What is e-commerce?

We’re starting a new e-commerce series that will be focusing on the nitty-gritty of doing business online and sharing our thoughts on the best way to do it. To kick things off, we’re going to cover the basics.

E-commerce or electronic commerce, in simple terms, means running an online business. It refers to the selling and purchasing of goods and services over the internet where the exchange of money and data takes place via protected connections in order to execute a transaction.

Importance of e-commerce in today’s world

E-commerce offers a number of benefits over “brick and mortar” stores. It allows customers to easily find their desired product(s) through a large database. They can research the product beforehand, compare prices, learn more from customer reviews, and then buy it once their concerns are rectified by the online customer support representative.

Online retailers on the other hand, also get to enjoy many e-commerce benefits. The internet or more accurately, search engines allow online businesses to reach global markets. They can be found by potential customers without spending hundreds of dollars on expensive advertising campaigns. The internet has allowed them to track customer preferences and then execute perfectly tailored marketing campaigns.

E-commerce classification

There are four primary types of e-commerce business models. All of them are classified based on the nature of the transactions.

Business-to-Business (B2B)

The B2B e-commerce model refers to trading goods or services from one business to the other. The B2B model promotes online businesses to interchange goods with each other. For instance, a manufacturer sells goods to a wholesaler who then sells it to the retailer. In this scenario, the manufacturer and the wholesaler are following the B2B model.

Business-to-Consumer (B2C)

The B2C e-commerce model works as the name suggests. In the B2C e-commerce model, a business sells the goods or services directly to the individual customer online. With the help of the B2C model, the customers can view and purchase the desired products from the retailer’s online store. Once the online retailer receives an order, it’s processed and then sent directly to the customer. For instance, Amazon is an excellent example of B2C e-commerce model as they sell individual goods to individual customers.

Consumer-to-Consumer (C2C)

Another e-commerce business model is the C2C model. It allows the customer to sell the goods or services to other customers with the help of the internet. It makes perfect sense in today’s digital landscape. In simpler terms, this is mobile e-commerce!

The C2C e-commerce model allows an individual to sell their assets online for e.g. a car, a house or a bike to other individuals. The seller can publish an ad containing all the product details. Interested customers can view the details of the product and contact the seller to pursue the transaction. Ebay is a great example of the C2C e-commerce model that is running successfully.

Consumer-to-Business (C2B)

This interesting e-commerce model allows an individual customer to sell goods and services to a business. It follows the reverse path of the B2C model where businesses create products and services for the end user.

The C2B e-commerce model allows individual customers to sell goods or services to businesses that are willing to purchase from them. For instance, if you are a software architect, then you can showcase your skills set to potential businesses on platforms like Fiverr or Upwork. If the business is enticed by your software skills then they will purchase the software from you, and might as well, hire you for future services.

Types of e-commerce businesses

Dropshipping

Dropshipping is one of the most successful e-commerce business models. Before you ponder how to start a dropshipping store in 2019, you will certainly be happy to know that with dropshipping, you never have to stock merchandise.

The dropshipping business model allows you to purchase a product once you have already made a sale and have been paid by the customer. Once you get paid, you can purchase the product from a third-party manufacturer or a supplier and ship the product directly to the customer. With the dropshipping model, the store owner doesn’t have to worry about ever seeing or handling the inventory.

Wholesaling and Warehousing

An interesting business model that allows you to purchase products in bulk and stock the inventory is warehousing. The wholesaling business model gets you better prices simply because you’re buying the product in a bulk and not making a one-off purchase.

This B2B model allows the business to sell goods in a large volume. The wholesaler sells the goods to the retailer, who then sells it for a profit. You can also sell the goods individually on your website in order to enjoy a better profit margin.

On the downside, most wholesale businesses need to generate enough sales volume in order to make up for the smaller profit margins. The wholesaling model also requires high upfront investments for both purchasing and stocking of the goods.

Manufacturing and White Labeling

The manufacturing business model has stood its ground for decades. This B2B model gets paid to create the goods.

As far as white labeling is concerned, you aren’t technically developing the product yourself. Instead, you’re licensing it which allows you to put your brand’s name on it as if you’re the owner and creator of that product.

Either way, this business model allows you to remain on top of the product chain at all times. You are able to control the entire product cycle and are always aware of what’s going on with the product.

As wholesalers purchase goods from manufacturers in bulk, you can also dropship your goods or white label drop-shippers to sell your products for you.

Subscription e-commerce

Unlike a traditional e-commerce business where one-time transactions take place, the subscription business model allows the customer to subscribe to a plan in order to receive regular deliveries of the subscription box.

The subscription-based business model offers two value propositions. One, savings and two, convenience for customers. They just need to order once and then the products are delivered to them at timely intervals, usually once a month.

This business model allows customers to enjoy discounts for subscriptions. Many times, the more plans they subscribe to, the more savings they can enjoy.

The e-commerce industry will continue to grow as brick-and-mortar retail stores are establishing their online presence to increase revenue and grab larger profits. The convenience of purchasing products online with just a few clicks from your comfort zone has become a trend that is not going to fade away anytime soon.

That concludes our introduction to e-commerce. Our next topic in the series will cover the steps needed to start an e-commerce business. So, be sure to watch this space closely for the latest update.

If you have questions regarding e-commerce, please ask our cloud consultants.