Ecommerce

To fully understand ecommerce, let’s take a look at its history, growth and impact on the business world. We will also discuss some advantages and disadvantages to ecommerce, plus predictions for the future.

Generally, there are six main models of ecommerce that businesses can be categorized into:

1. B2C.
2. B2B.
3. C2C.
4. C2B.
5. B2A.
6. C2A.

Let’s review each type of electronic commerce in a bit more detail.

1. Business-to-Consumer (B2C).

B2C ecommerce encompasses transactions made between a business and a consumer. B2C is one of the most popular sales models in the ecommerce context. For example, when you buy shoes from an online shoe retailer, it’s a business-to-consumer transaction.

2. Business-to-Business (B2B).

Unlike B2C, B2B ecommerce encompasses sales made between businesses, such as a manufacturer and a wholesaler or retailer. B2B is not consumer-facing and happens only between businesses.

Business-to-business sales often focus on raw materials or products that are repackaged before being sold to customers.

3. Consumer-to-Consumer (C2C).

C2C is one of the earliest forms of ecommerce. Customer-to-customer relates to the sale of products or services between customers. This includes C2C selling relationships, such as those seen on eBay or Amazon.

4. Consumer-to-Business (C2B).

C2B reverses the traditional ecommerce model, meaning individual consumers make their products or services available for business buyers.

For example, the iStockPhoto business model in which stock photos are available online for purchase directly from different photographers.

5. Business-to-Administration (B2A).

B2A covers the transactions made between online businesses and administrations. An example would be the products and services related to legal documents, social security, etc.

6. Consumer-to-Administration (C2A).

C2A is similar to B2A, but consumers sell online products or services to an administration. C2A might include online consulting for education, online tax preparation, etc.

B2A and C2A are focused on increased efficiency within the government via the support of information technology.

Ecommerce was introduced about 40 years ago in its earliest form.

Since then, electronic commerce has helped countless businesses grow with the help of new technologies, improvements in internet connectivity, added security with payment gateways, and widespread consumer and business adoption.

1969: CompuServe is founded.

Founded by electrical engineering students Dr. John R. Goltz and Jeffrey Wilkins, early CompuServe technology was built utilizing a dial-up connection.

In the 1980s, CompuServe introduced some of the earliest forms of email and internet connectivity to the public and dominated the ecommerce landscape through the mid-1990s.

1979: Michael Aldrich invents electronic shopping.

English inventor Michael Aldrich introduced electronic shopping by connecting a modified TV to a transaction-processing computer via telephone line.

This made it possible for closed information systems to be opened and shared by outside parties for secure data transmission — and the technology became the foundation for modern ecommerce.

1982: Boston Computer Exchange launches.

When Boston Computer Exchange launched, it was the world’s first ecommerce company.

Its primary function was to serve as an online market for people interested in selling their used computers.

1992: Book Stacks Unlimited launches as first online book marketplace.

Charles M. Stack introduced Book Stacks Unlimited as an online bookstore. Originally, the company used the dial-up bulletin board format. However, in 1994 the site switched to the internet and operated from the Books.com domain.

1994: Netscape Navigator launches as a web browser.

Marc Andreessen and Jim Clark co-created Netscape Navigator as a web browsing tool. During the 1990s, Netscape Navigator became the primary web browser on the Windows platform, before the rise of modern giants like Google.

1995: Amazon launch.

Jeff Bezos introduced Amazon primarily as an ecommerce platform for books.

1998: PayPal launches as an ecommerce payment system.

Originally introduced as Confinity by founders Max Levhin, Peter Thiel, Like Nosek and Ken Howery, PayPal made its appearance on the ecommerce stage as a money transfer tool.

By 2000, it would merge with Elon Musk’s online banking company and begin its rise to fame and popularity.

1999: Alibaba launches.

Alibaba Online launched as an online marketplace with more than $25 million in funding. By 2001, the company was profitable. It went on to turn into a major B2B, C2C, and B2C platform that’s widely used today.

2000: Google introduces Google AdWords as an online advertising tool.

Google Adwords was introduced as a way for ecommerce businesses to advertise to people using Google search.

With the help of short-text ad copy and display URLs, online retailers began using the tool in a pay-per-click (PPC) context. PPC advertising efforts are separate from search engine optimization (SEO).

2004: Shopify launches.

After trying to open an online snowboarding equipment shop, Tobias Lütke and Scott Lake launched Shopify. It’s an ecommerce platform for online stores and point-of-sale systems.

2005: Amazon introduces Amazon Prime membership.

Amazon launched Amazon Prime as a way for customers to get free two-day shipping for a flat annual fee.

The membership also came to include other perks like discounted one-day shipping and access to streaming services like Amazon Video and members-only events like “Prime Day.”

This strategic move helped boost customer loyalty and incentivize repeat purchases. Today, free shipping and speed of delivery are the most common requests from online consumers.

2005: Etsy launches.

Etsy launched, allowing crafters and smaller sellers to sell products (including digital products) through an online marketplace. This brought the makers community online — expanding their reach to a 24/7 buying audience.

2009: BigCommerce launches.

Eddie Machaalani and Mitchell Harper co-founded BigCommerce as a 100% bootstrapped ecommerce storefront platform. 

Since 2009, more than $25 billion merchant sales have been processed through the platform, and the company now has headquarters in Austin, San Francisco and Sydney.

2011: Google Wallet introduced as a digital payment method.

Google Wallet was introduced as a peer-to-peer payment service that enabled individuals to send and receive money from a mobile device or desktop computer.

By linking the digital wallet to a debit card or bank account, users can pay for products or services via these devices.

Today, Google Wallet has joined with Android Pay for what is now known as Google Pay.

2011: Facebook rolls out sponsored stories as a form of early advertising.

Facebook’s early advertising opportunities were offered to Business Page owners via sponsored stories. With these paid campaigns, ecommerce businesses could reach specific audiences and get in the news feeds of different target audiences.

2011: Stripe launches.

Stripe is a payment processing company built originally for developers. It was founded by John and Patrick Collison.

2014: Apple Pay introduced as a mobile payment method.

As online shoppers began using their mobile devices more frequently, Apple introduced Apple Pay, which allowed users to pay for products or services with an Apple device.

2014: Jet.com launches.

Jet.com was founded by entrepreneur Marc Lore (who sold his previous company, Diapers.com, to Amazon.com) along with Mike Hanrahan and Nate Faust.

The company competes with Costco and Sam’s Club, catering to folks looking for the lowest possible pricing for longer shipping times and bulk ordering.

2017: Shoppable Instagram is introduced.

Instagram Shopping launched with ecommerce partner BigCommerce. Since then, the service has expanded to additional ecommerce platforms and allows Instagram users to immediately click an item, and go to that item’s product page for purchase.

2017: Cyber Monday sales exceed $6.5B.

Ecommerce set a new record when online sales broke $6.5 billion on Cyber Monday — a 17% increase from the prior year.

2020: COVID-19 Drives Ecommerce Growth.

COVID-19 outbreaks around the globe pushed consumers online to unprecedented levels. By May of 2020, ecommerce transactions reached $82.5 billion — a 77% increase from 2019. It would have taken four to six years to reach that number looking at traditional year-over-year increases.

Consumers have moved online to make purchases normally made in physical stores, such as food and household items, apparel, and entertainment. Many consumers say they’ll continue to use online storefronts until a COVID-19 vaccine is available.

Ecommerce has come a long way since the CompuServe launch in 1969. Changes in technology have certainly driven ecommerce growth, along with global circumstances. Today, ecommerce must meet consumers’ expectations for safety and convenience.

• The United Parcel Service Inc. rode a pandemic-fueled surge in ecommerce to higher profits and a 13% jump in revenue during the June 2020 quarter. During that same quarter, UPS saw a 65% increase in deliveries to residences.
• In 2019, U.S. e-retail sales on Amazon increased by 19.1% and amounted to over 222.6 billion U.S. dollars.
• By the end of 2020, U.S. spending online is expected to reach approximately $375 billion. Experts forecast that by the end of 2024, online spending will surpass $476 billion.

The impact of ecommerce is far and wide with a ripple effect from small business to global enterprise.

1. Large retailers are forced to sell online.

For many retailers, the growth of ecommerce has expanded their brands’ reach and positively impacted their bottom lines. But for retailers who have been slow to embrace the online marketplace, the impact has been different.

Retailers that fall into the middle ground are the ones feeling the biggest changes in response to the impact of ecommerce.

In February of 2019, online sales narrowly surpassed general merchandise stores for the first time, including department stores, warehouse clubs and supercenters. Because Amazon Prime took away the price of shipping, more consumers are comfortable with online shopping.

2. Ecommerce helps small businesses sell directly to customers.

For many small businesses, ecommerce adoption has been a slow process. However, those who’ve embraced it have discovered ecommerce can open doors to new opportunities.

Slowly, small business owners are launching ecommerce stores and diversifying their offerings, reaching more customers and better accommodating customers who prefer online/mobile shopping. 

Pre-pandemic, small businesses were working to expand their ecommerce presence. Today, 23% of small business owners feel they’ll have to strengthen their ecommerce capabilities in order to survive in a post-pandemic world. Another 23% of small business owners have created a website or updated their existing one since COVID-19 lockdowns began.

3. B2B companies start offering B2C-like online ordering experiences.

B2B companies are working to improve their customer experiences online to catch up with B2C companies. This includes creating an omnichannel experience with multiple touchpoints and using data to create personalized relationships with customers.

Ecommerce solutions enable self-service, provide more user-friendly platforms for price comparison, and help B2B brands maintain relationships with buyers, too. 

 By 2026, B2B transactions are expected to reach $63,084 billion.

4. The rise of ecommerce marketplaces.

Ecommerce marketplaces have been on the rise around the world since the mid-1990s with the launch of giants we know today, such as Amazon, Alibaba, and others. 

In this chart, we can see that Amazon is the outlier in regard to ecommerce marketplace growth, but we can see that others are making headway.

By offering a broad selection and extreme convenience to customers, they’ve been able to quickly scale up through innovation and optimization on the go.

Amazon in particular is known for its unique growth strategy that has helped them achieve mass-adoption and record-breaking sales.

But Amazon doesn’t do this alone. As of 2020, 52% of products sold on Amazon were sold by third-party sellers (i.e. not Amazon).

Those sellers also make high profits from the sales on the marketplace, though they are required to follow strict rules enforced by Amazon.

5. Supply chain management has evolved.

Survey data shows that one of ecommerce’s main impacts on supply chain management is that it shortens product life cycles.

As a result, producers are presenting deeper and broader assortments as a buffer against price erosion. But, this also means that warehouses are seeing larger amounts of stock in and out of their facilities.

In response, some warehousers are now offering value-added services to help make ecommerce and retail operations more seamless and effective.

These services include:

• Separation of stock/storage for online vs. retail sales.
• Different packaging services.
• Inventory/logistics oversight.

6. New jobs are created but traditional retail jobs are reduced.

Jobs related to ecommerce are up 2x over the last five years, far outpacing other types of retail in regard to growth. However, growth in ecommerce jobs is only a small piece of the overall employment puzzle.

A few quick facts on how ecommerce has impacted employment:

• Ecommerce jobs are up 334%, adding 178,000 jobs since 2002.
• Most ecommerce jobs are located in medium to large metropolitan areas.
• Most ecommerce companies have four or fewer employees.

The flip side of this, however, is that upticks in efficiency paired with a shift away from traditional retail may lead to some job losses or reductions in workforces as well.

As with any major market shift, there are both positive and negative impacts on employment.

7. Customers shop differently.

Ecommerce (and now omni-channel retail) has had a major impact on customers. It is revolutionizing the way modern consumers shop.

Millennials are the largest demographic of online shoppers (67%), but Gen X and baby boomers are close behind at 56% and 41% participating in online shopping activities respectively.

8. Social media lets consumers easily share products to buy online.

Researchers have discovered that ecommerce has made an interesting social impact, especially within the context of social media.

Today, ecommerce shoppers discover and are influenced to purchase products or services based on recommendations from friends, peers and trusted sources (like influencers) on social networks like Facebook, Instagram and Twitter.

If you’ve ever been inspired to buy a product you saw recommended on Facebook or featured in an Instagram post, you’ve witnessed this social impact as it relates to ecommerce.

9. Global ecommerce is growing rapidly.

In 2018, an estimated 1.8 billion people worldwide made an online purchase.

Chinese platform, Taobao, is the biggest online marketplace with a gross market value (GMV) of  $484 billion. For context, Tmall and Amazon ranked second and third with $458 and $339 billion GMV in annual third-party global market value respectively.

Ecommerce has many different advantages — from faster buying to the ability to reach large audiences 24/7.

Let’s take a look in detail at some of the top perks it has to offer.

1. Faster buying for customers.

For customers, ecommerce makes shopping from anywhere and at any time possible.

That means buyers can get the products they want and need faster without being constrained by operating hours of a traditional brick-and-mortar store.

Plus, with shipping upgrades that make rapid delivery available to customers, even the lag-time of order fulfillment can be minimal (think Amazon Prime Now, for example).

2. Companies can easily reach new customers.

Ecommerce also makes it easier for companies to reach new, global customers. An ecommerce store isn’t tied to a single geographic location — it’s open and available to any and all customers who visit it online.

With the added benefit of social media advertising and email marketing, brands have the potential to connect with massive relevant audiences who are in a ready-to-buy mindset.

3. Lower operational costs.

Without a need for a physical storefront (and employees to staff it), ecommerce retailers can launch stores with minimal operating costs.

As sales increase, brands can easily scale up their operations without having to make major property investments or hiring a large workforce. This means higher margins overall.

4. Personalized experiences.

With the help of automation and rich customer profiles, you can deliver highly personalized online experiences for your ecommerce customer base.

Showcasing relevant products based on past purchase behavior, for example, can lead to higher average order value (AOV) and makes the shopper feel like you truly understand them as an individual.

Although modern ecommerce is increasingly flexible today, it still has its own set of disadvantages.

Here are some of the downsides to ecommerce retail.

1. Limited interactions with customers.

Without being face-to-face, it can be harder to understand the wants, needs and concerns of your ecommerce customers.

There are still ways to gather this data (surveys, customer support interactions, etc.), but it does take a bit more work than talking with shoppers in person on a day-to-day basis.

2. Technology breakdowns can impact ability to sell.

If your ecommerce website is slow, broken or unavailable to customers, it means you can’t make any sales.

Site crashes and technology failures can damage relationships with customers and negatively impact your bottom line.

3. No ability to test or try on.

For customers who want to get hands-on with a product (especially in the realm of physical goods like clothing, shoes and beauty products) before adding it to their shopping cart, the ecommerce experience can be limiting.

By 2022, ecommerce revenue in the U.S. alone is expected to reach $479 billion, with the toys, hobby and DIY vertical seeing the largest growth.

And it’s no passing trend, either.

It’s also interesting to note that looking ahead, ecommerce expert Gary Hoover’s data projects that ecommerce retail sales will eventually even out with that of brick and mortar.

This means that even though the online sales trend will continue to grow, there’s plenty of business to go around.

But that’s not all.

Soon, most ecommerce interactions will be an omni-channel experience for shoppers.

This means they’ll expect to be able to research, browse, shop, and purchase seamlessly between different devices and on different platforms (like a standalone web store, an Amazon presence, etc.).

Other trends to watch for in the future of ecommerce include:

• Robust customer journeys and personalization.
• Artificial intelligence-enabled shopping.
• Digital currencies.

Overall, we have to remember that ecommerce is still fairly new in the big picture of retail.

The future holds endless opportunity, but its success and continuation will depend largely on buyers’ preferences in the future.

We’ve looked at all corners of ecommerce, including its different types, the history, how it's grown over the years, and its impact on consumers and how business is conducted.

There are certainly advantages and disadvantages to ecommerce, but the future has many opportunities for even greater expansion.