Various online payment methods have sprung up in the last few years. Think of PayPal or the cryptocurrency, from which new online platforms such as Binance and Coinbase Commerce emerged. Worldwide, PayPal already has about 267 million user accounts, including 21 million business accounts. And on Binance, more than 1 billion transactions are executed every day. All these online platforms fall under the phenomenon E-commerce. With E-commerce, many will think of webshops, but E-commerce is much more than just online retail.
What is E-commerce?
E-commerce is the entire process of buying and selling products through electronic means, such as on mobile applications and the Internet. E-commerce is one of the most influential saleschannels today. The letter "E" in E-commerce stands for electronic. E-commerce can therefore also be read as electronic commerce. E-commerce is both online shopping and electronic transactions. You can think of cryptocurrency or PayPal as an electronic transaction. These payment methods and internet platforms fall under E-commerce. So, your subscription to Spotify or placing an order on Amazon or bol.com also fall under E-commerce.
E-commerce, a histoty
The Internet was developed in the United States in the late 1960's by the research and defense network ARPANET, which connected several servers at military and academic junction. Although it has been around for many years, the Internet was not accessible to the general public until 1990. In August 1991, Berners-Lee & Cailliau released the 'World Wide Web project' after years of working on HTTP and HTML. With this invention and the introduction of clickable-linked-pages, the internet became accessible to the general public.
The starting point of e-commerce is when computers were capable to communicate with each other. This began in the 1970s and included the invention of EFT, or Electronic Funds Transfers. This is a system that transfers money directly from one bank account to another, without the need for paper money to change hands.
Another invention that contributed to e-commerce is the start of Electronic Data Interchange. EDI is a system that allows data exchange between organisations, allowing e-commerce to expand to non-financial transactions. Telecommunications and increasing network capacity made e-commerce an important factor for companies in 1990.
The first online transaction was first made in 1994 in Philadelphia. At the time, this was an amount of $12.48 plus shipping. Today, this small amount is nothing compared to the amounts currently dealing in e-commerce. Annually this sector grows by an average of 23% and we talk about a total of transactions of $ 1.83 trillion annually. And this is only the retail sector...
Types of E-commerce
There are several advantages of E-commerce that you do not have as an offline retailer. For example, by lowering communication costs, it is easier and cheaper to offer products online to a wider range. Your marketplace will expanded as you will also reach international customers.
You can classify e-commerce based on the product type. You have physical products that are also referred to as the typical online retailers. Think of brands such as Zara, Nike or Apple. These are also products that can be bought physically in a store and many of these brands started this way too.
Another form is service-oriented e-commerce. Think of online services or services such as online courses and workshops or freelancers and consultancy companies. The buying process is often different with this form of e-commerce. You must first contact the company yourself and discuss your problem before a service is offered.
E-commerce is digital. The following product type is therefore indispensable and focuses on digital products. You can think of e-books, software, online courses or platforms. The best examples of this are online tools such as Google Analytics, WordPress or Spotify. But also graphic products or virtual products are included, such as Adobe Creative Suite.
Besides defining e-commerce by product type, you can also look at customer contact. Everybody knows Business to Business (B2B) (this includes trade between two companies - you can think of companies that engage consultancy companies to carry out a temporary project), and Business to Consumer (B2C) (the trade between a company and a consumer). Good examples of this type of customer contact are Ikea or Nike.
Consumer to Consumer (C2C) describes trade between consumers. These are usually online platforms such as Vinted or Amazone where consumers can sell their own stuff to other consumers. Finally, you have Business to Business for Consumer (B2B4C) or trade from company to company before it is bought by the consumer. In this form of e-commerce, companies sell their products to an online platform, for example, which then sells the product to the consumer. Examples of this form are online platforms such as AliExpress and Coolblue.
How does E-commerce work?
As we stated earlier, e-commerce is the entire process of buying and selling products through electronic means. But how does this work in practice?
First of all, you make a choice in what product or service you want to offer. For example, do you want to start a webshop where you sell physical products? You have to think carefully about the logistics behind your webshop. This logistics piece consists of the following parts:
- Inbound: receiving, registering and placing goods in a storage location or warehouse.
- Picking orders: when a product is ordered, it is taken from the warehouse, packed and provided with an address label.
- Shipping: the packages are then sent by mail order company or by delivery van.
With a webshop you still have several options when it comes to logistics. You can choose Dropshipping. This logistical form is the resale of a products, that you don't have in stock yourself. When you receive an order, you will order the product from the supplier who sends it to the consumer himself. With the logistics form E-fulfillment you completely outsource the logistics process. This costs a lot of money, but also saves you a lot of time. Finally, you can also do the entire logistics process yourself. From storage, warehouse to packaging and shipping. If you only sell a few small products per month, you can even do this from home!
Are you planning to start up an E-commerce business in the form of a webshop / website or online platform? The Dare Company has several specialists who can help you! Curious? Contact us!