Learn the Basics About E-Commerce
by Ajeet Khurana (also available at thebalancesmb.com)
Business transactions that take place on the internet are called e-commerce, short for “electronic commerce.” Popular examples of e-commerce generally involve buying and selling online, but the e-commerce universe contains other types of activities as well. Basically, any form of business transaction conducted electronically can be referred to as e-commerce. Those involved in the transactions can represent multiple combinations of customers, businesses, vendors or other suppliers, or government agencies.
E-commerce has experienced considerable growth since the dawn of the internet as a commercial enterprise. Its advantages include eliminating time and geographical limitations, streamlining operations, and lowering costs.
Growth
In the decade ending with the first quarter of 2018, e-commerce sales in the U.S. grew from less than 4 percent to more than 9 percent of all retail sales, according to U.S. Census Bureau statistics. In total dollars, retail outlets in the U.S. made about $123.7 billion worth of online sales during the first quarter of 2018, compared to about $1.3 trillion worth of total sales. Statista projects e-commerce sales to grow to nearly 14 percent of all U.S. retail sales by 2021.
Business-to-Consumer (B2C)
B2C transactions are what often come to mind when people think of e-commerce. One of the most popular examples of B2C transactions is buying and selling goods on the internet. Many businesses have virtual storefronts that are the online equivalents of their retail outlets. Some businesses have no physical storefronts at all—only websites. Buyers browse and purchase products with mouse clicks. Though Amazon.com is not the pioneer of online shopping, it is arguably the most famous online shopping destination. The online retailer’s quarterly net revenue has grown from just more than $4 billion in the first quarter of 2008 to more than $51 billion in the first quarter of 2018, according to Statista.
One of the biggest drivers of e-commerce has been the interfacing of websites with bank accounts—and by extension, credit cards. Today it is possible to perform the entire gamut of banking operations without visiting a physical bank branch. This makes it easy to pay for products online, allowing for secure electronic payments via credit cards, debit cards, or gift cards, which is far more efficient than writing and mailing checks.
M-Commerce
M-commerce is short for “mobile commerce.” This is largely a subsection of B2C transactions, but the rapid penetration of mobile devices with internet access has opened new avenues of e-commerce for retailers and their customers. M-commerce generally involves e-commerce taking place on mobile phones.
One of the most common examples of m-commerce is electronic ticketing. Air tickets, movie tickets, train tickets, play tickets, tickets to sporting events, and just about any kind of tickets can be booked online or through mobile apps. Instead of receiving a paper ticket, buyers download an electronic version of the ticket that can be scanned just like paper tickets. While electronic ticketing does not eliminate lines at entry points, it does reduce long lines for ticket purchases or picking up tickets at a will-call booth.
F-Commerce
F-commerce is short for “Facebook commerce.” The popular social media site provides a captive audience to transact business, and many small businesses rely more on their social media presence than they do on traditional websites. This type of e-commerce also is a subsection of B2C transactions and closely related to m-commerce.
Many Facebook users access the site via their phones, and businesses often provide links to online purchasing options through their pages and posts. This type of social commerce also extends to other social media, such as Instagram and Twitter.
Business-to-Business (B2B)
While B2C transactions get more attention from consumers and in the news media, B2B transactions represent greater volume in terms of dollars. For these transactions, both the parties are businesses, such as manufacturers, traders, retailers, and the like.
Most of these types of sales are automated. For example, a manufacturer might need a certain part for its assembly work. Before e-commerce, an individual would need to estimate how many parts would be needed over a specific period of time and order those parts in bulk. Now, such purchasing can be automated. Inventories are tracked electronically, and when numbers drop below a certain point, an order is submitted immediately to a supplier.
Another part of the process that can be automated is price tracking. Prices for some products may fluctuate day to day or week to week, so a system can be programmed to make a purchase if the price drops below a certain point. This approach helps keep expenses low.
Consumer-to-Consumer (C2C)
C2C transactions actually represent a form of bartering. Auction sites are perhaps the best example of C2C e-commerce. Physical auctions predate online auctions, but the internet made auctions accessible to a large number of buyers and sellers. Online auctions are an efficient mechanism for price discovery. Many buyers find the auction shopping mechanism much more interesting than regular storefront shopping.
Questions
E-commerce generally consists of a front end interface to the user and a database. The front end would be a webpage such as what you see with Amazon, Facebook, or Instagram and is run on your computer by your browser. The database that contains the product information, pictures, and messages along with the algorithms to decide what is displayed, what ads are run, what information is collected etc. is stored on a server. PHP (or possibly javascript) is used to enable the calculations and interactions and is generally run on the server.
- What is e-commerce? Describe in your own words.
- What are the 2 parts of an e-commerce system?
- Under what category of e-commerce would Amazon.com fall. Why?