Electronic commerce or eCommerce refers to any form of a business transaction facilitated by the internet. It involves the buying and selling of physical goods and services, and the transfer of money using the internet. We tend to associate ‘eCommerce’ with online shopping which is primarily business-to-consumer or ‘B2C’ in nature. Some of the other eCommerce models include B2B, C2B, C2C, and B2G. Auction sites, coupons & online ticketing some examples of eCommerce that isn’t traditional.
Some websites might showcase a retailer’s catalog, but if they aren’t hosted on a shopping cart or don’t have a payment integration on their site, they don’t have anything to sell and therefore, don’t contribute to eCommerce.
Electronic commerce has been rapidly growing over the last decade and is projected to hit approximately $4 trillion in sales next year.
How many eCommerce companies are there?
In our research, we found that there are 2-3 million eCommerce companies in the world, and North America (USA & Canada) accounts for nearly half of that with 1.3 million eCommerce companies. B2C eCommerce companies that sell physical goods form the biggest share of the pie (22% or 286,000).
In terms of eCommerce sales, however, no surprise marks for guessing which country comes first.
What are the different types of electronic commerce businesses?
We can classify eCommerce businesses based on the nature of goods sold or the transacting parties involved.
a) What is the type of product sold?
Physical goods: These include online stores selling physical products such as clothing, homeware and electronics, just to name a few. Stores that sell physical goods showcase the items online and allow shoppers to add the items they like into their virtual shopping carts. Once the transaction is complete, the store typically ships the orders to the shopper. Examples include Casper, Bonobos, and Warby Parker.
Digital goods: Digital goods or ‘e-goods’ typically include e-books, audio, and video products. Examples include Shutterstock (a site that sells stock photos), and Udemy.
Services: Services are also bought and sold online. A few popular examples include travel ticketing OTAs such as Expedia and Skyscanner, on-demand food delivery services such as Postmates and Grubhub, and freelancing marketplaces such as Fiverr and Upwork.
b) What are the transacting parties involved?
Business to Business (B2B): In the B2B model, businesses sell to other businesses. Large corporations sell anything from agri-commodities to metal ingots to finished industrial products on B2B trade portals. Such portals could be theirs or industry-specific trading platforms. It is also common for B2C businesses to have a wholesale section where they sell to other businesses, often for a bulk-purchase discount.
Typical examples include Costco, Office Depot, etc.
Business to Consumer (B2C): B2C is the most commonly known business model (almost synonymously to eCommerce, in general) where merchants sell to consumers. A familiar example of the B2C model would be a shopper buying clothes or groceries from a retail store.
Consumer to Consumer (C2C): C2C model enables individuals to sell privately to each other. Consumers who previously bought something can resell it to another consumer through C2C platforms such as eBay, OLX, and Taobao.
How does eCommerce work?
Through online storefronts, marketplaces and/or social channels.
i) Online storefronts: The most common way of conducting electronic commerce is through online storefronts. Shopify, Magento, WooCommerce, just to name a few are popular examples. Based on our analysis of the top 1 million websites, we found that the top ecommerce storefronts are WooCommerce, Shopify, Magento, and BigCommerce.
ii) Marketplaces: Just over 2 years ago, there were fewer than 500 marketplaces globally. Today, our guesstimates are around 3,000. Amazon continues to be the most popular marketplace. As of 2018, there were more than 5 million third-party sellers on its site. Companies like Mirakl are enabling B2C retailers to launch their own marketplaces. Some of the other top online marketplaces on the web are eBay, Etsy, and Alibaba.
iii) Social Media: Social platforms are a great way to acquire customers for your eCommerce storefront. Merchants primarily use Facebook, Instagram, and Pinterest as marketing channels for their merchandise. PipeCandy’s own data shows that eCommerce shoppers coming from social posts to the website, often convert at over 20% rate. A typical eCommerce website converts 5%-10% of its visitors to customers. Instagram and other social networks covert 3x-5x better!
Best practices for running eCommerce businesses
Yes, eCommerce is exciting but, it’d also bode well for nascent brands to be aware of the potential pitfalls in eCommerce. Here is a collection of articles about best practices you could follow to tackle the common challenges involved in building an eCommerce company.
- Picking an idea for eCommerce
- Setting up storefront
- How to get manufacturing done right?
- How to get drop shipping right?
- How to manage inventory?
- How to price?
- How to get promotions right?
- How to get assortments right?
- How to get forecasting done right?
- How to do warehousing right?
- How to do shipping right?
- How to do returns right?
- How to do customer service right?
- How to pick a product review platform?
At PipeCandy, we’re passionate about ecommerce and data. Our Machine Learning algorithms feed our purpose-built proprietary database to provide you with ecommerce & direct to consumer insights you won’t find anywhere else. Take a peek at our ecommerce app and let us know what you’re looking for.