We explain what e-commerce or electronic commerce is and its characteristics. We also tell you how the internet revolutionized commerce. Please read other MTV articles for more information. If you share it, it will be of little help to us.
What is e-commerce?
Electronic commerce, sometimes called e-commerce, consists of the buying and selling of goods and services through websites or online digital platforms, such as social media and smartphone apps. It has been one of the economic activities with the greatest impact worldwide since the popularization of the internet in the mid-1990s.
Originally, the term e-commerce (written in italics as it is an Anglicism) was used for the electronic exchange of data for commercial purposes, but it currently also encompasses the exchange of goods and services through digital means, especially those that link the traditional banking system (bank accounts, credit and debit cards) with new digital platforms and methodologies (apps, QR code payments, among others).
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The success of e-commerce worldwide has been immensely recognized. In 2020, approximately $4.2 trillion was invoiced through e-commerce, and this trend is considered to be on the rise. In Latin America alone, e-commerce grew by 36.7% that year. This new commercial reality has had a significant impact on the advertising world and even on everyday life.
Characteristics of E-Commerce
Broadly speaking, e-commerce is characterized by the following:
- It involves the purchase and sale of goods and services through computer systems and electronic devices connected to the internet. This purchase and sale encompasses both physical and digital goods.
- It can occur at retail or wholesale levels and can be adapted to different audiences, environments, and needs.
- It uses email and other forms of online advertising far more than traditional advertising media.
- It allows for customer mobility and the internationalization of transactions in a simple and efficient manner. Furthermore, it expands shopping hours to 24 hours a day.
- The term e-commerce is also used as a generic name for the websites through which a store or company offers its products to the online public, whether or not it also sells them in a physical store.
Internet Revolution in Commerce
The invention of the internet brought about a major change in almost every area of contemporary life, but its impact on commerce was particularly significant. Initially, companies took advantage of the mass communication possibilities offered by email to revive a practice that had fallen into disuse in many places: catalog sales. The catalog was sent by email, or a link to the online catalog was sent, and the customer could purchase via phone or postal mail.
But soon, the option of incorporating these digital catalogs into a web portal became a reality, allowing customers to purchase directly, without further formalities. Thus, purchasing took place no longer in a physical store, where the customer must visit, but on their personal computer, in the comfort of their home or work. This idea grew even more when the shopping environment was reduced to a tablet or even a smartphone.
A new form of shopping was then inaugurated, requiring the updating and, in some cases, modernization of mail and parcel systems to distribute the large number of items purchased online. At the same time, this new system required the incorporation of the traditional banking system into online payment platforms, generally through credit and debit cards, while also promoting new forms of non-bank financing.
In short, the worldwide implementation of e-commerce, coupled with globalization, drove a rapid change in structures that greatly streamlined buying and selling transactions, the circulation of money, and the creation of new and more complex markets.
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Types of e-commerce
There are different ways to classify e-commerce. For example, based on the type of product offered, we can distinguish between service platforms (digital or not), physical goods platforms, and digital goods platforms (mostly software).
However, the most useful way to organize e-commerce is by considering the type of organization or entity involved in its processes or transactions. In this case, we can talk about:
- Business to business (B2B): A “business-to-business” model involves transactions between companies or businesses connected via the Internet.
- Business to consumer (B2C): A “business-to-customer” model involves transactions between a company or business and its customers, usually through official sales portals.
- Consumer to business (C2B): A “customer-to-business” model involves transactions originating from the interest of the customer, who comes to the company to satisfy a need.
- Consumer to consumer (C2C): A “customer-to-customer” model involves transactions between two individuals, whose relationship can be facilitated by the service provider, or directly without the involvement of intermediaries.
Advantages and disadvantages of e-commerce
The advantages and disadvantages of e-commerce include the following:
Advantages of e-commerce
- Greater supply margin and therefore greater opportunities for the consumer to obtain what they want at an acceptable price.
- Convenience in purchasing goods for the consumer, who does not have to leave home or buys from their smartphone.
- It allows direct communication between customers and the company, and facilitates new marketing strategies.
- It reduces operating costs for all parties involved and reduces the time invested in the transaction.
- It facilitates access to information for all involved.
- It allows transactions to be carried out from any geographic location.
Disadvantages of e-commerce
- It requires an audience with minimal digital literacy and stable internet access, which can be difficult in certain regions.
- It requires traditional companies to invest in web platforms and in previously nonexistent jobs (such as community managers and content creators).
- It can favor large online retail chains over small, local businesses.
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Examples of e-commerce
Some of the best-known e-commerce platforms in the world are:
- Amazon.com: It is an American retail and cloud computing services company founded in 1994 by Jeff Bezos. It has more than one million employees worldwide and is considered one of the pioneers of online commerce.
- eBay: It is an auction and e-commerce site founded in 1995 by Pierre Omidyar, considered one of the pioneers of e-commerce. With a global footprint and more than 13,300 employees, it is a must-see in the field.
- MercadoLibre: It is a multinational company of Argentine origin, founded in 1999 by Marcos Galperin, with operations throughout most of Latin America. It mediates between online sellers and buyers, offering its own credit and transaction system called MercadoPago. It is a good example of a digital marketplace.
- PayPal: It is a US company with global reach that offers its users an electronic payment and money transfer system. With a PayPal account, internet users can purchase goods and services, receive payments, and make donations, all without the need for a bank or physical cash.
What is a marketplace?
A marketplace is an e-commerce platform that hosts a group of different sellers, similar to an online catalog or shopping mall. Marketplaces are distinguished from online stores in that they are not exclusively dedicated to a brand or company, but rather offer users the opportunity to experience a digital marketplace. Payments and shipments made through a marketplace usually charge intermediary fees.
What does it take to create an e-commerce site?
To create an e-commerce site, you need:
Create an identity
The first step is to choose a name for your e-commerce site, design a logo, and purchase a domain (URL). Then, you must sign up for hosting, a file storage service to host your online store’s content. From these four elements, you can create an image and begin to “exist” on the internet.
Establish a Content Management System (CMS)
To manage the online store’s content, you need a Content Management System (CMS), a digital tool that communicates with the hosting company and implements a web design—that is, organizes and builds the online store. A web design specialist is often hired to create a functional and visually appealing website.
Shaping the E-Commerce Site
Once the online store templates and formats are created, you’ll need to upload product photos, descriptive text, and everything else needed to help customers navigate the store and understand what they can buy and what options are available. Originality and creativity will be key at this stage.
Establish Payment Methods
Since the store’s goal is to sell, the site will need to offer one or more payment methods for online transactions. The more diverse and diverse options an online store has, the more attractive it will be to its customers. It’s a good idea to explore the different intermediary options in this regard, as many charge commissions and are governed by specific rules.
Designing a Marketing Strategy
Just like businesses in the physical world, e-commerce needs to make itself known to attract potential customers, and there are many ways to do this online. Ideally, you should define an informed marketing strategy and enlist the help of professionals to make the most of your resources and capture the attention of the largest number of users.
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References
All the information we offer is supported by authoritative and up-to-date bibliographic sources, ensuring reliable content in line with our editorial principles.
- Electronic Commerce on Wikipedia.
- How to Sell Through E-Commerce? (video) on Educatina.
- E-Commerce for Beginners on CACE, Boosting the Digital Economy.
- What is E-Commerce? on VISA (Mexico).
- What is E-Commerce, Concept, Features, and Advantages – concepto.de
