What is eCommerce? Definitions and tips for your business

eCommerce is an integral part of our modern global economy. Over the past two decades, it has transformed the way people shop and do business. In fact, across Wix eCommerce platforms alone, sales revenue grew 114% annually in 2020, reaching $5.4 billion in online transactions.

Today, starting an eCommerce business is easier than ever. To get started, you just need to create an online store on a platform like Wix eCommerce, which gives you an all-in-one solution with built-in eCommerce features to sell products or services anywhere in the world.

If you are interested in learning more about what eCommerce is, you have come to the right place. In this article we will answer the following questions:

1. What is eCommerce?
2. How has eCommerce evolved?
3. Any types of eCommerce exist?
4. About eCommerce trends and statistics should I know about?
5. What are the pros and cons of eCommerce?
6. How to start an eCommerce business?
7. How to promote my eCommerce business?

01. What is eCommerce?

eCommerce is short for electronic commerce, also known as online commerce. The term refers to all commercial transactions carried out over the Internet.

This includes retail, such as clothing stores or other physical goods and services of any kind, from cybersecurity to a hotel reservation. Therefore, electronic commerce includes all the processes in which purchases of any kind are processed.

The most common way to facilitate online sales and transactions is through an online store, or an eCommerce platform. Although most eCommerce businesses, especially smaller businesses, specialize in retail or wholesale product sales, eCommerce is not always about selling a product, there are other types of eCommerce as well.

02. How has eCommerce evolved?

In 1994, a 21-year-old named Dan Kohn sold his friend a Sting CD for $12.48. What makes this event remarkable is that Kohn made the sale through his website, NetMarket, and was paid via an encrypted credit card transaction, making it the first eCommerce sale in the history.

Kohn may have made the first real eCommerce sale, but other entrepreneurs had been paving the way for online shopping for decades.

CompuServe, which would become one of the great players in the e-commerce boom of the 1990s, launched in 1969 and established many of the platforms and practices that made the rise of online commerce possible in the first place.

In 1971, two computer science students from Stanford University and MIT used the ARPANET, a kind of precursor to the Internet, to trade marijuana.

In 1984 , a 78-year-old woman in the United Kingdom used a Videotex device to order food at home. However, since both cases required in-person payments (and in one of them, the product was illegal), neither can be considered an eCommerce transaction. This leaves the Sting CD as the first real sale within eCommerce. Since then, electronic commerce has experienced rapid development.

In August 1994, Pizza Hut launched PizzaNet, through which customers could order – and pay for – their pizzas online.

A year later, in 1995, Amazon launched its online book-selling service, followed by eBay and PayPal. Together, these companies ushered in the era of online commerce, encompassing nearly every product and service imaginable and generating billions of dollars in sales around the world.

Here are some of the most important e-commerce milestones in chronological order:

• 1979: Michael Aldrich invents online shopping, connecting televisions to telephone lines that allow people to order – but not pay for – certain items remotely.
• 1982: Boston Computer Exchange becomes the first online marketplace, selling used computers through its website (although payments were made by phone).
• 1984: Jane Snowball, a 78-year-old British grandmother, orders food delivered using a Videotex device.
• 1994: The first e-commerce sale in history was made by 21-year-old Dan Kohn. The product: a Sting CD.
• 1994: Pizza Hut launches PizzaNet, the world’s first online pizza ordering system.
• 1995: Amazon launches its online book sales website.
• 1997: Launch of PayPal.
• 2005: The first “Cyber ​​Monday” sale is announced.
• 2014: $2.68 billion in online sales made on a single Cyber ​​Monday.
• 2019: The first time that online retail sales exceeded sales of brick-and-mortar businesses.
• 2024: eCommerce sales are expected to account for 22% of total retail sales worldwide.

03. What types of eCommerce exist?

E-commerce businesses can be categorized in two ways. The first type of e-commerce focuses on the business relationship between the buyer and the seller. The second focuses on the type of products or services offered.

Categorization of e-commerce companies based on the commercial relationship

You may have seen the abbreviations B2B or B2C in the context of business before. These represent the two parties involved in a business transaction, but there are more than those two possibilities.

• B2C or Business to Consumer (business to consumer):

It is one of the most common types of online trading. These companies sell products and services directly to the end customer, including everything from physical goods to online services.

• B2B o Business to business (empresa a empresa):

It is also a common type of eCommerce. They are companies that sell their products and services to other companies. B2B covers a wide range of companies, such as B. Wholesalers, suppliers of raw materials and service providers, as long as they are oriented to sell to other companies.

• C2C – Consumer to consumer (consumidor a consumidor):

With the rise of e-commerce, the number of C2C business models has increased exponentially. Any transaction between two people (that is not considered a business) is called C2C. This includes most transactions made on platforms like eBay or Craigslist , or on social media marketplaces, like Facebook or Instagram.

• C2B or Consumer to business:

The C2B (consumer to business) model is relatively young and describes services provided by individuals to businesses. Freelancers and small service providers are often assigned to this business model. A common type of C2B is the sale of photos, videos, or music created by individuals. Such services can be found on platforms like Fiverr and the Wix Marketplace .

• B2G or Business to government (from company to government):

The State, as a legal entity, can both use and offer services. B2G companies focus on selling products and services to the state, either at the federal or local level. This includes many industries such as cybersecurity, waste management, urban planning, etc.

• G2B o Government to business (gobierno a empresa):

The G2B model is the inverse of the B2G model and includes products or services that the government offers to companies. For example, access to information for which companies can pay or the bidding processes in which they participate.

These six business models cover all types of eCommerce. But in most cases, when people talk about e-commerce, they mean either B2C or B2B business models.

Although this categorization describes companies according to their relationship with the trading partner, it does not tell us about what a company actually does and what it offers. A better way to understand the difference between eCommerce companies is to classify them according to the type of products or services they offer.

E-commerce business categorization based on the products or services

• Physical products:

Businesses that sell physical products online are extremely common and are often what people refer to when they talk about eCommerce. These online stores include both retailers and wholesalers, selling any type of physical product, from clothing to books, groceries to garden accessories.

Most businesses that sell physical products online have a store on their website or sell on an e-commerce marketplace, such as Amazon .

Since physical products are the most difficult to deliver from a logistical point of view, some models have emerged to simplify the process.

Services such as dropshipping and – demand printing print- on allow companies to produce and ship products without the need for a factory, logistics center, or distribution network.

What is Dropshipping? Dropshipping is a business model in which a company uses an external service to manufacture and fulfill orders for products. By using dropshipping, entrepreneurs can focus on marketing their products and creating a unique customer experience, instead of dealing with the logistics of manufacturing, warehousing, order processing, and shipping.

• Services:

There is an endless variety of services that can be purchased online, from hiring freelancers to streaming movies. Therefore, not all service-based eCommerce businesses work the same.

Many providers sell their services on their own website, or on a platform dedicated to similar services, much like a product-based business would.

It is also not uncommon for a company to ask its new customers to fill out a contact form , instead of going to buy the service directly. This usually depends on the type of business, as well as the clients.

Another common business model for eCommerce services is subscriptions. Streaming services, such as Netflix for example, use this model.

It’s a very good way to generate consistent income, if you can consistently provide value to the customer.

• Digital Products:

There is a third type of electronic commerce that sits between physical products and services: digital products. This sector has exploded in the last two decades. Includes computer software, music files, in-game purchases in video games, etc.

Digital products are the easiest to provide to the customer as it is just a matter of allowing a download. In addition, they have the added benefit of being freely duplicated, unlike a physical product, which requires manufacturing.

04. What eCommerce trends and statistics should I know?

To easily understand the scope and impact of e-commerce on our modern economy, let’s look at some statistics.

Online sales are overtaking traditional retail

In 2019, online sales accounted for around 14% of all retail sales, worldwide. By 2023, that number is expected to grow to 23% , nearly a quarter of all retail sales. According to the Nasdaq , eCommerce is expected to facilitate 95% of all retail sales by 2040.

Free shipping is a key factor

Offering quality products, fast delivery and competitive prices is not enough to succeed in eCommerce. One of the biggest incentives to shop online is free shipping.

Selling products online without offering free shipping can be fatal for many eCommerce businesses, as it can deter potential customers. It’s so important to shoppers that 85% of them say they prefer free shipping over expedited shipping .

Free shipping is good for attracting new customers, but it can also increase the profit from each transaction. Online transactions have been found to be 30% higher when free shipping is offered .

Shoppers feel more comfortable than ever when shopping online

Feeling comfortable shopping online is not something obvious. Many buyers continue to have their doubts when trusting online transactions. But in the last two years, especially because of the pandemic, we have changed the way we shop and the attitude we have towards online shopping significantly.

Today, 43% of shoppers have a positive opinion about buying products and services online. However, the real change is in people’s willingness to try new brands online. 44% of US shoppers said they did so during the pandemic.

Customers expect high-quality product images and videos

In a world where “what you see is what you get”, being able to accurately see the product you are about to buy can make a difference. The photos of your products have a great impact on the decision making of your customers.

In fact, 60% of digital shoppers in the US say they need to see an average of 3-4 images before deciding to buy a product .

Product photos can increase the number of sales you make, while good photography can also help you increase the price. But this is not limited to photos.

Product videos also play an important role in sales promotion. Shoppers who watch product videos are 73% more likely to make a purchase.

Social networks play a crucial role in e-commerce

It’s no secret that people spend a large part of their time online on social media. This makes them extremely attractive for eCommerce. In fact, 49% of US shoppers find new products on Facebook .

Many eCommerce companies already use social networks to market their products, through paid advertisements. With an average cost per click of $1.72 and an average conversion rate of 14.3%, it’s no wonder that businesses use Facebook ads a lot.

05. What are the pros and cons of eCommerce?

There are many reasons to start an online business. But before you start considering profitable online business ideas, it’s important to understand their advantages and disadvantages.

Advantages of eCommerce

Low investment costs and operating costs:

Compared to a physical establishment, eCommerce requires a much lower initial investment. Instead of renting a space and remodeling it to create the perfect store, it is enough to create a website and design an online store digitally.

Operating costs are also lower, since hiring employees can be dispensed with, at least initially. Rents and high utility bills associated with physical properties are also avoided.

Opens 24/7:

Online stores, unlike physical businesses, are not limited by business hours. An eCommerce business can run 24 hours a day, generating income even when you sleep.

Reach more customers:

By operating your business online, your clientele is not limited to a physical location, as with a store. This means that you can market and sell to a much larger audience. Your online store can serve customers from all over the world, and you can sell products abroad .

Quick and easy for customers:

One of the biggest advantages of eCommerce is the ease of use for shoppers. Allowing your customers to order their products online and receive them at home makes the purchase process much faster and easier than going to a store.

This means that customers are more likely to make impulse purchases, as well as come back for more, if they are happy with your products.

Easily scalable:

Growing an e-commerce business is much easier than growing a physical one. Of course, you may need more storage space and you may need to hire some employees to handle order processing and other tasks.

But you won’t have to search for new locations or hire enough employees to run an entire store. Your business may expand, but your online store can always expand with it.

Disadvantages of eCommerce

It is more difficult to interact with customers:

Most of the disadvantages of eCommerce stem from the inability to physically communicate with your customers. This makes it more difficult to understand their needs and make sure they are happy with your business.

To counteract this, it’s important to keep in touch with your customer base whether it’s through social media, emails, surveys, etc.

Buyers may not test products before purchasing:

In an online store, customers cannot physically see the products before buying them. That means they can’t try on clothes, try out gadgets or equipment, or even get a general feel just by holding an item in their hands.

Many online stores offer a return policy with free shipping so that their customers do not hesitate to buy. Good product photos and videos can also help customers better understand and perceive it.

Technology can ruin sales:

When your business is online, any mistake or failure can cost you money. There are many unexpected obstacles that can arise: transaction errors, bad page layouts, server crashes, etc.

This can not only botch a sale, but also discourage customers from coming back to your online store.

Make sure you build your website and store with a reliable hosting that has a proven track record of success to minimize these issues.

Extremely competitive:

In many cases, eCommerce is more competitive than physical commerce. Instead of competing with other businesses in your city or neighborhood, you are competing with the entire world.

However, there are many ways to stand out. Good marketing is the key to success in e-commerce.

06. How to start an eCommerce business?

If you are looking to create an e-commerce business, creating an online store is a good first step. You can go much deeper into this topic with our guide on how to create an online store , but we will give a basic explanation with these 5 steps that will help you get started:

Choose what to sell online

The first thing you will have to do before starting your eCommerce business is to decide what you want to sell. You can find products, based on the target audience you are after, or vice versa.

The products you choose to sell can ultimately determine your success, so take your time and plan your actions before you start.

Build and design your online store

To launch your online store, you will have to build a web page using a hosting that can facilitate eCommerce.

You can create your own website from scratch or use an online store template . All of our eCommerce templates are designed by professional designers and allow you to sell your products online.

Building a professional eCommerce site is crucial to creating a positive shopping experience and can make or break an eCommerce business, so don’t skip this step.

Find a manufacturer

After you have decided on a product, or a line of products, you will have to manufacture them. The type of manufacturer changes from one product to another.

If you are looking for digital products, you may not need a factory, but you may need to hire professionals to create or put the finishing touches on your products.

Select shipping partners

Shipping is an important part of any online store. You will look for all your customers to receive their products quickly and completely. To get it, you will need a good shipping company.

If manufacturing and shipping the products seem too complicated for you, you can always resort to dropshipping. Simply connect your store to a dropshipping service that manufactures, fulfills orders, and delivers products for you.

Of course, in the case of digital products, you can avoid shipping in its entirety. But you still have to make sure that your products are distributed correctly, that is, that the emails go out without errors and that the download links are always active.

Connect a payment provider

No business is complete without accepting payments. In order to process transactions and receive payments online , you will need to connect your online store to a payment provider . To make sure customers always have a convenient way to pay, you can offer various payment options such as credit card, digital wallets like PayPal , bank transfer, etc.

Since we’re talking about payments, it’s worth mentioning that you need to make sure your eCommerce business is compliant with online sales tax regulations.

07. How to promote my eCommerce business?

The importance of marketing in eCommerce cannot be underestimated. It is an essential part of winning new customers and retaining your existing customer base. No eCommerce business is complete without it.

Optimize the SEO of your online store

One of the main ways to drive traffic to your online store is to optimize it to appear higher in search engines. This is called eCommerce SEO (search engine optimization).

Without going into details, SEO means optimizing the text, images, and general construction of your web page, so that it ranks higher in search engines like Google.

Use content marketing

Content marketing is very common in eCommerce. Simply put, it’s all about creating content, like blog posts, to drive visitors to your website. Following a content strategy , along with SEO, can have a huge impact on your store traffic.

Use Facebook and Google ads

Facebook and Google Ads are the most common paid advertising channels for eCommerce, and they have proven to be very efficient. Between Facebook, Instagram and Google, you can cover a large part of all Internet users. But with all that reach, you’ll need to be very specific when setting up your campaign, or you’ll risk wasting your budget on the wrong audiences.

Recurre al email marketing

Email marketing is a great way to keep in touch with your customers, informing them of new products, offers or even sending them an abandoned cart email . Email marketing is considered to have one of the best ROIs in eCommerce marketing. However, to run a truly successful eCommerce business, you will need to create a marketing strategy that covers most, if not all channels.

Now that we have seen what eCommerce is, we can see that electronic commerce has become an integral part of our economy and the amount of online shopping is expected to continue to increase in the coming years.

Therefore, in a world where most of the commerce is done online, it is crucial for your company to have a strong online presence and offer eCommerce possibilities to your customers. It does not matter if you want to build and expand the presence of your physical store or if you are fulfilling your dream of becoming a freelancer, creating your own online store has never been more important or more accessible.

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