What is ecommerce?
- First things first. Before we get into the nitty-gritty of the ecommerce realm, let’s first answer one fundamental question: what exactly is ecommerce?
- Simply put, ecommerce refers to commercial transactions conducted online. This means that whenever you buy and sell something using the Internet, you’re involved in ecommerce.
It was August 11, and the year was 1994. Around noon that day, Phil Brandenberger of Philadelphia logged into his computer and used his credit card to buy Sting’s “Ten Summoners’ Tales” for $12.48 plus shipping.
That story may not sound too exciting today, but at that time, this particular transaction made history. Why? Because it was the first time that encryption technology was used to enable an internet purchase. Many consider that moment as the first “true” ecommerce transaction.
Needless to say, ecommerce has grown by leaps and bounds since then. BigCommerce cites that ecommerce is growing 23% year-over-year, and according to eMarkerter, global ecommerce sales are expected to top $27 trillion in 2020 — and that’s just statistics for the retail sector.
That’s a lot of growth (and money!), which is why if you’re interested in doing business online, you need to know the ins and outs of the ecommerce industry.
And that’s exactly what this guide is for. In this resource, we take a deep look at the ecommerce industry — how it came about, what types of merchants are out there, and what platforms enable online selling. We’ll also shed light on notable ecommerce success stories and flops to give you a better idea of what it takes to succeed in this industry.
Whether you’re someone who wants to start an ecommerce site or you’re already running an online store and just want to learn more about the industry, you’ll find plenty of nuggets in their guide.
Dive in below or jump to a specific section:
– What is ecommerce?
– Types of ecommerce merchants
– Classifying ecommerce merchants according to what they’re selling
– Classifying ecommerce according to the parties involved
– Ecommerce platforms: a look at where and how ecommerce takes place
– Ecommerce examples: success stories and flops
Types of ecommerce merchants
There are many ways to classify ecommerce websites. You can categorize them according to the products or services that they sell, the parties that they transact with, or even the platforms on which they operate.
In this guide, we’ll look at all three aspects to give you a clear picture of what types of ecommerce sites are out there.
Classifying ecommerce merchants according to what they’re selling
Let’s start with the products and services typically sold online. Below is a list of ecommerce merchants according to what they sell.
1. Stores that sell physical goods
These are your typical online retailers. They can include apparel stores, homeware businesses, and gift shops, just to name a few. Stores that sell physical goods showcase the items online and enable shoppers to add the things they like in their virtual shopping carts. Once the transaction is complete, the store typically ships the orders to the shopper, though a growing number of retailers are implementing initiatives such as in-store pickup.
2. Service-based e-tailers
Services can also be bought and sold online. Online consultants, educators, and freelancers are usually the ones engaging in ecommerce.
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. Web design company Blue Fountain Media is one example of a business that does this.
3. Digital products
Ecommerce is, by nature, highly digital, so it’s no surprise that many merchants sell “e-goods” online. Common types of digital products include ebooks, online courses, software, graphics, and virtual goods.
Examples of merchants that sell digital products are Shutterstock (a site that sells stock photos), Udemy (a platform for online courses), and Slack (a company that provides real-time messaging, archiving and search for teams).
Classifying ecommerce according to the parties involved
Another effective way to classify ecommerce sites? Look at the parties participating in the transaction. These typically include:
1. Business to consumer (B2C) – Transactions happen between businesses and consumers. In B2C ecommerce, businesses are the ones selling products or services to end-users (i.e. consumers).
2. Business to business (B2B) – As its name states, B2B ecommerce pertains to transactions conducted between two businesses. Any company whose customers are other businesses operate on a B2B model.
3. Consumer to business (C2B) – Consumer to business ecommerce happens when a consumer sells or contributes monetary value to a business. Many crowdsourcing campaigns fall under C2B ecommerce.
Soma, a business that sells eco-friendly water filters is one example of a company that engaged in B2C ecommerce. Back in 2012, Soma launched a Kickstarter campaign to fund the manufacturing of their product. The project was successful, and Soma went on to raise $147,444.
4. Consumer to consumer (C2C) – As you might have guessed, C2C ecommerce happens when something is bought and sold between two consumers. C2C commonly takes place on online marketplaces such as eBay, in which one individual sells a product or service to another.
5. Government to business (G2B) – G2C transactions take place when a company pays for government goods, services, or fees online. Examples could be a business paying for taxes using the Internet.
6. Business to government (B2G) – When a government entity uses the Internet to purchases goods or services from a business, the transaction may fall under B2G ecommerce. Let’s say a city or town hires a web design firm to update its website. This type of deal may be considered a form of B2G.
7. Consumer to government (G2C) – Consumers can also engage in B2C ecommerce. People paying for traffic tickets or paying for their car registration renewals online may fall under this category.
Ecommerce platforms: a look at where and how ecommerce takes place
We’ve talked about the types of ecommerce transactions on the web as well as the products and services sold online. But where and how do these transactions take place?
Answer: it varies.
In this section, we’ll shed light on some of the most common platforms on which ecommerce takes place.
1. Online storefronts
Having an online storefront is one of the most straightforward ways to conduct ecommerce. The merchant creates a website and uses it to sell products and services using shopping carts and ecommerce solutions. The “right” solution will depend on the merchant and their products. Below is a list of some of the top ecommerce platforms. Check them out and see which one is right for you.
Magento – Considered by many as one of the most flexible ecommerce solutions in the market, Magento offers powerful features right out of the box. It gives merchants the ability to customize just about aspect of their ecommerce store, and you have complete freedom over the look, feel, and functionalities of your site.
Magento also has an active community of experts, developers, and agencies allowing merchants to easily connect with others if they need support. And if you need to further extend the functionality of Magento, you can always use add-ons to enhance your site.
Demandware – This fully-hosted solution allows you to run a powerful ecommerce store in the cloud. Merchants using Demandware won’t have to worry much about platform maintenance and development since it’s fully hosted by the company (though this may limit your freedom a bit).
One of Demandware’s strengths is that it’s built with omnichannel retailers in mind, and it has features that enable merchants to easily sell across physical and digital storefronts.
Oracle Commerce – This enterprise ecommerce solution can be implemented on-premises, or it can be hosted by Oracle or a third party. It has features that can benefit both B2B and B2C merchants, and it comes with powerful functionalities that enable you to sell more complex merchandise and data-rich offerings.
Oracle Commerce also allows users to easily customize sites and campaigns while giving them the ability to efficiently launch sites for multiple brands and markets.
Shopify – A popular choice among many SMBs, Shopify has features that let you sell online, on social media, and in-person. It lets merchants build and customize their ecommerce site through easy-to-use interfaces and templates. And it has features such as inventory management, reporting, buy buttons and more. It also has social selling functionalities for those who are active on sites like Facebook and Pinterest.
Shopify is fully hosted, which means merchants won’t have to worry about maintaining the platform or using their servers.
WooCommerce – WooCommerce is an open source ecommerce platform for WordPress. It comes with standard features such as analytics and reporting, shipping options, and mobile-friendly functionalities. Built specifically for WordPress, WooCommerce seamlessly connects with the platform. This makes it a very attractive choice for existing WP users.
WooCommerce is highly extendable and very developer-friendly, offering things like custom AJAX endpoints, Webhook systems, and more.
BigCommerce – Used by big and small brands alike, BigCommerce offers features such as a site builder, shipping options, reporting, and more. It also enables merchants to sell on other sites and platforms, including eBay, Amazon, Facebook, Google Shopping, and Square. Plus it has a Buy Button for enabling sales on blogs, emails, and more.
Additionally, BigCommerce has a built-in B2B offering for wholesalers and merchants selling to other businesses.
BigCommerce is fully-hosted, so the company handles all platform maintenance and updates.
Volusion – Another popular ecommerce solution, Volusion enables merchants to create online stores, showcase their merchandise, and take payments all on one platform. Volusion comes with standard features including a site builder, shopping cart software, marketing tools, and more.
Drupal Commerce – This is an open-source ecommerce framework that enables users to build online stores and applications on Drupal. Drupal Commerce is highly flexible and offers hundreds of modules that allow users to enhance and extend its functionalities. There’s also Commerce Kickstart, “a distribution of Drupal Commerce packed with features that make it more complete, faster to launch, and easier to administer.”
2. Online marketplaces
Ecommerce transactions can also take place on online marketplaces — sites that facilitate transactions between merchants and customers. Many online marketplaces don’t own inventory; rather, they just connect buyers and sellers and give them a platform on which to do business.
Some of the top online marketplaces on the web are:
Amazon – A company that needs no introduction, Amazon is one of the world’s largest online marketplaces, offering extensive selections of books, electronics, apparel, accessories, baby products, and more.
As of 2015, there were more than 2 million third-party sellers on the site, and according to Amazon, these sellers sold 2 billion items in 2014.
eBay – eBay is another popular online marketplace that connects merchants and buyers, facilitating B2B, B2C, and C2C ecommerce. eBay offers products in several categories, including electronics, cars, fashion, collectibles, and more.
eBay merchants can also hold auctions that let buyers bid on products. This allows the possibility of selling items above market value.
Etsy – Etsy is an online marketplace that specializes in handmade, vintage, and one-of-a-kind goods. Millions of independent sellers use Etsy to showcase and sell their creations, and people (buyers and sellers alike) love the site because of its community-centric feel.
Alibaba – Alibaba is an online marketplace for wholesalers, manufacturers, suppliers, and importers/exporters. It’s an effective site that allows users to find vendors and purchase merchandise in bulk.
Fiverr – This is a “freelance services marketplace” that connects people (mostly entrepreneurs) with service providers who offer anything from graphic design and online marketing to translation and video development. As its name indicates, gig pricing on Fiverr starts at $5 USD, though depending on what you’re selling, that can go up to hundreds, even thousands of dollars.
Upwork – Formerly Elance-oDesk, Upwork is a marketplace that connects individuals and businesses with freelancers from all over the world. What types of services can you buy and sell on Upwork? Answer: a whole lot. Freelancers on the site range from web developers and designers to virtual assistants, accountants, and consultants.
3. Social media
Social media can pave the way for ecommerce in two ways: social sites can facilitate a sale by directing shoppers to a merchant’s ecommerce site, or they can allow users to buy something directly on the platform.
How social media facilitates ecommerce
In many cases, social networks such as Facebook, Instagram, Twitter, and Pinterest aren’t used as ecommerce platforms. Rather, merchants use these sites to showcase their merchandise. And when shoppers come across an item that they like on social, they are directed to the merchant’s ecommerce site.
For instance, many retailers who show off their products on Instagram use solutions such as Like2Buy to enable customers to purchase the items. Here’s how it works: when a user sees a product that they like on their Instagram feed, they can click the merchant’s Like2Buy link so they can view the item’s product page.
Conducting ecommerce transactions on social sites
Social networks are also exploring ways to let consumers complete purchases without having to leave the site.
Pinterest, for instance, has Buyable Pins that enable merchants to sell products featured on their Pinterest page. According to the site, “Buyable Pins have a blue price tag, which tells people your product is in stock and available for purchase. People can easily spot these Pins all over Pinterest—in search results, in related Pins and on your business profile.”
Buyable Pins are currently available on Shopify, BigCommerce, and Salesforce Commerce Cloud.
Speaking of Shopify, the ecommerce platform also offers a fully integrated Facebook store that allows shoppers to purchase products without having to leave the site. Shopify also has Messenger support, so customers can buy items and track their orders through chat.
The above-mentioned initiatives certainly are interesting, but it’s important to note that not all social selling projects are successful. Take Twitter’s Buy buttons. In 2014, the social site released a feature that allowed customers to purchase items directly from a Tweet.
It wasn’t a huge success.
In 2017, Twitter officially shut down the project, though it told Recode that the company “will continue to invest in ad products for retailers that help drive purchases via the social network.”
Ecommerce examples: success stories and flops
Now that you have sufficient background about ecommerce, it’s time to look at some real world examples of ecommerce success and failure stories. Check them out below, learn from their examples, and see what you can apply in your business.
Ecommerce success stories
This section lists some of the top ecommerce sites on the web, and it sheds light on what makes them successful.
We’ve mentioned Amazon quite a bit in this piece and for a good reason: it’s one of the most successful ecommerce businesses in the world. Aside from a thriving marketplace featuring third-party sellers, Amazon also has massive revenue coming in from its Prime membership, as well as subsidiaries such as Amazon Web Services and Zappos.com.
What makes Amazon successful
Bestselling author and speaker Bryan Eisenberg, who recently published the book Be Like Amazon: Even a Lemonade Stand Can Do It (co-authored by Jeffrey Eisenberg and Roy H. Williams) often talks about the 4 Pillars of Amazon’s Success.
These pillars are:
1. Be Customer Centric – “Amazon is not trying to force customers to fit the way they want to sell them,” he says. “Amazon would rather fit themselves into how customers buy today and will change their buying behavior in the future.”
2. Be Creative – Amazon is always conducting experiments and coming up with ways to improve the shopping experience.
3. Be Focused on Customer Experience – According to Bryan, “Amazon will do everything possible to have people talking about what an amazing experience it was to shop or return items through their store. Every tiny detail in the store is designed to have customers engaged and excited to be there.”
4. Continuously Improve & Optimize – Amazon makes good use of its data. The company is always crunching the numbers, and it uses data in just about every aspect of the business, including customer experience, warehousing, operations, finance, and marketing.
Birchbox has a two-pronged business: it offers a subscription in which the company charges members $10 a month to receive “personalized mix of 5 hair, makeup, skincare, and fragrance samples.” Birchbox also has an online shop that allows customers to purchase full-sized products. As of 2015, Birchbox had more than 800 brand partners and more than a million subscribers.
What makes Birchbox successful
Several factors contribute to Birchbox’s success, but one of the most important ones is data. The company’s co-founder, Katia Beauchamp, told Forbes that data became their best friend.
Here’s one example of how the company uses data. Birchbox asks subscribers to review each item and uses that information to match customers with the best products. Birchbox also sends the data to their partners so they can determine what works and what doesn’t.
Another key to their success? Unlike most of their competitors, Birchbox isn’t just a box subscription service. The company allows members to buy full-size products rather than just with samples. This enables Birchbox to differentiate itself.
Wayfair is a home furnishings e-tailer that offers a wide selection of more than 7 million items. Forbes reports that “Wayfair netted an estimated $18 million on $915 million in 2013, up 55% from the year before.” And as of May 2017, the site had over 36 million total visits.
What makes Wayfair successful
Wayfair is a drop-shipper, and it hardly carries any inventory. That said, the company does a tremendous job managing suppliers, orders, and fulfillment. “They figured out how to manage 7,000 vendors and the drop-ship process so the vendors go directly to the consumer,” says Battery Ventures’ Neeraj Agrawal in an interview with Forbes.
It works like this. Vendors upload their inventory data into Wayfair servers, and the company’s algorithm crunches the numbers and uses that information to determine shipping time and processes.
“Once an order is placed, software kicks in to notify the supplier. The system then decides how to ship the item–a Quoizel lamp might mean a small package via UPS or FedEx; an area rug requires a delivery company Wayfair contracts with.”
In addition to efficient supplier and order management, Wayfair also strives to get to know its customers. The company encourages each shopper to create an account, and it observes user behavior, so Wayfair personalizes the shopping experience accordingly.
Zappos is an online shoe and apparel retailer based in Las Vegas, NV. It’s currently owned by Amazon, but it’s still worth taking a look at what makes this ecommerce site successful.
What makes Zappos successful
Zappos is famous for its customer service. One of the retailer’s core values is to “Deliver WOW Through Service,” and it lives up to that value time and time again through its employees.
For instance, while other businesses encourage call center agents to get off the phone as quickly as possible, Zappos wants its employees to stay on the phone for as long as necessary. At one point, a Zappos employee even spent 10 hours on the phone with a customer.
When asked how the company felt about this, Jeffrey Lewis, Zappos Customer Loyalty Team supervisor said, “Zappos’s first core value is deliver wow through service, and we feel that allowing our team members the ability to stay on the phone with a customer for as long as they need is a crucial means of fulfilling this value.”
You’ve seen the success stories; now let’s look at some of the biggest flops in the industry. Pay attention, and learn from these companies’ mistakes.
Boo.com was a UK-based clothing and cosmetics e-tailer that failed just two years after its launch. It was just one of the many Internet companies that shut down during the dot-com bubble in the year 2000.
For the uninitiated, the dot-com bubble burst occurred from 1997 to 2001. The rapid growth of Internet usage and adoption at the time fueled investments at incredibly high valuations and companies that haven’t even turned a profit went public. The hype wasn’t sustainable, though, and capital soon dried up. As you’ll learn below, this was ultimately one of the reasons why Boo.com (among others) shut down.
Why Boo.com failed
Boo.com also tried to expand way too fast, and its operating expenses were too high. And because of the crash of tech stocks at the time, the company wasn’t able to raise enough funds to stay afloat.
As its name suggests, eToys.com was an online toy retailer. It launched in 1997 and then filed for bankruptcy in 2001.
Why eToys.com failed
Like Boo.com, eToys had tried to expand too fast and also incurred high operating expenses. Because of the market conditions following the dot-com bubble, eToys failed to obtain capital that would allow it to continue operations.
But that wasn’t the only factor that led to its failure. According to ABC News, “during its first holiday shopping season after going public, the site was swamped with orders, as were other online toy sites. EToys sold more than any of its competitors, but the publicity over late shipments dogged the company. Analysts say it also made customers wary of holiday Web shopping during the 2000 holiday season.”
The bad publicity didn’t stop there. At one point, the company sued Etoy, a Swiss art site. eToys tried to obtain the etoy.com domain saying that it was too similar to eToys.com. The move was met with widespread backlash, and eToys.com backed off.
Founded in 2010, Toygaroo was an online toy rental service that was dubbed Netflix for toys. Toygaroo enabled parents to rent toys for a period, then give them back when their kids got tired of playing with them.
Toygaroo had a promising start. Its founder, Nikki Pope, appeared on the hit TV show Shark Tank and secured a $200,000 investment from Mark Cuban and Kevin O’Leary. Unfortunately, that investment didn’t pay off. Toygaroo filed for bankruptcy in 2012 and subsequently shut down.
Why Toygaroo failed
While the exact details of Toygaroo’s shutdown weren’t clear, it looks like the company had problems dealing with its rapid growth as well as with executing its business model.
Phil Smy, former Chief Technology Officer for Toygaroo, told Shark Tank Blog, that Toygaroo might have had trouble scaling the business. “The business was growing,” he said. “To be honest, that was the problem. Explosive growth is a difficult thing to handle for small businesses. I thought – and still think – it is a great idea. The business model needs some changing from what we were doing. I would have grown more organically (i.e., slower) and also found investors who were willing to go the distance.”
Meanwhile, Kevin O’Leary, one of the sharks who invested in Toygaroo, told Forbes that it was his worst deal on the show. “Great concept but they proved unable to execute,” he said.
Putting ecommerce knowledge to action
And there you have it. We just discussed what ecommerce is, the types of merchants that do business online, and the biggest success (and failures) in the industry. What’s next?
Answer: take action.
Wherever you are right now in your ecommerce journey, we hope this post gave you some insights that you can apply in your venture. If you’re just starting out and need help picking a platform or deciding on your target audience, go back and read the section on ecommerce types and solutions. Already running a business and want to ensure your success? Read through the ecommerce stories above.
And if you need additional advice or insights, we’re here to help. Get in touch, and we’ll see how we can help you take your ecommerce business to the next level.