What is E-Commerce?

ecommerce, online shopping
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E-commerce refers to the purchase and sale of goods and/or services via electronic channels, such as the Internet. Online retail is convenient due to its 24-hour availability, global reach and ease of customer service.

Though purchasing items online is a major facet, e-commerce is more than that. This type of commerce can be useful at the enterprise level as well. E-commerce is not just on the Web — it was first introduced in the 1960s via electronic data interchange (EDI) through value-added networks (VANs). In the mid-1990s, e-commerce was transformed with the introduction of Amazon and eBay. Amazon started as a book shipping business, out of Jeff Bezos' garage, in 1995. EBay, which enabled consumers to sell things online, introduced online auctions in 1995 and exploded with the 1997 Beanie Babies frenzy.

There are four main categories: B2B, B2C, C2B, and C2C.

  • B2B (Business to Business) — this kind of e-commerce involves companies doing business with each other. One example is manufacturers selling to distributors and wholesalers selling to retailers.
  • B2C (Business to Consumer) — This is what most people think of when they hear "e-commerce." B2C consists of businesses selling to the general public through shopping cart software, without needing any human interaction. An example of this would be Amazon. 
  • C2B (Consumer to Business) — In this scenario, a consumer would post a project with a set budget online, and companies bid on the project.  The consumer reviews the bids and selects the company — Elance is an example of this.
  • C2C (Consumer to Consumer) — this type of e-commerce is made up of online classifieds or forums where individuals can buy and sell their goods, thanks to systems like PayPal. An example of this would be eBay or etsy.

E-commerce strategy

Just like any type of business, e-commerce businesses need to have a fully fleshed strategy. The first step is to set goals. Do you plan to increase revenue from existing customers? Gain new customers? Increase the average order value? Sell through new channels? Lower prices? Once you have figured out your goals, the next step is to set a plan.

Your first step is to conduct a SWOT analysis and assess the strengths, weaknesses, opportunities and threats of where your business is. What does the market look like? Where does your business excel, and where does it falter? Review your entire business, not just segments of it. Evaluate external opportunities, because this is the often the primary place to invest time and money. Be honest with yourself when analyzing weaknesses and threats, or else the analysis will not be helpful.

After the SWOT analysis is done, see how it fits into your overall vision. Where do you see your business in five years? In 10 years? This will help you set business objectives for the current year, where you set objectives for sales, profits, customers, traffic, new systems, and new staff. After the objectives are set, a strategy can be put in place, either by you or by a hiring an e-commerce consultant.

In addition to having a strong business strategy, it's important to have a basic understanding of e-commerce law. There are different legal and financial considerations, especially with privacy, security, copyright, and taxation. The Federal Trade Commission (FTC) regulates most e-commerce activities, including the use of commercial emails, online advertising, and consumer privacy. Through any average day, businesses collect and retain personal information from their customers — information that is often sensitive. You are subject to federal and state privacy laws, depending on the type of data that you collect.

There are also online advertising laws that protect consumer privacy and ensure truthful marketing practices online. As an e-commerce business, online advertising is a major part of your strategy. Over the past decade, federal and state governments have passed new online advertising laws — it's important to be familiar with these.

In addition to protecting consumers from data leaks and misleading online advertising, digital works are also protected on the Internet via the Digital Millennium Copyright Act (DMCA). There are a number of provisions that e-commerce businesses need to be aware of, including copyright infringement liability and a service provider's responsibilities.

Like any digital technology or consumer-based purchasing market, e-commerce has evolved over the years. As mobile devices became more popular, m-commerce because its own market. With the rise of Facebook and sites like Pinterest, f-commerce and s-commerce (social commerce) have become the newest versions of e-commerce. As the market changes, businesses must also change to stay relevant and understand business opportunities out there in the e-commerce world.