What Is Electronic Commerce (Ecommerce)?

Electronic commerce (ecommerce) refers to companies and individuals that buy and sell goods and services over the Internet. Ecommerce spans various market segments and individuals can conduct it over computers, tablets, smartphones, and other smart devices. Nearly every imaginable product and service is available through ecommerce transactions, including books, music, plane tickets, and financial services such as stock investing and online banking. As such, many consider it a highly disruptive technology.

KEY TAKEAWAYS

• Ecommerce is the buying and selling of goods and services over the Internet.
• Users conduct it over computers, tablets, smartphones, and other smart devices.
• Today, individuals can purchase almost anything through ecommerce; hence, it often becomes a highly competitive domain.
• It can be a substitute for brick-and-mortar stores, though some businesses choose to maintain both.
• Ecommerce operates in several market segments including business-to-business, business-to-consumer, consumer-to-consumer, and consumer-to-business.

Understanding Ecommerce

As noted above, ecommerce is the process of buying and selling tangible products and services online. It involves more than one party along with the exchange of data or currency to process a transaction. It is part of the greater industry that is known as electronic business (ebusiness), which involves all of the processes required to run a company online.

Ecommerce has helped businesses (especially those with a narrow reach like small businesses) gain access to and establish a wider market presence by providing cheaper and more efficient distribution channels for their products or services. Target (TGT) supplemented its brick-and-mortar presence with an online store that allows customers to purchase everything from clothes and coffeemakers to toothpaste and action figures right from their homes.

Special Considerations

Ecommerce has changed the way people shop and consume products and services. More and more people are turning to their computers and smart devices to order goods, which can easily be delivered to their homes. As such, it has disrupted the retail landscape. Amazon and Alibaba have gained considerable popularity, forcing traditional retailers to make changes to the way they do business.

But that’s not all. Not to be outdone, individual sellers have increasingly engaged in ecommerce transactions via their own personal websites. And digital marketplaces such as eBay or Etsy serve as exchanges where multitudes of buyers and sellers come together to conduct business.

History of Ecommerce

Most of us have shopped online for something at some point, which means we’ve taken part in ecommerce. So it goes without saying that ecommerce is everywhere. But very few people may know that ecommerce has a history that goes back before the internet began.

Ecommerce actually goes back to the 1960s when companies used an electronic system called the Electronic Data Interchange to facilitate the transfer of documents. It wasn’t until 1994 that the very first transaction. took place. This involved the sale of a CD between friends through an online retail website called Net Market.

The industry has gone through so many changes since then, resulting in a great deal of evolution. Traditional brick-and-mortar retailers had to embrace new technology to stay afloat as companies like Alibaba, Amazon, eBay, and Etsy became household names. These companies created a virtual marketplace for goods and services that consumers can easily access.

Advantages and Disadvantages of Ecommerce

Ecommerce offers consumers the following advantages:

Convenience: Ecommerce can occur 24 hours a day, seven days a week. Although ecommerce may take a lot of work, it is still possible to generate sales as you sleep or earn revenue while you are away from your store.

Increased selection: Many stores offer a wider array of products online than they carry in their brick-and-mortar counterparts. And many stores that solely exist online may offer consumers exclusive inventory that is unavailable elsewhere.

Potentially lower start-up cost: Ecommerce companies may require a warehouse or manufacturing site, but they usually don’t need a physical storefront. The cost to operate digitally is often less expensive than needing to pay rent, insurance, building maintenance, and property taxes.

International sales: As long as an ecommerce store can ship to the customer, an ecommerce company can sell to anyone in the world and isn’t limited by physical geography.

Easier to retarget customers: as customers browse a digital storefront, it is easier to entice their attention towards placed advertisements, directed marketing campaigns, or pop-ups specifically aimed at a purpose.

Disadvantages of e-commerce website

Limited customer service: If you shop online for a computer, you cannot simply ask an employee to demonstrate a particular model’s features in person. And although some websites let you chat online with a staff member, this is not a typical practice.

Lack of instant gratification: When you buy an item online, you must wait for it to be shipped to your home or office. However, e-tailers like Amazon make the waiting game a little bit less painful by offering same-day delivery as a premium option for select products.

Inability to touch products: Online images do not necessarily convey the whole story about an item, and so ecommerce purchases can be unsatisfying when the products received do not match consumer expectations.

Reliance on technology: If your website crashes, experiences an overwhelming amount of traffic, or needs temporary takedown for any reason, your business effectively closes until the ecommerce storefront is restored.

Higher competition: Although the low barrier to entry regarding low cost is an advantage, this means other competitors can easily enter the market. Ecommerce companies must have mindful marketing strategies and remain diligent on SEO optimization to ensure they maintain a digital presence.

Ecommerce Businesses

Pros :-

• Convenient for owners as it allows them to generate revenue semi-passively.
• Convenient for consumers looking to easily browse for specific products
• Greater earning potential due to no limitations on physical location (can sell to anyone as long you can ship there)
• Reduced costs assuming digital presence costs less than building, insurance, taxes, and repairs.
• Greater marketing control including data extraction from customers, targeted ads, and pop-up placement

Cons :-

• Limited customer service opportunities as there is little to no face-to-face opportunities
• Lacks instant gratification as customers must believe in a product before seeing it in person
• Products can’t been seen or handled until delivered (can’t try before they buy)
• Risk of a down website causing lost revenue or income.
• High reliance on shipping constraints which may be out of your control
• Higher competition due to lower barriers of entry and greater customer potential