
Course marketplaces, niche sites with info products, or premium newsletters are among the businesses selling digital products. They offer a product that doesn’t require shipping, and they can scale without stock limitations.
Skillshare is a course marketplace, for example. And it offers a tremendous amount of educational courses for learning any skill you want, including cooking, carpentry, and even public speaking.
Skillshare is catered toward the general public (B2C), so its pricing and platform are set for anyone to use it—like Netflix for courses.
4. Wholesale vendors
These are businesses that sell products in bulk. Often, to retailers who sell them to the end consumer. You could categorize them as B2B ecommerce since they sell products to businesses, but their role is simply to act as vendors for the brands who put those products on the market.
Alibaba, for example, is a classic ecommerce wholesale vendor. They provide products from chinese suppliers to thousands of ecommerce stores selling products through dropshipping—and they only need to order products from their website.
Dropshipping is a sale method where the retailer sells a product online, and the supplier handles the shipping. Therefore, a dropshipping business is an online store where you only need to take care of the online sales and not worry about logistics or inventory management.
It’s not surprising that this method is trendy due to how accessible it is to build an ecommerce business this way. Dropshipping apps like Oberlo and AliExpress make it as easy as installing an app.
There are thousands of online stores doing dropshipping. Warmly, for example, simply sells home decor.
Its website is a pretty organized catalog of domestic products you can buy, and the fact that they’re a dropshipping store means that they don’t manufacture those products—they only sell them.
Crowdfunding is the collection of money from potential consumers to help bring a product to the market. They’re often businesses that facilitate businesses to raise funds for their projects.
What’s interesting about crowdfunding is that the upfront money allows the business owners to develop the product under specific conditions given by their audience—building some sort of relationship right away without making the first transaction.
A popular crowdfunding platform is Kickstarter, where you can either make your ideas public or invest in the development of other products. Thanks to this platform, multiple businesses have risen as this platform makes it easy to publish an idea or donate.
7. Subscription-based businesses
These are businesses that “rent” online services for a monthly price.
Most of the time, these are software-as-a-service businesses (SaaS) that offer access to a software product for a recurrent payment—often with a variety of subscription plans and different price ranges.
The SaaS industry has its own world and best practices, such as freemium plans, free trials, onboarding processes—so it is a very different business model from an online store that sells t-shirts.
Hubspot is the typical example of a subscription-based business. Its main product is a CRM for sales teams, but it also offers plenty of marketing features for email marketing, SEO, blogging, etc.
They have a basic free plan for people who need a simple CRM. However, once you start growing and requiring more capacity/features, you’ll have to upgrade your plan and start paying a subscription to use the software in full.
Note: SaaS isn’t the only type of subscription-based business. Other businesses that offer premium newsletters, access to premium communities, or courses can also fall into this category.
The Platforms Where Ecommerce Takes Place
Now that you know the types of ecommerce businesses in the market right now. Let’s go over the platforms where these businesses are taking place.
1. Online Store Websites
The first place where businesses are doing business is on their own website. Using shopping carts and ecommerce platforms, retailers build online stores where they showcase their products and services.
Thankfully, today you don’t need technical skills nor hire a web developer to build a website—for there are plenty of ecommerce platforms that do it for you.
Below are listed the most relevant ecommerce solutions currently on the market.
Shopify powers over 3,766,071 websites around the globe, and owns over 32% of the ecommerce platform’s market share.
This platform is very popular among beginners and small businesses since Shopify allows you to launch effective online stores over the weekend. With a user-friendly and intuitive interface—as well as tons of templates—this platform offers flexible shipping rates, automatic taxes, and over 100 payment gateways.
Plus, Shopify enables social media integrations, is packed with built-in SEO features, and is fully hosted. And from their app store, you can install numerous third-party apps to complement your business.
Shopify is best for: Small businesses looking for an all-in-one ecommerce solution. If you think it’s not the right platform, you can always try other Shopify alternatives.
To date, Magento has powered over 772,000 websites around the world.
Magento is a highly flexible ecommerce solution used by medium to big businesses ready to scale. This platform offers robust features to customize all aspects of your online store, including custom templates, modules, and automation rules.
If you need to extend the features of your Magento store further, you can always use one of the 5,900 extensions available in the extension store to turn your vision into a reality.
Considered as a complex ecommerce platform, Magento also supports you by maintaining an operative community of developers and experts on the Magento ecosystem who are ready to help you, whether you use the enterprise plan or the open-source version.
Magento is best for: Medium-sized businesses that want to scale and enterprises that need complete website customization.
This platform powers over 5,102.506 live websites. And over 1,773 plugins designed to integrate with WooCommerce can be bought on CodeCanyon.
WooCommerce is so popular because it’s one of the most prominent open-source ecommerce platforms, and it’s specifically designed to integrate with WordPress.
WooCommerce has plenty of templates that can help you build a unique online store. You’ll get all essential features, including unlimited products, unrestricted customization, order management, and free shipping—and since it’s open-source, you can always personalize the platforms to your liking if you know how to code.
WooCommerce is best for: Small businesses with a WordPress website and users familiar with it.
Carrd is not a platform built to create an ecommerce website, as it’s made for simplicity and to build one-page sites.
This platform is the cheapest way for freelancer portfolios or handcrafters selling their work. It’s made for individuals who want a quick, easy business to run. And the reason it’s relevant is due to the segment it covers in the digital industry, powering over 800,000 websites right now.
Carrd is best for: Individual freelancers or one-person businesses selling one service or few products.
2. Product Marketplaces
Online marketplaces facilitate transactions between buyers and sellers, enabling sellers to showcase their products and reach a larger audience. These platforms are popular among customers because of their wide selection of products and services from different sellers and providers all around the globe.
In an online marketplace, you’re no longer purchasing from the brand’s website. Instead, you’re buying from a retailer who’s simply reselling products online. Some of those marketplaces include:
A company that needs no introduction, Amazon is the largest ecommerce seller in the United States, with a revenue of $469.8 billion in 2021. The ecommerce giant has around 200 million US-based Amazon prime members worldwide who, on average, spend $1,400 a year on online purchases.
Amazon is one of the biggest online marketplaces in the world. It offers customers a wide selection of products from retailers around the globe and enables businesses to reach a large audience on its platform.
eBay has a total of 1.5 billion products listed on their platform and around 147 million active buyers in 2021—impacting the ecommerce industry significantly.
Connecting retailers and customers from all around the globe, eBay is an online marketplace that can help small and medium-sized businesses establish an international customer base.
eBay is user-friendly, intuitive, and offers several payment options, so almost anyone can buy or sell on their platform. Plus, it has a unique feature that allows merchants to host online auctions and make the market more interactive.
Etsy had 2.7 million active sellers and 45.7 active online buyers in 2020, plus 60 million items listed for sale.
Etsy is the perfect platform for creatives looking for an online marketplace to showcase their unique handmade products. It’s particularly popular among independent creatives and people looking to buy one-of-a-kind, exclusive, and rare items.
Handcrafters and artists come here to put their unique work on sale. And surprisingly, a lot of people are willing to pay good money for them—as Etsy’s platform makes it easy to both sell and buy this kind of goods.
Alibaba had 1.24 billion customers in 2021 and $109.48 billion in revenue in 2021. It is a marketplace where retailers can get products from their suppliers.
Alibaba is one of the biggest online marketplaces in the world. As mentioned before, this platform is particularly effective for reaching big manufacturers and purchasing products in bulk. Alibaba dominated the Chinese market, too, with an estimated 960 million active customers.
3. Social Media Marketplaces
There are around 4.62 billion users of social media in the world.
Over the last years, social media platforms—particularly Facebook, Instagram, and Pinterest—have started to make it easier for brands to reach and get customers.
Despite social media platforms making it harder to get traffic from them, they’re instead allowing brands to sell products directly from their platform.
For example, retailers that showcase their products on Instagram can use Instagram’s checkout option—enabling customers to purchase the items they like without leaving Instagram.
Ecommerce companies can also use Instagram Shoppable Stories, which allows businesses to add product stickers on a story. So customers that come across a product they like can simply click on a sticker to start the checkout process.
Facebook is on this train as well, as its marketplace has been a famous place to sell and buy products for several years. But more than that, you can now launch a Facebook Shop that integrates with your Instagram account.
Pinterest is another social marketplace, as you can sell products with Pinterest Shopping and make your catalog available, publish product pins, and drive traffic to your online store.
Due to the traffic they manage, social media platforms are rapidly shifting to support the ecommerce industry. So they’re not only helpful to build brand awareness and promote marketing campaigns, but to drive sales too.
4. Unique Digital Platforms
Ecommerce is also taking place on other less centralized platforms. And they’re important because these are the types of businesses that allow individuals to build their own audience in unique ways—and from anywhere in the world.
Some examples include:
- Course platforms such as Gumroad or Podia, where you can quickly put your own courses on sale, build a landing page, and promote it on your sales channels such as Twitter or Facebook.
- Premium newsletter platforms like Substack, where you can create your personal newsletter and charge subscribers a monthly fee to receive your email content.
- No code tools like Bubble.io, where you can build a software product without being a software developer and launch a SaaS. There is no need to code or have any technical skills to create a minimum-viable product.
And this is just the tip of the iceberg. The Internet is flooded with platforms where you can provide products or services online (and make a living).
5. Decentralized Commerce
Given the development of blockchain technology and cryptocurrencies, there has been a lot of buzz around the “web3”, which is a decentralized internet where the user is in control of the platforms they use.
In the ecommerce industry, there are a few platforms in development that can potentially impact the future of selling and buying online. A pair of them include:
- DAOs. Standing as a Decentralized Autonomous Organization, they’re organizations run by code and where the stakeholders make decisions with votes using unique tokens. Currently, there’s a DAO called “The DAO” that offers “borderless commerce” to enable worldwide payments without regulatory hassles and integrate it with your store.
- NFTs marketplaces. Non-fungible tokens are individual currencies often tied to a specific document such as an image, video, audio, certificate, or any type of file. As of now, there’re NFT marketplaces where people can publish and trade their own NFTs, the most popular being OpenSea.
Soon, blockchain technologies will be strong enough and shift the ecommerce industry toward a more decentralized environment— so it’s a good idea to be aware of it now when it’s in its early stages.
You Can Participate in The Ecommerce Industry Too
Ecommerce is one of the most interesting areas of business, and it’s one where anyone can take part.
Starting out? Learn how to build an ecommerce business and do it.
Trying to get customers? Learn how to market your online store, and do the work.
Trying to scale? Get in touch with us if we may be able to help.
We hope that this guide has been useful, and that your journey forward related to ecommerce is successful.