Ecommerce, or electronic commerce, refers to transactions conducted via the internet. Every time individuals and companies are buying or selling products and services online they’re engaging in ecommerce. The term ecommerce also encompasses other activities including online auctions, internet banking, payment gateways, and online ticketing.
Now, a little bit of history first.
How ecommerce came to be
The first ecommerce transaction was made in 1994. A guy named Phil Brandenberger used his Mastercard to buy Sting’s Ten Summoners’ Tales via the internet for $12.48. This particular transaction made history and signaled to the world that the “internet is open” for ecommerce transactions. Why? Because it was the first time that encryption technology was used to enable an internet purchase.
Needless to say, ecommerce has grown by leaps and bounds ever since. The rise of ecommerce giants like Amazon and Alibaba in the mid -1990s changed the face of the retail industry. They largely capitalized on the global internet penetration and digitalization of the financial system which contributed to the decline in sales for many brick-and-mortar businesses.
The growth of ecommerce has also shifted the retail workforce. The U.S Bureau of Labour Statistics (BLS) has revealed that from 1997 to 2016, employment in the ecommerce sector increased by 80%. BLS is also predicting that the number of ecommerce jobs will keep on growing and reach 450,000 in the US by 2026.
Taking this into account, it’s clear that the highly competitive nature of ecommerce will keep on changing the retail industry and influence customers’ behaviour. Starting an online business nowadays seems like an attractive idea for many savvy entrepreneurs, but before anyone dives into this dynamic business sector, they first need to learn the ropes of the ecommerce industry.
And that’s exactly what this guide is for.
In this resource, we’ll take a deep look at the ecommerce industry — how it came about, what types of merchants exist, and what platforms allow online selling. We’ll also shed light on notable ecommerce success stories and flops to give you a better idea of what it takes to succeed in this industry.
Whether you’re someone who wants to start an ecommerce site or you’re already running an online store and just want to learn more about the industry, you’ll find plenty of nuggets in our guide.
Dive in below or jump to a specific section:
The most important ecommerce statistics
If you’re interested in doing business online, it’s important to stay up to date with the latest ecommerce stats, as we all know that the best way to understand any commercial sector is through hard facts and data.
We’ll start with 99Firms’ Ecommerce Statistics for 2020, which prove that ecommerce is growing at a steady rate all over the globe. What’s more, experts predict that retail ecommerce sales will reach $4.13 trillion in 2020.
- It is expected that by 2040, 95% of all purchases will be via ecommerce.
- The world’s fastest-growing ecommerce market is China with an estimated ecommerce value of $672 billion in 2017.
- The US has the highest ecommerce penetration rates, with around 80% of all internet users making at least one purchase.
- The top reason why people make online purchases is that they can shop whenever they want, 24/7.
- Around 43% of ecommerce traffic comes from Google search (organic).
- Slow-loading websites see an abandonment of 75%.
Finance Online’s “Data and Share Market Analysis for 2020” shows that ecommerce is not only thriving in the B2C sector, but sales are also scaling in the B2B sector and can even outgrow B2C profits by the end of 2020. Here are a few more intriguing stats from this report:
- It is estimated that around 35% of Google product searches are converted into purchases within 5 days.
- Around 51% of digital buyers conduct purchases via their smartphones.
- Digital buyers are more likely to spend more if they are provided with free shipping.
- Around 93% of online shoppers declared that the visual appearance of an online store plays a key factor in their purchasing decisions.
- It is estimated that around 80% of online shoppers don’t make purchases from ecommerce sites that have problematic return policies.
- It is estimated that 85% of all products purchased via social media platforms come from Facebook.
According to Statista, e-retail sales accounted for 14% of all retail sales around the globe and these figures are expected to keep growing and reach 22% by 2023.
- It is expected that mobile ecommerce retail sales will reach $3.5 trillion by 2021.
- In 2017, around 42% of online shoppers stated that they prefer to pay with a credit card.
So it’s clear – ecommerce is here to stay. But how does one get started? The first step is to make sure you’re familiar with the basics.
Types of ecommerce businesses
There are many ways to classify ecommerce websites. You can categorize them according to the products or services that they sell, the parties that they transact with, or even the platforms on which they operate.
In this guide, we’ll look at all three aspects to give you a clear picture of the types of ecommerce sites out there.
Classifying ecommerce businesses according to what they sell
Let’s start with the products and services typically sold online. Below is a list of ecommerce merchants according to what they sell.
1. Stores that sell physical goods
These are your typical online retailers. Clothing, furniture, tools, and accessories are all examples of physical goods. Shoppers can buy physical goods through online stores by visiting the stores’ websites, adding items in their shopping cart, and making a purchase.
Once the shopper has made a purchase, the store delivers the item(s) right at their doorstep. There are also online stores where customers can make an online purchase but go to the store themselves to pick up the products.
Some examples of these ecommerce stores include eyewear retailer Warby Parker, menswear store Bonobos, and shoe retailer Zappos.
2. Service-based e-tailers
Aside from products, services can also be purchased online. Everytime you hire educators, freelancers, and consultants through online platforms, you’re doing business with service-based e-tailers.
The buying process for services depends on the merchant. Some may allow you to purchase their services straightaway from their website or platform. An example of this comes from Fiverr.com, a freelance marketplace. People who want to buy services from Fiverr must place an order on the website before the seller delivers their services.
Some service providers, on the other hand, require you to get in touch with them first (i.e. book a consultation) to determine your needs. For example, Blue Fountain Media, a company that creates digital strategies for large businesses, asks clients to contact them by filling in an online form first where they should describe their business needs.
3. Digital products
Ecommerce transactions are conducted via the internet which is why, in the ecommerce realm, products are usually referred as “e-goods”. The term digital products refers to all items that are in a digital format including ebooks, online courses, software, graphics, and virtual goods.
Examples of retailers that sell digital products are Coursera (a platform for online learning) and Audiobooks (a website where you can buy audio books).
Classifying ecommerce according to the parties involved
Looking at the parties participating in the transaction is another way in which ecommerce sites can be classified. These typically include:
1. Business to consumer (B2C)
As the name suggests, the B2C ecommerce model represents a transaction between businesses and individuals. B2C ecommerce is the most common business model among both physical and online retailers.
Nike, Macy’s, IKEA, and Netflix are all examples of companies that engage in B2C ecommerce.
2. Business to business (B2B)
In the B2B ecommerce model both parties involved are businesses. In this type of a transaction, one business provides the other with products and/or services.
Slack, a platform for communication between remote businesses, and Xero, a cloud-based accounting software for businesses, are examples of B2B companies.
3. Consumer to business (C2B)
The C2B business model represents a transaction in which individuals create value for businesses, unlike the traditional business-to-consumer model where companies are the ones that deliver value. Consumers provide companies with products and/or services, co-operate on projects, and ultimately help businesses increase their profits.
Freelancer, a freelance platform that connects remote workers and companies, is an example of a company that brings two parties to engage in C2B transactions.
4. Consumer to consumer (C2C)
C2C ecommerce happens when the two parties involved are consumers that trade with one another. eBay and Craigslist are examples of online marketplaces where individuals buy and sell products to each other.
5. Government to business (G2B)
The G2B ecommerce models happen when the government provides companies with goods and services. Government procurement, data centres, and e-learning are all examples of G2B ecommerce.
6. Business to government (B2G)
The B2G model refers to companies and businesses that provide goods and services for the government. For example, OpenGov is a company that offers governments cloud-based platforms for communication, reporting, and budgeting.
7. Consumer to government (C2G)
Every time consumers pay taxes, health insurance, electronic bills, or request information concerning the public sector, they’re engaging in C2G.
Make note that we’ve included all these sections to give you a general idea of ecommerce classification, although models like G2C or C2G are part of ecommerce only in its loosest definition. 80% of the time, when we’re talking about ecommerce, we’re talking about the B2C or the B2B model.
Ecommerce platforms: a look at where and how ecommerce takes place
We’ve talked about the types of ecommerce transactions on the web as well as the products and services sold online. But where and how do these transactions take place?
Answer: it varies.
In this section, we’ll shed light on some of the most common platforms where ecommerce takes place.
A visual representation of the percentage of websites using ecommerce technologies. Source: Career Cliff
What are the best ecommerce platforms?
By using shopping carts and ecommerce platforms, retailers build online stores where they showcase their products and services. Having an online storefront is one of the most straightforward ways to conduct ecommerce. There’s a great number of ecommerce solutions and choosing the right fit for your business depends on your budget, preferences, and company needs. Below we’ve listed the best ecommerce solutions currently on the market.
Here are some Shopify facts:
A popular choice among many SMBs, Shopify allows clients to build effective online stores and scale their business. Created with a user-friendly and intuitive interface, as well as tons of templates, this platform offers flexible shipping rates, automatic taxes, and over 100 payment gateways. Shopify enables social media integrations, is packed with built-in SEO features, and is fully hosted.
Best for: Small businesses looking for an all-in-one ecommerce solution.
Here are some Magento facts:
Magento is a highly flexible ecommerce solution used by medium sized businesses ready to scale. This platform offers robust features which allow retailers to customize all aspects of their online store including custom templates, extensions, and modules. If clients need to further extend the functionality of their Magento store, they can always use add-ons to turn the vision of their online store into a reality.
Considered by many a complex ecommerce platform, Magento supports clients by maintaining an operative community of developers and experts on the Magento ecosystem who are ready to help newbies with the maintenance of their online store.
Best for: Brands looking for a highly customizable ecommerce solution.
Here are some Salesforce facts:
This fully-hosted solution allows you to run a powerful ecommerce store in the cloud. Merchants using Salesforce won’t have to worry much about platform maintenance and development since it’s fully hosted by the company (though this may limit your freedom a bit).
One of Salesforce’s strengths is that it’s built with omnichannel retailers in mind with features that allow merchants to easily sell across physical and digital storefronts.
Best for: Large businesses that need a fully-fledged and scalable CRM software.
Here are some Oracle Commerce facts:
Oracle Commerce is a powerful ecommerce solution suitable for both B2B and B2C retailers. It is packed with out-of-the-box-features that enable you to sell more complex merchandise and data-rich offerings.
This is a highly customizable ecommerce platform which allows retailers to customize every aspect of their online store and campaigns.
Best for: Growing businesses looking for a flexible and scalable ecommerce platform.
Here are some WooCommerce facts:
WooCommerce is one of the biggest open-source ecommerce platforms. Specifically designed to integrate with WordPress, WooCommerce has plenty of templates that can help you build a unique online store. You’ll get all essential features including unlimited products, unrestricted customization, order management, and free shipping.
Best for: Small businesses that have a website powered by WordPress.
Here are some BigCommerce facts:
BigCommerce is a popular ecommerce solution that provides online retailers with a robust online store builder for creating a fully functional online store and selling an unlimited number of products. One thing that particularly distinguishes BigCommerce from other ecommerce solutions are the powerful business management features such as shipping, reporting, and product and order management, as well as the fact that it’s fully hosted.
Additionally, BigCommerce has a built-in B2B offering for companies engaging in B2B ecommerce.
Best for: Growing businesses that want to leverage on multi-channel selling.
Here are some Volusion facts:
Another popular ecommerce solution, Volusion allows merchants to create online stores, showcase their merchandise, and take payments all on one platform. Volusion comes with standard features including a site builder, shopping cart software, marketing tools, and more.
Best for: Small businesses in need of a simple and easy-to-use ecommerce platform.
Here are some Drupal Commerce facts:
This is an open-source ecommerce framework that enables users to build online stores and applications on Drupal. Drupal Commerce is highly flexible and offers hundreds of modules that allow users to enhance and extend its functionalities. Drupal Commerce also offers the Commerce Kickstart package which integrates with the latest versions of Drupal. It’s packed with out-of-the-box features that allow developers to quickly set up and customize all aspects of their online store.
Best for: Large businesses that require a robust and feature-rich ecommerce solution.
What are the biggest online marketplaces?
Online marketplaces are platforms that facilitate e commerce transactions between buyers and sellers, enabling buyers to showcase their products and reach a larger audience. These platforms are popular among customers because of their wide selection of products and services from different sellers and providers all around the globe.
Let’s dive into the best online marketplaces on the web:
Here are some Amazon facts:
A company that needs no introduction, Amazon is one of the biggest online marketplace in the world. It offers customers a wide selection of products from retailers around the globe and enables businesses to reach a large audience.
Best for: Big businesses that want to expand their sales channels.
Here are some eBay facts:
Connecting retailers and customers from all around the globe, eBay is an online marketplace that can help small and medium sized businesses establish an international customer base. eBay is user-friendly, intuitive, and offers a number of payment options. One thing that particularly distinguishes eBay from other online marketplaces is that it allows merchants to hold online auctions.
Best for: Established brands selling unique items looking to expand their audience pool.
Here are some Etsy facts:
Etsy is the perfect platform for creatives looking for an online marketplace to showcase their unique and handmade products. It’s particularly popular among independent creatives and people looking to buy one-of-a-kind, exclusive, and rare items.
Best for: Small businesses selling handmade and vintage items.
Here are some Alibaba facts:
Alibababa is one of the biggest online marketplaces in the world. The platform is particularly effective for reaching big manufacturers and purchasing products in bulk. Alibaba dominated the Chinese market in 2019, with an estimated number of 960 million active customers.
Best for: Big and established brands looking to expand and reach a global audience.
Here are some Fiverr facts:
Unlike the other marketplaces listed above, Fiverr offers freelance services. This platform connects businesses with remote workers that specialize in all kinds of services including digital marketing, video editing, programming, and graphic design. Joining Fiverr is free for freelancers and the costs for hiring a remote worker for a particular job start at $5 USD.
Best for: Small businesses looking to hire freelancers for outsourcing.
Here are some Upwork facts:
Formerly Elance and oDesk, Upwork is a freelance service marketplace that connects companies and businesses with remote workers from all around the globe, whether part-time or for a long-term engagement. Remote workers using Upwork specialize in all types of services including accounting, expert marketing, content writing and web developing. They can set up an account on Fiverr and offer their knowledge and services to businesses from all around the globe.
Best for: Businesses that need freelance services and competent remote workers who can stand out in a highly competitive job marketplace.
Social media and ecommerce
Social media platforms can help ecommerce businesses expand their reach and establish a recognizable brand identity. They can also increase sales and pave the buyer’s journey by either directing consumers to the retailers’ online stores or by enabling shoppers to buy items directly from the retailers’ social media pages.
How social media facilitates ecommerce
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The most popular social media platforms such as Facebook, Instagram, Twitter, and Pinterest, aren’t usually used by sellers as an alternative to online stores. Rather, retailers use these platforms to showcase their products by using visuals, like photos and videos, and appealing social media copy to attract customers and reach a wider audience. Consumers that come across an item they find interesting on social media platforms are then directed to the retailer’s online store so they can make a purchase.
Conducting ecommerce transactions on social sites
Is there anything more to be said about social media ecommerce or ecommerce on social? Well, some social media platforms are taking things further by enabling clients to sell products directly from their social media accounts. For example, retailers that showcase their products on Instagram can use Instagram’s checkout option. This feature enables customers to purchase the items they like without having to leave Instagram.
Since September 2018, companies can also use Instagram Shoppable Stories, a feature which allows businesses to add product stickers on a story. Customers that come across a product they like can just click on a sticker which will redirect them to the product page that features further details about the product.
The above-mentioned initiatives certainly are interesting, but it’s important to note that not all social selling projects are successful. Take Twitter’s Buy buttons. In 2014, this social media platform launched a feature that allowed customers to purchase items directly from a Tweet.
It wasn’t a huge success so the company officially shut down the project in 2017.
Ecommerce examples: success stories and flops
At this point, you have a solid idea of what ecommerce represents, what types of ecommerce transactions are conducted, and what type of platforms sellers use to reach their audience. Now let’s go over some of the most successful ecommerce examples as well as those that didn’t make it in this industry in order to learn from their winning strategies and mistakes.
This section lists some of the top ecommerce sites on the web, and sheds light on what makes them successful.
The Amazon ecommerce example
Amazon is not just one of the biggest ecommerce platforms, it’s also the most valuable company in the world surpassing even Microsoft in market value. Amazon is a booming and competitive marketplace for third – party sellers and a platform where customers enjoy a wide selection of products from providers all around the globe.
What makes Amazon successful
Bryan Eisenberg is a bestselling author who has recently co-authored his latest publication Be Like Amazon: Even a Lemonade Stand Can Do It with Jeffrey Eisenberg and Roy H. Williams. In the book he talks about the 4 Pillars of Amazon’s Success.
- Be Customer Centric – “Amazon is not trying to force customers to fit the way they want to sell them,” he says. “Amazon would rather fit themselves into how customers buy today and will change their buying behavior in the future.” They address all customer’s concerns by providing them with a detailed Help Center where they can get informed about their purchase, refunds, and shipping rates.
- Be Creative – Amazon is always conducting experiments and coming up with ways to improve the shopping experience. Amazon regularly makes online surveys via email where they ask customers to evaluate their shopping experience with Amazon. This gives the company guidance about which areas they should work on in order to improve their customer experience.
- Be Focused on Customer Experience – Amazon is all about engaging customers and making them a vital part of the buying process. A good proof is the enormous number of reviews. Customers want to share their experience with the platform because they feel their opinion matters.
- Continuously Improve & Optimize – Amazon makes good use of its data. The company is always crunching the numbers, and it uses data in just about every aspect of the business, including customer experience, warehousing, operations, finance, and marketing.
However, when you’re trying to build an ecommerce business from scratch, it’s difficult to relate to one of the biggest giants of the digital age. That’s why we’re also going to look at Birchbox.
The Birchbox ecommerce example
Birchbox has a two-pronged business: it offers a subscription in which the company charges members $10 a month to receive a “personalized mix of 5 hair, makeup, skincare, and fragrance samples”, and it also has an online shop that allows customers to purchase full-sized products. As of 2015, Birchbox has more than 800 brand partners and more than a million subscribers.
What makes Birchbox successful
Several factors contribute to Birchbox’s success, but one of the most important ones is data.
The company’s co-founder, Katia Beauchamp, told Forbes that data became their best friend.
Here’s one example of how the company uses data: Birchbox asks subscribers to review each item and uses that information to match customers with the best products. Birchbox also sends the data to their partners so they can determine what works and what doesn’t.
Another key to their success? Unlike most of their competitors, Birchbox isn’t just a box subscription service. The company allows members to buy full-sized products in addition to samples, which is what differentiates it from the competition .
The Wayfair ecommerce example
Wayfair is an American company that specializes in selling furniture and home items. The company offers over 14 million items from 11,000 suppliers around the world and was the fastest growing retailer in the U.S in 2018.
What makes Wayfair successful
Wayfair is a dropshipper, so it hardly carries any inventory. That said, the company does a tremendous job managing suppliers, orders, and fulfillment. “They figured out how to manage 7,000 vendors and the drop-ship process so the vendors go directly to the consumer,” says Battery Ventures’ Neeraj Agrawal in an interview with Forbes.
It works like this. Vendors upload their inventory data into Wayfair servers, and the company’s algorithm crunches the numbers and uses that information to determine shipping time and processes. The system is very effective when it comes to informing suppliers for the purchases made. They are immediately notified about the type of the order placed. Plus, the system evaluates the size of the order and makes a decision whether to send it through FedEx or use a delivery company.
In addition to efficient supplier and order management, Wayfair also strives to get to know its customers. The company encourages each shopper to create an account, and it observes user behavior in order to personalize the shopping experience accordingly.
The Zappos ecommerce example
Zappos is an online shoe and apparel retailer based in Las Vegas, NV. It’s currently owned by Amazon, but it’s still worth taking a look at what makes this ecommerce site successful.
What makes Zappos successful
Zappos is famous for its customer service. The company’s main promise to customers is that they deliver WOW service. Their popular motto “Deliver WOW Through Service,” lives up to that core value by always putting customers first.
For instance, while other businesses encourage call center agents to get off the phone as quickly as possible, Zappos wants its employees to stay on the phone for as long as necessary. At one point, a Zappos employee even spent 10 hours on the phone with a customer.
When asked how the company felt about this, Jeffrey Lewis, Zappos Customer Loyalty Team supervisor said, “Zappos’s first core value is deliver wow through service, and we feel that allowing our team members the ability to stay on the phone with a customer for as long as they need is a crucial means of fulfilling this value.”
Ecommerce failure examples
You’ve seen the success stories; now let’s look at some of the biggest flops in the industry. Pay attention and learn from these companies’ mistakes.
Boo.com was a UK-based clothing and cosmetics e-tailer that failed just two years after its launch. It was just one of the many Internet companies that shut down during the dot-com bubble in the year 2000.
The NASDAQ Composite index (which was composed of many tech companies) shot up in the late 1990s, but saw a sudden drop after the bubble.
For the uninitiated, the dot-com bubble burst occurred from 1997 to 2001. The rapid growth of Internet usage and adoption at the time fueled investments at incredibly high valuations and companies that haven’t even turned a profit went public. The hype wasn’t sustainable, though, and capital soon dried up. As you’ll learn below, this was ultimately one of the reasons why Boo.com (among others) shut down.
Why Boo.com failed
Boo.com also tried to expand way too fast while its operating expenses were too high. And because of the crash of tech stocks at the time, the company wasn’t able to raise enough funds to stay afloat.
As its name suggests, eToys.com was an online toy retailer. It launched in 1997 and then filed for bankruptcy in 2001.
Why eToys.com failed
Like Boo.com, eToys had tried to expand too fast and also incurred high operating expenses. Because of the market conditions following the dot-com bubble, eToys failed to obtain capital that would allow it to continue operations.
But that wasn’t the only factor that led to its failure. According to ABC News, eToys’ main failure was not being able to deliver all orders on time. They had an enormous amount of orders during their first holiday season but most customers received late shipment which brought them a bad reputation.
The bad publicity didn’t stop there. At one point, the company sued Etoy, a Swiss art site. eToys tried to obtain the etoy.com domain saying that it was too similar to eToys.com. The move was met with widespread backlash, and eToys.com backed off.
Founded in 2010, Toygaroo was an online toy rental service that was dubbed the Netflix of toys. Toygaroo enabled parents to rent toys for a period and return them once their kids got tired of playing with them.
Toygaroo had a promising start. Its founder, Nikki Pope, appeared on the hit TV show Shark Tank and secured a $200,000 investment from Mark Cuban and Kevin O’Leary. Unfortunately, that investment didn’t pay off. Toygaroo filed for bankruptcy in 2012 and subsequently shut down.
Why Toygaroo failed
While the exact details of Toygaroo’s shutdown weren’t clear, it looks like the company had problems dealing with its rapid growth as well as with executing its business model.
Phil Smy, former Chief Technology Officer for Toygaroo, told Shark Tank Blog, that Toygaroo might have had trouble scaling the business. The company received explosive growth in a short span of time which is at the same time a big success and a difficult thing to handle. No matter their expertise, small businesses lack the capacity to manage rapid growth. If Toygaroo had slow and organic growth, the company might have avoided bankruptcy.
Meanwhile, Kevin O’Leary, one of the sharks who invested in Toygaroo, told Forbes that it was his worst deal on the show. “Great concept but they proved unable to execute,” he said.
Frequently Asked Ecommerce Questions
How many ecommerce transactions are there worldwide?
How much is ecommerce worth?
Is ecommerce still growing?
How many ecommerce sites are there in the world?
What are the biggest ecommerce companies?
What percentage of ecommerce is mobile?
What days do people shop the most?
What time do people shop online the most?
Putting ecommerce knowledge to action
And there you have it. Now you know what ecommerce is, the types of merchants that do business online, and the biggest successes (and failures) in the industry. What’s next?
Answer: take action.
Wherever you are right now in your ecommerce journey, we hope this post gave you some insights that you can apply in your venture. If you’re just starting out and need help picking a platform or deciding on your target audience, go back and read the section on ecommerce types and solutions. Already running a business and want to ensure your success? Read through the ecommerce stories above.
And, finally, if that’s not enough, we suggest you check out the following resources on our blog:
If you need additional advice or insights, we’re here to help. Entrepreneurs who want to start a new ecommerce project and need professionals to discuss their ideas with or solve an issue can contact our consulting team at any time. Our experienced ecommerce professionals can help new businesses implement the right strategy in this fast-growing industry. Whether you need advice concerning search engine optimization, product promotion, progress tracking, or branding, our team at EcommerceGuide will be happy to help your ecommerce businesses grow and prosper.