Ecommerce has been around since 1994, when a man named Phil Brandenberger purchased the first product online: the Sting CD Ten Summoner's Tales. Fast forward to today, and digital sales worldwide continue their remarkable growth trajectory, with projections indicating online transactions will exceed $6 trillion by 2026.
Stats like these show that in three decades, ecommerce has become an integral part of everyday life.
In this article, we'll look deeper into what ecommerce is. We'll run through the history of ecommerce and share some key stats on online sales. We'll also delve into ecommerce development, platforms, and business models to show the impact ecommerce has had on the world.
What is ecommerce?
Ecommerce, also known as electronic commerce or internet commerce, is the buying and selling of goods over the internet. Sites that sell their products online are known as ecommerce stores or businesses.
For example, Amazon.com is one of the most popular online stores in the ecommerce industry.
Ecommerce should not be confused with e-business. Although sometimes used interchangeably, the terms are not synonymous. Ecommerce specifically indicates the transaction of goods and services, whereas e-business refers to all aspects of operating an internet business.
How does ecommerce work?
Ecommerce works by connecting retailers and consumers using various platforms. For instance, you can set up a Shopify store to help your target market easily find your products. Connecting a payment processor is the next step—it facilitates the exchange of goods between the buyer and seller.
Ecommerce transactions use a number of payment methods, ranging from cash on delivery to BNPL (buy now, pay later) payments. After a successful transaction, the online retailer delivers a customer's purchase via shipping or local delivery. In the case of digital products like virtual courses and NFTs, the retailer delivers the item online.
What is an ecommerce business?
An ecommerce business is an organization or individual entity that seeks profits by offering goods or services over the internet. It allows consumers to buy quickly and choose from a range of payment methods to execute the ecommerce transaction. There are many different types of ecommerce businesses, based on the model you choose.
Popular ecommerce business models
The beauty of ecommerce is that there are various business models for you to choose from, whereas in traditional commerce the business models are more restrictive. There are four widely known ecommerce business models, but there are other niche models as well.
B2B (business-to-business) ecommerce
B2B ecommerce is the trading of goods or services between businesses. No consumers are involved in the trade, and the price of the products is often higher than what a retailer sells to an end customer. Alibaba is an example of a B2B business, as its suppliers sell to other companies.
B2C (business to consumer) ecommerce
B2C ecommerce involves businesses selling goods or services to consumers. If you decide to open your own online retail store, you'll likely be selling to customers instead of businesses. Amazon, Walmart, and Apple are examples of B2C businesses.
C2C (consumer to consumer) ecommerce
C2C ecommerce is when consumers sell goods or services to other consumers. Consumers typically do this through online marketplaces like Swappa and Facebook Marketplace, or shopping sites like eBay, Craigslist, and Etsy. Many of the sellers on those sites aren't businesses, but average consumers selling products they own, whether second-hand or new.
C2B (consumer to business) ecommerce
C2B ecommerce is where a consumer sells their own product or service to a business or organization. This could be a photographer selling their photography to a business, or a sticker collector selling one of their rare finds to an online sticker store.
Direct to consumer (DTC) ecommerce
Direct to consumer brands manufacture and sell products straight to shoppers, bypassing traditional wholesalers or retail chains. Many DTC companies focus on online sales exclusively, controlling their entire customer experience from initial contact through final delivery. These brands often emphasize strong relationships with buyers and maintain complete ownership of their brand messaging and customer data.
What is an ecommerce website?
An ecommerce website is any website that sells a good or service. This type of website can adhere to any of the above ecommerce business models. To show just how broad ecommerce online stores can be, we’ll outline the common types of ecommerce websites you may find.
Common types of ecommerce websites
- Physical goods ecommerce site: Retailers with brick-and-mortar stores may also host an online store to reach a broader audience. This option is ideal for those looking to increase sales without expanding their physical locations.
- Service-based ecommerce site: Freelancing and pure online services have recently become a significant trend. In this model, websites serve as intermediaries between service providers and potential clients.
- Digital products ecommerce site: Companies that sell digital products, such as software or video games, don't require physical stores. Sales occur online, with customers simply downloading the purchased product.
- Dropshipping ecommerce site: Unlike typical physical goods stores, dropshipping involves merchants who don't hold any inventory. They display products on their online store and, when a customer makes a purchase, a supplier fulfills the order.
Advantages of ecommerce businesses
Starting an ecommerce business comes with a lot of perks. Not only does this business model help you build an online presence, it also offers a convenient way for customers to engage with your brand. Here are a few of the things an ecommerce business lets you do:
Reach far and wide
With an ecommerce platform, your products travel farther than they would in a physical store. Shipping partners and logistics ensure your products reach even the farthest corners of the world. In short, your online business suddenly has access to new markets you might never have considered.
Use data to your advantage
Physical stores may offer a personal touch, but online stores counter with smart, data-driven personalization. These insights enable targeted marketing campaigns and tailored services, building customer loyalty and increasing the likelihood of repeat purchases.
Customize your business
Your ecommerce company can offer a range of options that could overwhelm a physical store. Whether it's different colors or custom engravings, your customers get more choices, which means they're more likely to find exactly what they want.
Lower your startup costs
Perhaps one of the biggest advantages of selling online is cost savings. Without the overhead of physical space, your operating costs plummet, allowing you to invest in other aspects of your business.
Shop anytime, anywhere
Online stores never close their doors, giving customers the freedom to browse and purchase whenever it suits them best. This round-the-clock availability means you can capture sales from different time zones and accommodate customers who prefer shopping outside traditional business hours.
Challenges of ecommerce businesses
Like all other online businesses, ecommerce has its challenges. The key ones are:
Security concerns
Security tops the list of ecommerce challenges. Customers must feel their personal and financial information are in safe hands. Secure your online store with features like SSL certificates and trustworthy payment gateways. Shopify, for example, offers built-in security features. Make these security protocols clear to customers at checkout and in your terms of service.
Shipping and logistics
Shipping isn't just about moving boxes; it shapes your brand's reputation. Efficient, reliable delivery systems are crucial for getting products into customers' hands on time and in great condition.
High competition
The ecommerce arena is a battlefield, crowded with businesses fighting for the same customers. Stand out by offering unique products, unbeatable prices, and a customer experience that wins hearts.
Returns and customer service expectations
A top-notch return policy and responsive customer service are not optional - they're essential. These become even more crucial for stores selling complex or technical items. If you're a small operation without a dedicated staff, this aspect can pose a significant challenge, but it's one you can't afford to neglect.
What makes an ecommerce store successful?
Running an ecommerce business is not easy. Just having a store and some stock to sell doesn't mean people will flock to buy your products. Here are some tactics and strategies you can use to ensure your store is a success.
Focus on the user
With ecommerce, you can sell anything to anyone, but you must know what you need to do to make website visitors trust you enough to buy your products. Pick the right website theme, choose the right branding and tone of voice for your copy, and focus on only one or two target audiences, so you don't get overwhelmed.
Test on friends
Use your friends as your test subjects and have them run through the purchase steps to make sure everything flows perfectly. You don't want the checkout process to be so long that people leave before they've placed an order.
Optimize for mobile
Make sure that users can purchase on mobile and tablet devices. With mobile commerce continually on the rise, optimizing your store for the small screen is paramount to being successful in your business.
Invest in SEO and PPC
SEO and PPC drive traffic to your store, so missing out on them will slow down your success. Find a good consultant or agency if you have the budget, or get started by learning about ecommerce SEO and applying relevant strategies to your store.
Research and develop
Never be content with what you do; research new products and ways to sell them. You don't need to restock your ecommerce store every month. Try to attract attention through innovative ways to grow your store.
Popular ecommerce sales channels
When it comes to selling online, you've got options. You can use your own website, go through big sites like Amazon, or even use social media. Here's a quick rundown:
Ecommerce platforms
Your own online store gives you control. Sites like Shopify help you set up a shop where you can sell whatever you want. It's a direct line between you and the customer, but you'll have to work to get people to visit.
Online marketplaces
Amazon and Etsy come with built-in customers. People go there to make online purchases, so half your marketing is already done. The downside? You're one of many sellers, and Amazon and co. hold all the cards, including customer data.
Social selling channels
Facebook and Instagram let you sell right where your audience is. No need for them to even leave the app. But remember, it's Meta's playground. It makes the rules, and those rules can change.
Mobile commerce (m-commerce)
More and more people shop right from their phones. Mobile purchasing now accounts for nearly half of all digital sales, making smartphone optimization crucial for any online business. If your online store isn't easy to use on a phone, you're missing out on a lot of business.
Each channel has its own ups and downs. Often, the smart move is to use a mix of them to fit your online business needs. That way, you make the most of online shopping opportunities.
Choosing your ecommerce revenue model
Picking your ecommerce platform is just the first step. Next, determine how you'll make money. Here are five revenue streams commonly used in online commerce:
Sales model
The sales model dominates both the online and brick-and-mortar markets. You sell products or services for a profit, plain and simple.
Advertising model
If you're an online creator or influencer, consider the advertising model. Partner with businesses to feature promoted content and cash in on your personal brand.
Subscription model
A rising star among consumers and direct-to-consumer brands, the subscription model generates steady income from product or service subscriptions.
Affiliate model
Creators with a large following also excel in the affiliate model. You get a commission every time someone makes a purchase through your affiliate link.
Transaction free model
If your ecommerce business processes payments, you could make money via the transaction fee model. Collect a small fee for each sale, and it all adds up.
How to launch your ecommerce website
Ready to transform your business idea into reality? Building a successful online store requires careful planning and execution. Start by researching market opportunities and identifying gaps where your products or services could thrive. Study your competitors to understand their strengths and weaknesses.
Next, develop your brand identity with a memorable name and professional logo. Choose an ecommerce platform that fits your needs and budget, then customize your store's design to reflect your brand personality. Upload detailed product listings with high-quality photos and compelling descriptions.
Plan your shipping strategy carefully, as delivery speed and costs significantly impact customer satisfaction. Finally, create a marketing plan that includes social media, search engine optimization, and paid advertising to drive traffic to your new store.
Stay ahead with top ecommerce trends and stats
Understanding ecommerce trends can make or break your online store. These trends shape site design, product offerings, and customer interactions. Keep your finger on the pulse to stay competitive and adapt to changing customer needs. While trends evolve, some are marking permanent shifts in consumer behavior.
Social ecommerce climbs the charts
Social media platforms are becoming powerful sales engines, with transactions through these channels expected to reach massive heights in the coming years. Building genuine connections with potential buyers through social interactions creates trust and strengthens relationships. This approach helps guide prospects through your marketing process and increases conversion rates.
M-commerce takes center stage
Mobile shopping continues its dramatic growth, now representing a significant portion of all digital transactions. Phone-based purchasing habits are reshaping how brands design their user interfaces, with special attention needed for streamlined mobile payment systems and responsive design elements.
AI powers personal shopping experiences
Artificial intelligence technology enables brands to create highly customized customer journeys that feel tailored to individual preferences. Recent surveys show that many consumers now expect personalized experiences from the brands they support, representing a major shift in shopping expectations. AI tools help automate everything from customer support conversations to inventory management tasks.
Social platforms outrank search engines
Product discovery habits are evolving beyond traditional search methods. Consumers increasingly turn to video platforms and major retail sites to find new brands and products. Younger generations especially favor short-form video platforms over conventional search engines when researching potential purchases.
Personalization becomes essential
Today's shoppers expect brands to understand their individual preferences and deliver relevant experiences. Recent research indicates that many consumers will abandon brands that fail to offer personalized interactions, while most businesses now prioritize customization as a core strategy for building customer relationships.
Paving your path in ecommerce
The ecommerce landscape invites fresh talent and innovation. With retail ecommerce sales on an upswing, this business avenue serves as an excellent starting point for budding entrepreneurs.
Keep this guide at the ready for when you're set to turn your ecommerce aspirations into a reality. It's your go-to resource for launching not just a business, but your online empire.
Ecommerce FAQ
What is ecommerce and how does it work?
Ecommerce, short for electronic commerce, is the buying and selling of goods or services online. It works through platforms such as Shopify, Amazon, or Etsy, where retailers list products, connect payment processors, and manage shipping or digital delivery.
What are the main types of ecommerce business models?
The most common ecommerce models are B2C (business to consumer), B2B (business to business), C2C (consumer to consumer), and C2B (consumer to business). Direct-to-consumer (DTC) and dropshipping are also popular options for entrepreneurs.
What is an ecommerce website?
An ecommerce website is a platform that allows businesses or individuals to sell products or services online. Examples include physical goods stores, digital product sites, service marketplaces, and dropshipping websites.
What are the advantages and challenges of ecommerce?
Ecommerce offers benefits like global reach, lower startup costs, data-driven insights, and 24/7 availability. However, challenges include high competition, shipping and logistics management, customer service demands, and ensuring security for online transactions.
How can I start a successful ecommerce business?
To launch an ecommerce store, choose a niche, build your brand, and set up an ecommerce platform with user-friendly design and mobile optimization. Success also depends on strong SEO, marketing strategies, fast delivery, and a focus on customer experience.