The simple explanation of e-commerce

The way we shop has changed enormously in recent years. Online retailing has experienced an incredible upsurge and has gained a lot of momentum. One of the driving forces behind this is e-commerce, which allows consumers to shop conveniently and flexibly via mobile devices or desktop computers. But what exactly does e-commerce mean and how does it affect businesses and customers? In this blog post, we take a comprehensive look at the topic and explore the importance of online retail in the modern business world.

What is e-commerce?

E-commerce, short for electronic commerce, refers to commercial transactions conducted over the Internet. Specifically, e-commerce includes all purchases and sales of goods and services through online platforms and stores. Customers can shop from the comfort of their own homes using websites or mobile apps.

How did e-commerce start?

The history of e-commerce goes back a long way. Online retail has developed over decades and reflects the constant evolution of the digital world.

Early beginnings (1960s - 1970s): The roots of e-commerce go back to the 1960s and 1970s, when the first electronic data transmission systems, which laid the foundations for commerce on the Internet, came onto the market.

Emergence of the Internet (1980s - 1990s): With the advent of the internet in the 1980s, e-commerce expanded enormously. In the 1990s, companies such as Amazon (1994) and eBay (1995) founded platforms that enabled consumers to buy and trade directly online for the first time.

Dotcom boom (late 1990s - early 2000s): The dotcom boom in the late 1990s led to an explosive rise in e-commerce companies and left a lasting impact on the industry.

Mobile Revolution and Social Media (2010s): Smartphones ushered in a new era of e-commerce as consumers could now shop online anywhere. Social media created platforms for social commerce, while companies became active on Facebook and Instagram, selling their products and services.

Today's era (2020s): In the current era, e-commerce plays a central role in global trade. The pandemic accelerated the digital transformation as more and more consumers made their purchases online. New technologies such as artificial intelligence (AI) and augmented reality (AR) are further improving the shopping experience.

What types of e-commerce are there?

There are different types of e-commerce, each covering different aspects of e-commerce.

1. Business-to-consumer (B2C) e-commerce:

B2C e-commerce refers to trade between companies and end consumers. In this form, companies buy and sell their products or services directly to individual customers via online shops. This is the most common form of e-commerce and includes all online retail platforms.

2. Business-to-business (B2B) e-commerce:

B2B e-commerce refers to trade between companies. Here, products or services are sold from one company to another. This can be the case, for example, when a company supplies products to retailers. B2B e-commerce often involves the sale of large quantities and specific offers for retailers and companies.

3. Consumer-to-consumer (C2C) e-commerce:

C2C e-commerce enables consumers to trade directly with each other. This often takes place via online marketplaces where private individuals can sell used or self-made products. This can be the case with auction platforms or classified ad portals, for example. Well-known C2C e-commerce platforms are Ricardo, Tutti or Ebay. 

4. Consumer-to-business (C2B) e-commerce:

C2B e-commerce is rather unconventional, but can be found in some industries. Here, consumers offer their products or services for sale to companies. Examples include influencers who "rent" their reach and presence to companies, or professionals who offer their skills as freelancers via online platforms.

5. Mobile commerce (m-commerce):

M-commerce refers to e-commerce that is processed via mobile devices such as smartphones or tablets. Customers can make purchases via mobile apps or mobile-optimised websites. M-commerce has increased significantly in recent years due to the increasing use of mobile devices.

6. Social commerce:

This form of e-commerce takes place on social media. Here, companies can present their products or services via platforms such as Facebook, Instagram or Pinterest and sell them directly to customers. Social commerce benefits from the fact that customers remain directly on the platforms and can make their purchasing decisions in a social environment.

What are the advantages and disadvantages of e-commerce?

E-commerce offers both advantages and disadvantages for businesses and consumers. Here are some of the main advantages and disadvantages of e-commerce:

Advantages of e-commerce:

• Global reach: e-commerce enables companies to offer their products and services to a global audience. With their own online shop, companies can reach customers in different countries and significantly expand their business potential.
• Reducing costs: Operating an online shop can be worthwhile for companies as it often incurs lower costs compared to a physical shop. There are no rental costs for a shop and fewer staff are required. This allows companies to offer their products at more competitive prices.Round-the-clock availability: Unlike physical shops, online shops are open 24 hours a day, 7 days a week. Customers can shop at any time and from any location, which leads to increased convenience and flexibility.

• Personalisation and targeted marketing: By using customer data and technologies such as AI, companies can create personalised offers and tailored marketing campaigns. This enables a more direct approach to customers and can lead to higher conversion rates.

Disadvantages of e-commerce:

• Lack of personal interaction: e-commerce can reduce personal contact between customers and sellers. Customers often have to find out about the products and services themselves, which can lead to uncertainty and bad purchases.
• Logistical challenges: Fulfilling orders, warehousing and shipping can present complex logistical challenges. Companies need to build efficient supply chains to ensure timely and reliable delivery.
• Security concerns: E-commerce poses potential security risks such as data breaches and fraudulent activity. Customers need to be confident that their personal data is handled securely and that transactions are protected.
• Dependence on technology: E-commerce is heavily dependent on technology. Technical problems, such as server failures or security gaps, can impair the purchasing process and shake customer confidence. In addition, the technological aspect in particular requires high and recurring investment costs.

What impact is e-commerce having on the retail sector?

The impact of e-commerce on retail is profound and has meant that many traditional retailers have had to adapt their business models to keep pace with online competition. Competitive pressure ultimately gave rise to the famous concept of "multichannel distribution", in which products or services are offered via several sales channels simultaneously.

Under this approach, retailers are no longer exclusively present in brick-and-mortar stores, but also online. And with success: in recent years, it has been shown that multi-channel sales, i.e. the combination of e-commerce and bricks-and-mortar retail, is the most economically successful strategy. Retailers repeatedly use different strategies to combine the advantages of both sales channels. Some keep their online and offline businesses separate by offering different prices and logistics solutions. Others deliberately combine their online and offline sales to create an omnichannel sales concept. One example of this is click-and-collect services, where customers can order their products online and then pick them up in-store. This linking of sales channels makes it clear that e-commerce is not making the retail sector redundant, but rather that it is adapting and constantly evolving.

What significance does e-commerce have in the business world?

In recent years, e-commerce has not only established itself as a supplementary sales channel, but has also taken on a central role in the global business world. Impressive figures emphasise the importance of e-commerce: 

• Global sales growth: Sales in e-commerce have risen continuously in recent years. This will not change in the coming years: According to a publication by Statista Research Department, global e-commerce sales will increase by 45.5 per cent between 2024 and 2028. E-commerce sales are forecast to reach USD 4.9 trillion in 2028, which would represent a significant peak compared to previous years. (1)
• Asian e-commerce market: Asia has become an important driver of global e-commerce in recent years. Alibaba, SHEIN and, more recently, Temu are just some of the major Asian e-commerce giants. These companies are not only shaping the Asian market, but are also having a huge impact on e-commerce internationally.
• Mobile shopping apps: M-commerce is booming: more and more people are using smartphones and tablets to make their purchases online. At the same time, mobile shopping apps are experiencing a considerable upswing. According to Statista, shopping apps generated sales of up to 348,000 US dollars in September 2022. In addition to the best-known "everything commerce" shops such as Amazon, SHEIN, Walmart and Temu, marketplaces are also playing an increasingly important role in mobile shopping. In the USA alone, eBay was downloaded around 6.4 million times and Etsy 5.7 million times via the Google Play Store in 2022. (2)

What are the current e-commerce trends for 2024?

Exciting trends are also on the horizon for e-commerce in 2024. Although it is difficult to make precise forecasts, we have nevertheless tried to list the most important ones:

Personalised customer experiences: Personalised customer experiences are still on the rise in e-commerce. Successful companies are increasingly relying on personalised shopping experiences to increase customer satisfaction. With the help of AI and machine learning, they analyse user behaviour in order to ultimately create tailored recommendations and offers.

Augmented reality (AR) and virtual reality (VR): With the launch of the Apple Vision Pro in summer 2023, Apple is showing that AR and VR will also play a role in the coming year. The technologies could be increasingly used in e-commerce by offering customers interactive opportunities to virtually try out products before buying. This enables a more realistic idea of how products look and function in real life.

Sustainable e-commerce: Sustainability will become an increasingly important factor in e-commerce. Consumers are already placing greater value on environmentally friendly products and companies that are committed to ecological practices. Sustainable packaging and transparent supply chains will therefore become increasingly important in the future.

Live shopping and social commerce: Live shopping events, where products can be presented and purchased in real time, will continue to grow on social media platforms. Social commerce, i.e. selling directly via social media, will continue to be an effective way of marketing products.

Conclusion

E-commerce has fundamentally changed traditional retail and has become an important pillar of the modern business world. Companies must face up to the challenges of the digital age and adapt their business models accordingly. At the same time, however, e-commerce also offers immense opportunities to reach customers conveniently and flexibly and to successfully establish their own company. Forecasts indicate that growth in e-commerce will continue and we can look forward to seeing what new and innovative developments await us in the coming years.

Bibliography

(1) Statista. (2024). Revenue in the global e-commerce market in the years 2019 to 2028. https://de.statista.com/prognosen/484763/prognose-der-umsaetze-im-e-commerce-markt-in-der-welt

(2) Statista. (2024). Statistics on mobile commerce. https://de.statista.com/themen/1347/mobile-commerce/#topicOverview