Posted on November 25th, 2022.

E-commerce, also known as electronic commerce, allows businesses and consumers to make online purchases. Many businesses and consumers find e-commerce to be more efficient than brick-and-mortar stores. Businesses save on costs, and customers can select from a wide variety of product choices and shop from anywhere in the world, at any time of day.

How E-Commerce Works

E-commerce is a way for businesses and consumers to sell and purchase products online. Instead of marketing products to a local demographic around a brick-and-mortar store, the potential customer base is much larger and can potentially be located anywhere there is internet.

There are four different types of e-commerce: business-to-consumer (B2C), business-to-business (B2B), consumer-to-business (C2B), and consumer-to-consumer (C2C). In general, people think of business-to-consumer (B2C) transactions when they think about e-commerce.

B2C e-commerce: B2C transactions occur when a business sells a product directly to a customer over the internet. For example, if you bought a shirt from Amazon, that would be a B2C transaction.
B2B e-commerce: B2B e-commerce is when one business is selling a product to another, like web services or cloud services, such as Wix.com.
C2B e-commerce: C2B e-commerce occurs when a person sells products or services to a business. For example, a small business in need of a press release might pay for the services of a freelancer who writes press releases and promotional content for a variety of clients and businesses.
C2C e-commerce: C2C e-commerce happens when a person sells a product or service to another person. This often happens on sites such as eBay and Facebook Marketplace. For example, you could pay for singing lessons or purchase a chair from someone online.

E-Commerce Is Growing

In 2018, even before the COVID-19 pandemic, the U.S. Bureau of Labor Statistics (BLS) predicted that employment in e-commerce would reach almost 450,000 by 2026. E-commerce workers include customer service representatives, packaging agents, shipping clerks, general operation managers, software developers, and delivery drivers.2

E-commerce sales increased by 43%, or nearly $250 billion, in 2020, and sales are still growing in 2022.3 Total e-commerce retail sales for the second quarter of 2022 were estimated at about $257 billion, which was an increase of almost 2% from the first quarter of 2022.4

Many businesses that sell their products online still have brick-and-mortar stores. You can actually test out a product in a brick-and-mortar store and speak directly to a representative about products and services without needing to wait on hold. But if you shop online, the store is always open and the products are less likely to be out of stock.

Advantages of E-Commerce for Customers

There are quite a few advantages that e-commerce provides to customers. You can look at all of the product choices all at once, and you usually won’t miss out on a product because the store is out of stock.

Shopping From Home

If you shop online, you won’t need to spend your weekends or evenings driving to different stores to run errands. You can also buy products from anywhere in the country, and sometimes from other countries, from the comfort of your couch.

Shop at Any Time

If you work odd hours or are just extremely busy, you can still buy products online at any time of the day or night. A website can be open 24/7, even though most stores close at night.

Product Information

If you’re purchasing a product online, you can take a look at reviews from previous customers, check out similar products on other websites to see if there are cheaper options, and read the product description and any warranty information.

Advantages of E-Commerce for Businesses

While consumers gain many benefits from buying products online, businesses also benefit from lower business costs and access to customer data.

Lower Business Costs

An e-commerce business doesn’t have to pay rent or pay to maintain a physical storefront and make it appealing to customers. A sole proprietor may be able to handle orders on their own and might not need to hire employees until their business has already had some success.

More Potential Customers

This is especially helpful for small businesses, which otherwise would have been limited to a small geographic footprint. Search-engine rankings can also help businesses better compete by allowing them to get in front of new customers.

Customer Data

E-commerce helps businesses by allowing them to collect customer data. Businesses can use customer buying habits, demographics, and preferences to better market their products. They can use e-commerce data to predict when demand for a product will be higher or lower, which reduces the risk of overstocking or understocking a product. Companies may also be able to use this information to make the shopping experience easier for the customer.5

Disadvantages of E-Commerce

E-commerce is a powerful tool for buying and selling, but there are some downsides. If the website is slow, or if a customer is having internet problems in their area, a business could lose a potential customer. Customers may also have online privacy and security concerns when shopping online, and some people may prefer to buy products in person.

Concerns for Businesses

If there are any problems with your site, you could lose dozens of customers in a short period of time and never get them back. You have to make sure that your site works well and is user-friendly on mobile and on a desktop. You also can’t rely on foot traffic. Instead, you’ll need to drive customers to your site through social media strategy, online advertising, or by making sure your company’s website ranks near the top when people search for products you sell. You’ll also need to make sure that your customers receive their products in a timely manner.

Security Concerns

In 2019, 73% of internet-using households in the United States had significant concerns about online privacy and security risks, and 35% of households said their concerns held them back from some online activities.6

Customer Preferences

Some customers still prefer to shop in brick-and-mortar stores. Raydiant’s 2021 State of the In-Store Experience survey revealed that 47% percent of responders estimated that they had spent just over half of their shopping budget when making in-person purchases, and 48% of responders still preferred to shop in-person rather than online.7

The Bottom Line

E-commerce customers and businesses can save time and money. Customers can find more products to choose from, and businesses also get a wider range of customers who can shop at their stores. E-commerce is not perfect, and customers may not be able to get their products as quickly as they could at a physical store. Despite some disadvantages, e-commerce is a rapidly growing industry that businesses will continue to invest in.

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