E-commerce is a truly revolutionary innovation. But what is it exactly, and what are its benefits? This article answers these questions and will give you an idea about how you can use this vital tool to help your business and customers.
What is E-commerce?
E-commerce describes using computer networks (often the Internet) to buy and sell products and services. Basically it means transacting online. Some people find this definition narrow and prefer the term e-business instead. We’ll use the term “e-commerce” to mean a broader definition which includes servicing customers, collaborating with business partners as well as transacting within the organization.
Some organizations can be called pure e-commerce organizations, in that all processes are digital. The products are digital (such as e-books), product delivery is digital, and the selling process is digital. At the other end of the spectrum, purely physical organizations use no digital dimensions and are called brick-and-mortar organizations. Many organizations fit somewhere in between and can be called partial e-comerce organizations. Amazon.com is a good example of a partial e-commerce organization. It sells physical goods but uses digital means for activities like customer service and order processing.
You might also hear the term click-and-mortar (or click-and-brick) organization. This refers to companies like Walmart, whose primary business is done in the physical world, but gradually expand their e-commerce activities.
Types of E-Commerce Transactions
E-commerce transactions can happen between various parties, not just between a business and its retail customers. The most common terms you’ll come across that describe the types of e-commerce transactions include:
- Business-to-business (B2B): Both the seller and the buyer is a business. Most e-commerce volume is B2B.
- Business-to-Consumer (B2C): The sellers are organizations and the buyers are individuals.
- Consumer-to-Consumer (C2C): Both the seller and buyer is an individual.
What’s the whole point of E-Commerce?
Most companies provide products and/or services to customers. To do so, the company has to buy inputs like parts or materials and/or services from suppliers, process the inputs, and then sell the final products to customers.
The main idea of e-commerce is to automate as many business processes as possible. By “processes” we mean things like order initiation, order fulfillment, buying, product delivery and customer support. The aim is to benefit both the seller and customer.
Benefits and Limitations of E-Commerce
As far as recent human innovations go, the benefits of e-commerce on businesses, individuals and society is no doubt towards the top of the list. On the other hand, e-commerce does have its limitations. As time passes, we expect these limitations to decrease, or to be overcome. We’ll quickly outline some of the main benefits and limitations of e-commerce on businesses and individuals.
Benefits of E-commerce
- Expands an organization’s potential customer base by reaching customers in new markets in a cost-effective way.
- Allows companies to buy materials and services from other organizations at less cost and more quickly.
- Helps shorten or eliminate distribution channels allowing for lower prices and higher vendor profits.
- The cost of creating and selling products that can be digitized (such as music and software) can be reduced by up to 90%.
- Allows for lower costs in areas like telecommunication and inventory.
- Helps smaller companies to compete with the big guys.
- Often provides less expensive products and services by allowing consumers to compare product prices more easily.
- Gives consumers more product choice.
- Enables convenient 24/7 shopping without the need to travel outside the home.
- Customers can quickly retrieve detailed product information.
- Enables customers to get customized products quickly and at competitive prices (computers, cars, etc.).
- Makes it possible to work and study at home.
- Allows for individuals to more easily sell to other individuals using classified and auction websites.
- Allows consumers to interact in online communities to exchange ideas and compare experiences.
- There is currently a lack of universally accepted standards for quality, security and reliability.
- Costly or inconvenient Internet accessibility for some potential customers.
- Lack of national and international government regulations and standards.
- Difficult to find accurate methodologies for measuring the benefits of e-commerce and for justifying its costs..
- Perception that e-commerce is expensive and not secure.
Entire books on e-commerce have been written with far too many concepts for us to include here. Nevertheless, with this brief introduction to e-commerce, we hope you’ve gained a better understanding of what it’s all about and how you might use it to help your business and customers.