Before getting to the heart of the subject of e-commerce, let’s first answer a fundamental question: what is e-commerce?
E-commerce refers to commercial transactions carried out online. This means that whenever you buy and sell something using the Internet, you are involved in e-commerce.
It was August 11, 1994. Around noon, Phil Brandenberger of Philadelphia logged on to his computer and used his credit card to buy Sting’s “Ten Summoner’s Tales” for $12.48 plus shipping.
This story doesn’t sound very exciting today, but at the time, this particular transaction made history. Why? Because it was the first time encryption technology was used to enable a purchase over the Internet. Many consider this moment the first “real” e-commerce transaction.
Needless to say, e-commerce has grown by leaps and bounds since then. BigCommerce cites that e-commerce is growing 23% over last year. According to eMarketer, global e-commerce sales are expected to reach $27 trillion in 2020 – and those are only statistics for the retail sector.
That is a lot of growth (and money!), which is why, if you are interested in online business, you need to know the ins and outs of the e-commerce industry.
And that is exactly what this guide is for. In this resource, we take a close look at the e-commerce sector: how it came about, what types of merchants are out there and which platforms enable online selling. We will also highlight notable e-commerce successes and failures to give you a better idea of what it takes to succeed in this sector.
Whether you want to build an e-commerce site or you already run an online store and simply want to learn more about the sector, you will find plenty of nuggets in this guide.
Types of e-commerce merchants.
There are many ways to classify e-commerce websites. You can classify them by the products or services they sell, by the parties they deal with, or even by the platforms they operate on.
In this guide, we will look at all three aspects to give you an accurate idea of the types of e-commerce sites that exist.
Classifying e-commerce merchants by what they sell
Let’s start with the products and services typically sold online. Below is a list of e-commerce merchants based on what they sell.
1. Stores selling physical goods.
These are your typical online retailers. They can include clothing stores, home goods businesses and gift shops, to name just a few. Stores that sell physical goods showcase items online and let customers add what they like to their virtual carts. Once the transaction is complete, the store typically ships the orders to the buyer, although a growing number of retailers are implementing initiatives such as in-store pickup.
A few examples of these e-commerce stores include eyewear retailer Warby Parker, men’s clothing store Bonobos and shoe retailer Zappos.
2. Service-based e-merchants.
Services can also be bought and sold online. Online consultants, educators and freelancers are generally the ones who venture into e-commerce.
The process of buying services depends on the merchant. Some may let you buy their services directly on their website or platform. An example of this comes from Fiverr.com, a freelance marketplace. People wishing 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 contact them first (i.e., book a consultation) to determine your needs. The web design company Blue Fountain Media is an example of a business in this field.
3. Digital products.
E-commerce is, by nature, highly digital, so it is not surprising that many merchants sell “electronic products” online. Common types of digital products include e-books, online courses, software, graphics and virtual goods.
Shutterstock (a site that sells stock photos), Udemy (an online course platform) and Slack (a company providing messaging, archiving and real-time search services) are examples of merchants that sell digital products.
Classifying e-commerce by the parties involved.
Another effective way to classify e-commerce sites? Look at the parties taking part in the transaction. These generally include:
1. Business to consumer (B2C) – Transactions take place between businesses and consumers. In B2C e-commerce, businesses are the ones selling products or services to end users (i.e., consumers).
Online retail typically operates on a B2C model. Retailers with online stores such as Walmart, Macy’s and IKEA are all examples of businesses that engage in B2C e-commerce.
2. Business to business (B2B) – As the name suggests, B2B e-commerce concerns transactions carried out between two businesses. Any business whose customers are other businesses uses a B2B model.
Examples include Xero, online accounting software for small businesses, ADP, a payroll processing company, and Square, a payment solution for SMBs.
3. Consumer to business (C2B) – Consumer-to-business e-commerce happens when a consumer sells or brings monetary value to a business. Many crowdsourcing campaigns fall under C2B e-commerce.
Soma, a company that sells eco-friendly water filters, is an example of a business that has engaged in C2B e-commerce. In 2012, Soma launched a Kickstarter campaign to fund the manufacturing of its product. The project was a success and Soma went on to raise $147,444.
4. Consumer to consumer (C2C) – As you may have guessed, C2C e-commerce happens when a product is bought and sold between two consumers. C2C generally takes place on online marketplaces such as eBay, in which one person sells a product or service to another.
5. Government to business (G2B) – G2B transactions take place when a business pays for government goods, services or fees online. An example could be a business paying taxes using the Internet.
6. Business to government (B2G) – When a government entity uses the Internet to buy goods or services from a business, the transaction may fall under B2G e-commerce. Suppose a city hires a web design company to update its website. This type of agreement can be considered a form of B2G.
7. Government to consumer (G2C) – Consumers can also engage in G2C e-commerce. People who pay fines or pay online for their registration renewal may fall into this category.
E-commerce platforms: an overview of where and how e-commerce happens
We have talked about the types of e-commerce 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 highlight some of the most common platforms on which e-commerce takes place.
1. Online storefronts.
Having an online storefront is one of the simplest ways to do e-commerce. The merchant creates a website and uses it to sell products and services using shopping carts and e-commerce solutions. The “right” solution will depend on the merchant and their products. Below is a list of some of the main e-commerce platforms. Check them out and see which one suits you best.
PrestaShop – PrestaShop is an open source web application for creating an online store for the purpose of doing e-commerce. The application is released under the terms of the Open Software License 3.0. PrestaShop is also the name of the company that publishes this solution.
PrestaShop has won the Open Source Awards several times and has become a major player in e-commerce.
This e-commerce CMS is characterized by its simplicity of installation and management, unlike classic e-commerce sites. It comes with more than 300 features such as catalog management, multilingual support, marketing operations and statistical analysis tools to help businesses boost their performance without great technical knowledge.
The PrestaShop community is very active and offers users more than 2,000 additional extensions and templates on a dedicated marketplace. Today PrestaShop claims 250,000 stores built with their CMS.
Magento – Considered by many to be one of the most flexible e-commerce solutions on the market, Magento offers powerful, ready-to-use features. It gives merchants the ability to customize just about everything about the look of their e-commerce store and gives you total freedom over the appearance, usability and features of your site.
Magento also has an active community of experts, developers and agencies, allowing merchants to easily connect with others if they need assistance. And if you need to extend Magento’s functionality even further, you can always use add-on modules to improve your site.
Demandware – This fully hosted solution lets you run a powerful e-commerce store in the cloud. Merchants using Demandware won’t have to worry about maintaining and developing the platform, since it is fully hosted by the company (although this may limit your freedom a bit).
One of Demandware’s strengths is that it was designed for omnichannel retailers and offers features that let merchants easily sell in both physical and digital storefronts.
Oracle Commerce – This enterprise e-commerce solution can be implemented on-premises or hosted by Oracle or a third party. It has features that can benefit B2B and B2C merchants, as well as powerful features that let you sell more complex products and data-rich offerings.
Oracle Commerce also lets users easily customize sites and campaigns while letting them efficiently launch sites for multiple brands and markets.
Shopify – A common choice among many SMBs, Shopify offers features that let you sell online, on social media and in person. It lets merchants create and customize their e-commerce site through easy-to-use interfaces and templates. And it includes features such as inventory management, reporting, buy buttons, and more. It also offers
social selling features for users active on sites such as Facebook and Pinterest.
Shopify is fully hosted, which means merchants won’t have to worry about maintaining the platform or using their servers.
WooCommerce – WooCommerce is an open source e-commerce platform for WordPress. It comes with standard features such as analytics and reporting, shipping options and mobile-friendly features. Built specifically for WordPress, WooCommerce connects seamlessly to the platform. This makes it a very attractive choice for existing WP users.
WooCommerce is highly extensible and very developer-friendly. It offers features such as custom AJAX endpoints, Webhook systems, and more.
BigCommerce – Used by large and small brands, BigCommerce offers features such as a site builder, shipping options, reporting, and more. It also lets merchants sell on other sites and platforms, including eBay, Amazon, Facebook, Google Shopping and Square. In addition, it has a buy button to enable selling through blogs, emails, and more.
In addition, BigCommerce offers a built-in B2B offering aimed at wholesalers and merchants who sell to other businesses.
Since BigCommerce is fully hosted, the company handles all platform maintenance and updates.
Volusion – Another popular e-commerce solution, Volusion lets merchants create online stores, showcase their products and accept payments on a single platform. Volusion comes with standard features including a site builder, shopping cart software, marketing tools, and more.
Drupal Commerce – This is an open source e-commerce framework that lets users create applications and online stores on Drupal. Drupal Commerce is extremely flexible and offers hundreds of modules that let users improve and extend its functionality. There is also Commerce Kickstart, “a distribution of Drupal Commerce with features that make it more complete, quicker to launch and easier to administer.”
2. Online marketplaces
E-commerce transactions can also take place on online marketplaces, sites that facilitate transactions between merchants and customers. Many online marketplaces don’t own inventory; they simply connect buyers and sellers and give them a platform on which to do business.
Some of the main online marketplaces on the Web are:
Amazon – A company that needs no introduction, Amazon is one of the largest online marketplaces in the world. It offers a vast selection of books, electronics, clothing, accessories, baby products and much more.
In 2015, there were more than 2 million third-party sellers on the site and, according to Amazon, those sellers sold 2 billion items in 2014.
eBay – eBay is another popular online marketplace that connects merchants and buyers, facilitating B2B, B2C and C2C e-commerce. eBay offers products in several categories, including electronics, cars, fashion, collectibles, and more.
eBay merchants can also run auctions that let buyers bid on products. This opens up the possibility of selling items above market value.
Etsy – Etsy is an online marketplace specializing in handmade, vintage and unique products. Millions of independent sellers use Etsy to showcase and sell their creations, and internet users (buyers and sellers) love the site because of its user-friendliness.
Alibaba – Alibaba is an online marketplace for wholesalers, manufacturers, suppliers and importers / exporters. It is an effective site that lets users find suppliers and buy goods in bulk.
Fiverr – This is a “freelance services marketplace” that connects people (mostly entrepreneurs) with service providers offering solutions ranging from graphic design and online marketing to translation and video development. As the name suggests, gig prices on Fiverr start at $5, although they can go up to several hundred or even thousands of dollars depending on what you are selling.
Upwork – Formerly Elance-oDesk, Upwork is a marketplace that connects individuals and businesses with freelancers around the world. What types of services can you buy and sell on Upwork? Answer: many. The freelancers on the site range from web developers and designers to virtual assistants, accountants and consultants.
3. Social media
Social media can pave the way for e-commerce in two ways: social sites can facilitate sales by directing shoppers to a merchant’s e-commerce site or by letting users buy something directly on the platform.
How social media facilitates e-commerce
You may also like: Third-party sellers.
In many cases, social networks such as Facebook, Instagram, Twitter and Pinterest are not used as e-commerce platforms. Instead, merchants use these sites to showcase their products. And when shoppers come across an item they like on social media, they are directed to the merchant’s e-commerce site.
For example, many retailers who showcase their products on Instagram use solutions such as Like2Buy to let customers buy the items. Here is how it works: when a user sees a product they like in their Instagram feed, they can click the merchant’s Like2Buy link to be able to view the item’s product page.
Carrying out e-commerce transactions on social sites
Social networks are also exploring ways to let consumers make purchases without having to leave the site.
Pinterest, for example, has Buyable Pins that let merchants sell the products featured on their Pinterest page. According to the site, “Buyable Pins have a blue price tag, which tells people that your product is in stock and available to buy. Internet users can easily spot these pins on Pinterest – in search results, in related pins and on your business profile.”
Buyable Pins are currently available on Shopify, BigCommerce and Salesforce Commerce Cloud.
Speaking of Shopify, the e-commerce platform also offers a fully integrated Facebook store that lets shoppers buy products without
having to leave the site. Shopify also supports Messenger, so customers can buy items and track their orders via chat.
The initiatives mentioned above are certainly interesting, but it is important to note that not all social selling projects are successful. Take Twitter’s buy buttons. In 2014, the social site released a feature that let customers buy items directly from a Tweet.
It was not a huge success.
In 2017, Twitter officially shut down the project, although it told Recode that the company “will continue to invest in advertising products for retailers that drive purchases through the social network.”
E-commerce examples: successes and failures.
Now that you have enough knowledge about e-commerce, it is time to look at a few real-world examples of e-commerce successes and failures. Check them out below, find out about their examples and see what you can apply in your business.
E-commerce success stories
This section lists some of the best e-commerce sites on the Web and explains what makes them successful.
Amazon
We have talked a lot about Amazon in this article, and for good reason: it is one of the most successful e-commerce companies in the world. In addition to a thriving marketplace featuring third-party sellers, Amazon also earns considerable revenue from its Prime members, as well as from subsidiaries such as Amazon Web Services and Zappos.com.
What makes Amazon successful?
Best-selling author and speaker Bryan Eisenberg, who recently published the book Be Like Amazon: Even a Lemonade Stand Can Do It (co-written by Jeffrey Eisenberg and Roy H. Williams), often talks about the 4 pillars of Amazon’s success.
These pillars are:
- Be customer-centric – “Amazon doesn’t try to force its customers to adapt to how they want to sell to them,” he says. “Amazon would rather fit in with how customers buy today and will change their buying behavior in the future.”
- Be creative – Amazon is always running experiments and coming up with ways to improve the shopping experience.
- Focus on the customer experience – According to Bryan, “Amazon will go to great lengths to get people to tell how amazing an experience it is to shop or return items in their store. Every detail of the store is designed so that customers engage and get excited to be there.”
- Continuously improve and optimize – Amazon uses its data wisely. The company is always looking for numbers, and uses data in almost every aspect of its business, including customer experience, warehousing, operations, finance and marketing.
Birchbox
Birchbox has a two-part 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.” Birchbox also offers an online store that lets customers buy full-size products. In 2015, Birchbox had more than 800 partner brands and more than a million subscribers.
What makes Birchbox successful: Birchbox’s success is due to several factors, but one of the most important is data. The company’s co-founder, Katia Beauchamp, told Forbes that data had become their best friend.
Here is an 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 its partners so they can determine what works and what doesn’t.
Another key to their success? Unlike most of its competitors, Birchbox is not just a subscription service. The company lets members buy full-size products rather than samples. This lets Birchbox differentiate itself.
Wayfair
Wayfair is an online home furnishings retailer offering a vast selection of more than 7 million items. According to Forbes, “Wayfair reported around $9 million in 2013, up 55% from the previous year’s $18 million.” In May 2017, the site had received more than 36 million visits.
What makes Wayfair successful: it is a drop shipper, and it holds practically no inventory. That said, the company manages suppliers, orders and fulfillment very well. “They figured out how to manage 7,000 suppliers and the drop-shipping process so that suppliers ship directly to the consumer,” said Neeraj Agrawal of Battery Ventures in an interview with Forbes.
It works like this. Suppliers upload their inventory data to Wayfair servers. The company’s algorithm aggregates the numbers and uses this information to determine shipping time and processes.
« Une fois la commande passée, le logiciel entre en contact avec le fournisseur. Le système décide ensuite du mode d’expédition de l’article : une lampe Quoizel peut signifier un petit colis via UPS ou FedEx; une carpette nécessite une société de livraison avec laquelle Wayfair passe un contrat. ”
In addition to efficient supplier and order management, Wayfair also works to know its customers. The company encourages every shopper to create an account and observes user behavior. Wayfair thus personalizes the shopping experience.
Zappos
Zappos is an online shoe and clothing retailer based in Las Vegas, NV. It is currently owned by Amazon, but it is still worth taking a look at what makes this e-commerce site successful.
What makes Zappos successful: it is famous for its customer service. One of the retailer’s core values is to “deliver WOW through service,” and it still lives up to this value thanks to its employees.
For example, while other companies encourage call center agents to hang up as quickly as possible, Zappos wants its employees to stay on the phone as long as necessary. At one point, a Zappos employee even spent 10 hours on the phone with a customer.
Jeffrey Lewis, a supervisor on Zappos’s customer loyalty team, said: “Zappos’s first core value is to deliver WOW service, and we believe that letting our team members stay on the phone with a customer for as long as they need is a crucial way to fulfill that value.”
E-commerce flops: You have seen the success stories.
Now let’s look at some of the industry’s biggest setbacks. Pay attention and learn from these companies’ mistakes.
Boo.com
Boo.com was a UK-based online clothing and cosmetics retailer that failed only two years after launching. It was one of many Internet companies that shut down during the dot-com bubble in 2000.
The NASDAQ Composite index (made up of many tech companies) rose sharply in the late 90s, but suffered a sudden fall after the bubble.
For the uninitiated, the dot-com bubble burst occurred from 1997 to 2001. The rapid growth in Internet usage and adoption at the time fueled investment at incredibly high valuations, and companies that had not even made profits went public. The hype was not sustainable, however, and capital soon ran out of steam. As you will see below, this is ultimately one of the reasons Boo.com (among others) shut down.
Why Boo.com failed: A faulty growth plan and a high burn rate all contributed to Boo.com’s failure. To start, the site needed JavaScript and Flash, as well as many large files. This led to slow loading times and, ultimately, a poor user experience.
Boo.com also tried to expand much too quickly and its operating expenses were too high. And because of the tech stock crash at the time, the company was unable to raise enough funds to stay afloat.
eToys.com
As its name suggests, eToys.com was an online toy retailer. It was launched in 1997 and later filed for bankruptcy in 2001.
Why eToys.com failed: Like Boo.com, eToys had tried to grow too quickly and had also incurred high operating costs. Because of the market conditions following the dot-com bubble, eToys failed to obtain the capital to continue operating.
But that was not the only factor that led to its failure. According to ABC News, “during the first holiday shopping season after its release, the site was flooded with orders, as were other online toy sites. EToys sold more than any of its competitors, but the publicity about late shipments hurt the company. Analysts say it also made customers wary of shopping online during the 2000 holidays.”
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 it was too similar to eToys.com. The move was very poorly received and eToys.com backed down.
Toygaroo
Founded in 2010, Toygaroo was an online toy rental service dubbed the Netflix for toys. Toygaroo let parents rent toys for a period of time and then return them when their children grew tired of playing with them.
Toygaroo had a promising start. Its founder, Nikki Pope, appeared on the famous TV show Shark Tank and secured a $200,000 investment from Mark Cuban and Kevin O’Leary. Unfortunately, that investment did not pay off. Toygaroo filed for bankruptcy in 2012 and subsequently shut down.
Why Toygaroo failed: Although the exact details of Toygaroo’s shutdown have not been clear, it appears the company had problems coping with its rapid growth as well as implementing its business model.
Phil Smy, a former head of technology at Toygaroo, told the Shark Tank Blog that Toygaroo may have struggled to scale its business. “The company was growing,” he said. “To be honest, that was the problem. Explosive growth is a hard thing for small businesses to manage. I thought – and still think – it’s a great idea. The business model needs to change somewhat from what we were doing. I would have grown more organically (i.e., more slowly) and I would also have found investors willing to go all the way.”
Meanwhile, Kevin O’Leary, one of the sharks who invested in Toygaroo, told Forbes it was his worst deal on the show. “Great concept, but they proved unable to execute,” he said.
Putting e-commerce knowledge into practice
And there you have it. We have just talked about what e-commerce is, the types of merchants doing business online and the industry’s biggest successes (and failures). What’s next?
Answer: Take action.
Wherever you are right now in your e-commerce journey, we hope this article gives you ideas you can apply in your business. If you are just starting out and need help choosing a platform or choosing your target audience, check out the e-commerce Types and Solutions section. Already running a business and want to ensure your success? Read the e-commerce stories above.
And if you need additional advice or ideas, we are here to help. Contact us and we will see how we can help take your e-commerce business to the next level.
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