What is E-Commerce?

E-Commerce History:
E-commerce (electronic commerce) is the buying and selling of goods and services,
or the transmitting of funds or data, over an electronic network, primarily the internet.
These business transactions occur either as business-to-business (B2B), business-to-
consumer (B2C), consumer-to-consumer or consumer-to-business.
The terms e-commerce and e-business are often used interchangeably. The term e-tail is
also sometimes used in reference to the transactional processes that make up online retail
shopping.
In the last two decades, widespread use of e-commerce platforms such as Amazon
and eBay has contributed to substantial growth in online retail. In 2011, e-commerce
accounted for 5% of total retail sales, according to the U.S. Census Bureau. By 2020, with
the start of the COVID-19 pandemic, it had risen to over 16% of retail sales.
E-commerce:
How does e-commerce work?

E-commerce is powered by the internet. Customers access an online store to browse

through and place orders for products or services via their own devices.
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As the order is placed, the customer's web browser will communicate back and forth with
the server hosting the e-commerce website. Data pertaining to the order will be relayed to a
central computer known as the order manager. It will then be forwarded to databases that
manage inventory levels; a merchant system that manages payment information, using
applications such as PayPal; and a bank computer. Finally, it will circle back to the order
manager. This is to make sure that store inventory and customer funds are sufficient for the
order to be processed.
After the order is validated, the order manager will notify the store's web server. It
will display a message notifying the customer that their order has been successfully
processed. The order manager will then send order data to the warehouse or fulfillment
department, letting it know the product or service can be dispatched to the customer. At
this point tangible or digital products may be shipped to a customer, or access to a service
may be granted.
Platforms that host e-commerce transactions include online marketplaces that
sellers sign up for, such as Amazon; software as a service (SaaS) tools that allow customers
to "rent" online store infrastructures; or open source tools that companies manage using
their in-house developers.
List of types of e-commerce
The different types of e-commerce are classified by the parties participating in online
transactions.
Commerce:
Types of e-commerce
 Business-to-business (B2B) e-commerce refers to the electronic exchange of
products, services or information between businesses rather than between businesses and
consumers. Examples include online directories and product and supply exchange websites
that let businesses search for products, services and information and initiate transactions
through e-procurement interfaces. A Forrester report published in 2018 predicted that by
2023, B2B e-commerce will reach $1.8 trillion dollars and account for 17% of U.S. B2B sales.
Business-to-consumer (B2C) is the retail part of e-commerce on the internet. It is
when businesses sell products, services or information directly to consumers. The term was
popular during the dot-com boom of the late 1990s, when online retailers and sellers of
goods were a novelty.
Today, there are innumerable virtual stores and malls on the internet selling all types of
consumer goods. Amazon is the most recognized example of these sites. It dominates the
B2C market.
Consumer-to-consumer (C2C) is a type of e-commerce in which consumers trade
products, services and information with each other online. These transactions are generally
conducted through a third party that provides an online platform on which the transactions
are carried out.
 Online auctions and classified advertisements are two examples of C2C platforms.
EBay and Craigslist are two well-known examples of these platforms. Because eBay is a
business, this form of e-commerce could also be called C2B2C -- consumer-to-business-to-
consumer. Platforms like Facebook marketplace and Depop -- a fashion reselling platform --
also enable C2C transactions.
Consumer-to-business (C2B) is a type of e-commerce in which consumers make their
products and services available online for companies to bid on and purchase. This is the
opposite of the traditional commerce model of B2C.
A popular example of a C2B platform is a market that sells royalty-free photographs,
images, media and design elements, such as iStock. Another example would be a job board.
Business-to-administration (B2A) refers to transactions conducted online between
companies and public administration or government bodies. Many branches of government
are dependent on various types of e-services or products. These products and services often
pertain to legal documents, registers, social security, fiscal data and employment.
Businesses can supply these electronically. B2A services have grown considerably in recent
years as investments have been made in e-government capabilities.
Consumer-to-administration (C2A) refers to transactions conducted online between
consumers and public administration or government bodies. The government rarely buys
products or services from individuals, but individuals frequently use electronic means in the

following areas:
Social security. Distributing information and making payments.
Taxes. Filing tax returns and making payments.
Health. Making appointments, providing test results and information about health
conditions, and making health services payments.
Mobile e-commerce (m-commerce) refers to online sales transactions using mobile devices,
such as smartphones and tablets. It includes mobile shopping, banking and payments.
Mobile chatbots facilitate m-commerce, letting consumer’s complete transactions via voice
or text conversations.
Advantages and disadvantages of e-commerce
Benefits of e-commerce include its around-the-clock availability, the speed of access,
the wide availability of goods and services, easy accessibility and international reach.
 Availability. Aside from outages and scheduled maintenance, e-commerce sites are
available 24/7, enabling visitors to browse and shop at any time. Brick-and-mortar
businesses tend to open for a fixed number of hours and may even close entirely on certain
days.

Speed of access. While shoppers in a physical store can be slowed by crowds, e-

commerce sites run quickly, which is determined by compute and bandwidth considerations
on both the consumer device and the e-commerce site. Product and shopping cart pages
load in a few seconds or less. An e-commerce transaction can comprise a few clicks and take
less than five minutes.
Wide availability. Amazon's first slogan was "Earth's Biggest Bookstore." It could
make this claim because it was an e-commerce site and not a physical store that had to
stock each book on its shelves. E-commerce enables brands to make a wide array of
products available, which are then shipped from a warehouse or various warehouses after a
purchase is made. Customers will likely have more success finding what they want.
Easy accessibility. Customers shopping a physical store may have difficulty locating a
particular product. Website visitors can browse product category pages in real time and use
the site's search feature to find the product immediately.
 International reach. Brick-and-mortar businesses sell to customers who physically
visit their stores. With e-commerce, businesses can sell to anyone who can access the web.
E-commerce has the potential to extend a business's customer base.
Lower cost. Pure play e-commerce businesses avoid the costs of running physical
stores, such as rent, inventory and cashiers. They may incur shipping and warehouse costs,
however.
Personalization and product recommendations. E-commerce sites can track a
visitor's browse, search and purchase history. They can use this data to present personalized
product recommendations and obtain insights about target markets. Examples include the
sections of Amazon product pages labeled "Frequently bought together" and "Customers
who viewed this item also viewed."
The perceived disadvantages of e-commerce include sometimes limited customer
service, consumers not being able to see or touch a product prior to purchase and the wait
time for product shipping.
Limited customer service. If customers have a question or issue in a physical store, they can
see a clerk, cashier or store manager for help. In an e-commerce store, customer service can
be limited: The site may only provide support during certain hours, and its online service
options may be difficult to navigate or not answer a specific question.
Limited product experience. Viewing images on a webpage can provide a good sense about
a product, but it's different from experiencing the product directly, such as playing a guitar,
assessing the picture quality of a television or trying on a shirt or dress. E-commerce
consumers can end up buying products that differ from their expectations and have to be
returned. In some cases, the customer must pay to ship a returned item back to the retailer.
Augmented reality technology is expected to improve customers' ability to examine and test
e-commerce products.
Marketing:
Wait time. In a store, customers pay for a product and go home with it. With e-commerce,
customers must wait for the product to be shipped to them. Although shipping windows are
decreasing as next-day and even same-day delivery becomes common, it's not
instantaneous.
Security. Skilled hackers can create authentic-looking websites that claim to sell well-known
products. Instead, the site sends customers fake or imitation versions of those products -- or
simply steals credit card information. Legitimate e-commerce sites also carry risk, especially
when customers store their credit card information with the retailer to make future
purchases easier. If the retailer's site is hacked, threat actors may steal that credit card

information. A data breach can also lead to a damaged retailer reputation.

E-commerce applications

Many retail e-commerce apps use online marketing techniques to get customers to
use the platform. These include email, online catalogs and shopping carts, Electronic Data
Interchange (EDI), file transfer protocol, web services and mobile applications.
These approaches are used in B2C and B2B activities, as well as other types of
outreach. They include emailing targeted ads and e-newsletters to subscribers and sending
SMS texts to mobile devices. Sending unsolicited emails and texts is generally considered
spam. More companies now try to entice consumers online, using tools such as digital
coupons, social media marketing and targeted advertisements.
Another area of focus for e-commerce companies is security. Developers and admins
should consider consumer data privacy and security, data governance-related regulatory
compliance mandates, personally identifiable information privacy rules and information
protection protocols when developing e-commerce systems and applications. Some security
features are added during the design of an application, while others must be continually
updated to address evolving threats and new vulnerabilities.
E-commerce platforms and vendors
An e-commerce platform is a tool that is used to manage an e-commerce business.
E-commerce platform options range in size from ones for small businesses to large
enterprises. These e-commerce platforms include online marketplaces such as Amazon and
that simply require signing up for user accounts and little to no IT implementation.
Another e-commerce platform model is SaaS, where store owners subscribe to a
service where they essentially rent space in a cloud-hosted service. This approach does not
require in-house development or on-premises infrastructure. Other e-commerce platforms
include open source platforms that require a hosting environment -- cloud or on premises --
or complete manual implementation and maintenance.
A few examples of e-commerce marketplace platforms include the following:
E-commerce Types:
 Alibaba
 Amazon
 Chewy
 eBay
 Etsy
 Overstock
 Newegg
 Rakuten
 Walmart Marketplace
 Wayfair
 Vendors offering e-commerce platform services for clients hosting their own online
store sites include the following:
Different platform:
 Big Commerce
 Ecwid
 Magneto
 Oracle NetSuite Commerce
 Salesforce Commerce Cloud (B2B and B2C options)
 Shopify
 Squarespace
 Woo Commerce
 Government regulations for e-commerce

In the United
States, the
Federal
Trade
Commission
(FTC) and the
Payment
Card Industry
(PCI) Security
Standards
Council are
among the
primary agencies that regulate e-commerce activities. The FTC monitors activities such as
online advertising, content marketing and customer privacy. The PCI Security Standards
Council develops standards and rules, including PCI Data Security Standard compliance,
which outlines procedures for the proper handling and storage of consumers' financial data.
To ensure the security, privacy and effectiveness of e-commerce, businesses should
authenticate business transactions, control access to resources such as webpages for
registered or selected users, encrypt communications and implement security technologies,
such as Secure Sockets Layer and two-factor authentication.
History of e-commerce
E-commerce began in the 1960s, when businesses started using EDI to share
business documents with other companies. In 1979, the American National Standards
Institute developed ASC X12 as a universal standard for businesses to share documents
through electronic networks.
E-commerce Revenue Gains
E-commerce grew significantly in 2020 as the pandemic took hold.
After the number of individual users sharing electronic documents with each other
grew in the 1980s, the rise of eBay and Amazon in the 1990s revolutionized the e-commerce
industry. Consumers can now buy many items online, from e-commerce-only vendors -- also
called e-toilers -- and brick-and-mortar stores that have e-commerce capabilities. Now,
almost all retail companies are integrating online business practices into their business
models.
The COVID-19 pandemic of 2020 caused e-commerce to spike significantly. With
shoppers confined to their homes for an extended period of time, e-commerce jumped to a
record high of 16.4% in the second quarter of 2020, according to the U.S. Census Bureau.
The Census Bureau keeps a record of quarterly e-commerce data dating back to
1999.
Disruption to physical retail

Given the large

rise in e-
commerce in
recent years,
many analysts,
economists and
consumers have
debated whether
the online B2C
market will soon make physical, brick-and-mortar stores obsolete. There is little question
that online shopping is growing at a significant rate. Gartner's 2021 State of Digital
Commerce Report found that of the 409 digital commerce decision-makers surveyed, 90%
were aggressively expanding e-commerce investments, with a focus on what Gartner
described as digital-first value creation and customer experience.
Data from the U.S. Census Bureau and Federal Reserve Economic Data shows the
increasing importance of e-commerce in the retail market. The percent of total U.S. sales
from e-commerce has consistently grown since 1999, peaking at 16.4% in Q2 2020. In Q1
2022, e-commerce accounted for 14.3% of total sales, several percentage points higher than
the pre-pandemic level in Q4 2019 of 11.1%.
Graph showing e-commerce retail sales as a percentage of total sales
E-commerce sales have risen steadily since 1999 and peaked in 2020, early in the pandemic.
Despite the growth of online retail, many shoppers still prefer brick-and-mortar. Forrester
projected that most retail sales will continue to come from physical stores, estimating that
they will still account for 72% of U.S. retail sales in 2024.
Adoption of new tech also plays a part in the growth of online retail. A 2021 study from
Juniper Research predicted e-commerce transactions made via voice assistant will grow by
more than 320% to $19.4 billion by 2023 from $4.6 billion in 2021.
A consistent example of the impact e-commerce has had on physical retail is the post-
Thanksgiving Black Friday and Cyber Monday shopping days in the United States. According
to the National Retail Foundation's 2021 Thanksgiving Weekend Consumer Survey,
conducted by Prosper Insights and Analytics, 88 million shoppers made online purchases on
Black Friday compared to 66.5 million in-person purchases. On Cyber Monday, there were
77 million online purchases and 20.3 million in-person purchases.
Along with physical retail, e-commerce is transforming supply chain management
practices among businesses, as distribution channels become increasingly digitized. Learn
what's next for the global supply chain in this interview with Supply Chain Management Best
Practices author David Blanchard as he discusses trends in supply chain management.
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