The Different Types of e-Commerce
What is e-Commerce?
e-Commerce refers to any transaction that occurs online. The buying and selling of products, services, and digital products through the Internet all fall under the umbrella that is e-Commerce. These exchanges cover a vast array of business types, industry verticals, and product offerings. The first online transaction occurred decades ago, but the way in which consumers shop has evolved tremendously since then. Today, trillions of dollars are spent annually and the number continues to rise each year.
In the past, operating an online store was a competitive advantage that most brands did not have. The brands that did set up an e-Commerce store were able to reach a new customer base and increasing sales and saw early growth. Brands that do not sell online are limiting their reach and restricting optimal cash flow. Brands that desire growth both short term and long term must make the investment of creating an online shop. Traditional brick and mortar locations still work and account for a major chunk of retail spending worldwide but e-Commerce is a fast-growing trend. This trend is impossible to ignore. Operating online is vital to a brand’s success but setting up shop online will be easier than you think by reading and following this guide.
Benefits and Opportunities
The rise of shopping and selling online has created opportunities for millions of people and offers distinct advantages to those who partake in it. An increased bottom line, more customers, and maximized brand awareness are some of the fruits of e-Commerce but they are not the only ones. Opening an online store eliminates many boundaries associated with a physical retail location. e-Commerce stores can sell nationwide and even worldwide if desired. This exponentially increases your potential customer base by hundreds of millions if not billions. Any person with access to the internet is able to search for, find, and purchase products that would have been previously limited geographically. Another feature that increases sales is the fact that online stores do not close. They are open 24/7 and 365 days per year. This means checkout can happen anytime day or night.
Opening up a virtual store allows for overhead costs and employment costs to be reduced as well. Once the store is fully functional, it essentially runs itself. Some maintenance may be required but a well-designed store will require minimum attention over time. Brands must remember that setting up an online storefront is an investment. There will be upfront costs, of course, but it is vital to acknowledge the benefits that may be sowed after the site is up and running.
Today’s e-Commerce market relies heavily on maximizing the conversion rate resulting in more sales, revenue, and potential profit. Setting up an e-Commerce store opens up an untapped revenue stream for new or existing businesses.
Many different types of e-commerce and transactions exist in the world of e-commerce today. Understanding these options and selecting the one that most represents your business will assist you in the process of building your site and selecting an e-commerce CMS, to begin with.
- Business-to-Business (B2B)
- Business-to-Consumer (B2C)
- Consumer-to-Consumer (C2C)
- Consumer-to-Business (C2B).
- Consumer-to-Administration (C2A)
B2B and B2C are the two most prominent types of e-Commerce in the world today and they are the traditional transaction types that most people think of when they hear the word e-Commerce. Businesses are able to specialize and operate in more than one type of e-Commerce. Each recipient of the transaction has different wants, needs, and business requirements making each transaction type different from the rest.
Almost all of the listed transaction types may involve the same product or service. However, some of the differentiating factors can include price, quantity, order frequency, fulfillment method, product expectations, scale, and even barriers to enter the market. There are many factors consider when devising a business plan but understanding your target market and target audience is a great place to start.
As the title suggests, a B2B transaction is where one business is selling to another business. These transactions often involve customizing an order on a rolling basis. B2B transactions can include bulk pricing, larger quantity orders, or specialty products that an average consumer would never need on a day to day basis. B2B transactions create powerful and long-lasting relationships between each side when orchestrated correctly. Typical products that are involved in B2B transactions include office supplies, gasoline and oil, medical equipment, airplanes, ships, and military equipment. These items are large in physical size or quantities needed which would be overwhelming for an average consumer to purchase on their own.
B2B transactions occur in many forms and take place globally. A popular derivative of the B2B model occurs between business and an administration of some sort (B2A). B2A transactions occur between companies and bodies of public administration such as the government. Also, the B2A model is sometimes referred to as B2G (business-to-government). As the world becomes increasingly reliant upon the internet, so have governments. Many processes are becoming optimized through digitalization and many administrations and governing bodies have implemented third-party technologies to assist in the process. In order to win business, marketing may occur targeted at decision makers within the government or authoritative body. These efforts would fall under the B2A model. Other B2A transactions include social security, employment contracting, financial measuring, and other online payment options.
The most traditional transaction type from a consumer’s point of view is the B2C model. This model mimics a purchase that made in-store at a brick and mortar location but occurs entirely online. Businesses sell goods straight to consumers through their website. The internet serves as a marketplace in itself and the eCommerce store serves as the portal between businesses and consumer shopping online. Online stores are able to list multiple products and SKUs which gives customers many options to pick and choose from during their buying experience. This allows for more options for a customer to research and find the perfect fit. Clothing, electronics, and outdoor recreational equipment are just a few of the products that effectively sold online in the B2C. The B2C transaction is not limited to products, but services are quite often distributed in this fashion as well. Businesses may offer services like financial advising, tutoring, subscription memberships, and others to grow their presence online.
With the rise of eCommerce, much innovation has taken place in many forms. The internet itself is a powerful marketplace in and of itself. Other marketplaces have come to fruition to offer consumers shopping options and pathways to obtain desired products. Platforms like eBay, Craigslist, Grailed, and even parts of Amazon allow consumers to sell to consumers. This bridge allows men and women to sell goods without setting up a personalized store. This results in fast and easy individual transactions allowing for niche items, used goods, and individual listings to be sold online.
In the C2C model, the platform itself does not own or sell any products. rather, it serves as the bridge between the consumer selling and consumer buying. They act as a third party to oversee and authorize the transaction to ensure it goes smoothly. Popular platforms became successful due to a high amount of users and traffic while offering a solution to get rid of goods with little cost and overhead. Selling an item on these sites can be as simple as opening the app or site, creating an account, listing the item, and waiting for another consumer to purchase. No additional marketing is needed which leaves more profit in the lister’s pockets.
This type of model is becoming increasingly prominent with the inception of different marketplaces looking to gain a share of the market opportunity. C2C opportunities increase consumer buying power by eliminating many steps of the buying process.
On the other side of the spectrum, the C2B model allows businesses to receive value from consumers when it is traditionally the other way around. Consumers are able to provide a service to businesses to augment their existing business through a reverse auction system. Consumers can act like contractors bidding on certain projects which allows them to bring value back to the business. This name your price option allows businesses to reach different parts of a community that may have been previously untapped. For example, popular bloggers can charge a fee to businesses wishing to have their item or idea listed in order to receive exposure. The consumer is setting the price and has leverage over the transaction since they are providing the service.
This relationship allows access for consumers to receive information, make payments, and establish a direct line of communication between the government or authoritative body and the consumers it represents. Many common C2A transactions may include paying taxes, fines, inquiring about zoning codes, or paying tuition to a University. This permits consumers to conduct business instantly with large organizations that in the past may have been tedious and inefficient. Previously this sort of business was tedious and time-consuming, but operations have been vastly improved since transactions are able to be conducted over the internet. This opens up resources for both consumers and the administration to allocated more effectively.
No matter the type of model(s) your business will operate under, it is vital to understand the core functionality of your business. This internal development and insight will yield more desirable results and smoother operations. A business that is self-aware of its values and goals will facilitate the process of getting your eCommerce store up and running. This introspection will help make decision making more clear and simpler moving forward.
eCommerce is a budding industry and many people do not want to fall behind in the race. Setting up an online store is attainable but requires effort and industry knowledge to do so effectively. Planning out why you want to enter the eCommerce market and understanding your core values will make the process of setting up your store much easier in the long run. This guide will lead you through the many steps of getting your new eCommerce site up and running.