Electronic Commerce (E-Commerse) involves the exchange of goods and services or the transaction of funds or data, over the internet. The rise of e-commerce platforms such as Amazon and eBay has shown the success of e-commerce platforms. During the COVID pandemic, retail sales in e-commerce had risen over 16% in the US as everyone was isolating. E-commerce platforms enabled businesses traditionally traded in physical stores to continue operating online.

How Does E-Commerce Work?

Customer accesses online store to place an order for products or services via their own devices
Customer web browsers communicate back and forth with the server hosting the e-commerce website
Data of the order is relayed to the central computer known as the order manager
Data is forwarded to databases that manage inventory levels and merchant system that manages payment information such as PayPal
Data on the store inventory and customer funds go back to the order manager to be processed
Once the order is validated, the order manager will notify the store’s web server
A message is a display notifying the customer that their order has been successfully processed
The order manager will send order data to the warehouse or fulfilment department letting them know the product or service can be dispatched to the customer.

Payment Methods for E-Commerce

Consumers can make online purchases in several ways from credit cards to digital wallets. E-commerce platforms include integrations with payment processing services which liaise online transactions between merchants and a customer’s bank.

Types of Payment Methods

Accepting Credit Cards and other popular payment methods through the payment processor
Redirect through a payment platform
Mobile Wallets such as Apple and Google Pay
Buy now, pay later (BNPL) service

Types of E-Commerce Businesses

There are many E-Commerce types which define who you are and who you are selling to. Here are some E-Commerce terms:

Business to Consumer (B2C)

A business that sells goods or services to an individual consumer. For example, selling individual pairs of shoes directly to customers.

Business to Business (B2B)

A business that sells goods or services to another business. For example, a software company sells licenses for its technology to a small business.

Consumer to Consumer (C2C)

An individual who sells goods or services to another individual. For example, selling a single used sofa to another person on a buy-an-sell marketplace.

Consumer to Business (C2B)

An individual that sells their products or services to a business or organisation. For example, a business pays an independent influencer to promote the brand on social media.

Benefits of E-Commerce Businesses

Convenient Way to Shop

E-Commerce enables consumers to shop from anywhere or any device at any time without the need to visit a physical store. Customers can easily discover the brand and compare products, features, and prices.

Increase Reach and Access to New Markets

E-Commerce businesses can reach a wide audience than a physical store. E-Commerce business can sell their products to customers all over the world.

Opportunity for Personalisation

With the aid of customer data, a personalised customer experience can be served per customer such as providing personalised product recommendations and targeted marketing campaigns.

Lower Cost

E-Commerce businesses have lower overhead costs than traditional physical stores An E-Commerce business can be run from anywhere at a lower cost without the need to pay for rent, utilities, and other start-up costs.

Challenges of E-Commerce Business

Security

The biggest challenge when running an E-Commerce business is security. Customers need to be able to trust that their personal and financial information is safe when they make purchases online. E-Commerce businesses should invest in secure payment gateways such as SSL certificates to protect customer data.

Competition

The E-Commerce space is highly competitive with many businesses targeting the same customer demographic. Online businesses will need to differentiate themselves from their competitors by offering unique products, competitive prices, and excellent customer experiences.

Shipping and Logistics

An efficient reliable shipping and logistics system will need to be in place to ensure that products are delivered to customers on time and in good condition.

Returns and Customer Service

E-Commerce businesses will need to have robust return policies and customer service systems in place to handle customer inquiries and complaints.

What is Electronic Commerce?