Ecommerce has a simple definition: It is the buying and selling of goods and services online. But there are several different types of ecommerce. Understanding the different forms of ecommerce is useful for anyone looking to launch their own business, as it helps you better understand the different avenues that your business can take.
On this page:
- What Is Ecommerce?
- What Are the Types of Ecommerce?
- Choosing Your Type of Ecommerce
- How To Develop an Ecommerce Strategy for Your Type
- Pros & Cons of Ecommerce
What Is Ecommerce?
Just about everything, from the online sale of everyday products to financial services like investing in stocks, is done through ecommerce. Amazon is the biggest name in ecommerce, but your local mom-and-pop shop selling their goods online is participating as well.
The ability to buy and sell goods and services online has opened up a massive market for both sellers and consumers, allowing businesses to reach consumers all over the world rather than only those who enter their brick-and-mortar stores.
Likewise, for consumers, ecommerce opens up a whole new world of possibilities for purchasing goods and shopping around for the best prices and services available.
The ecommerce market is huge. In 2020, ecommerce sales generated more than $4.28 billion. That is expected to grow by more than 5% by 2022.
What Are the Types of Ecommerce?
While ecommerce broadly refers to the idea of selling goods and services online, there are different types of ecommerce, typically defined by who is doing the selling and who is doing the buying.
If you are starting an ecommerce business, understanding these different types of ecommerce is essential to defining your business and identifying your market.
There are six different types of ecommerce:
The most common form of ecommerce, and the one you have likely engaged in the most, is business-to-consumer. This is when businesses establish online storefronts and shops to sell their goods or services directly to consumers.
A business-to-consumer ecommerce business can take many forms and sell many different things, but the target market is always individual consumers who are interested in the goods or services offered.
Business-to-business ecommerce is the sale of goods and services from one business to another. Business-to-business transactions can be services rendered or the sale of goods, often sold in large quantities to another business that may sell those products directly to consumers.
Wholesale sellers are often business-to-business companies, and ecommerce allows a business to reach a wider audience of potential business buyers.
Consumer-to-consumer ecommerce is typically seen as an online marketplace. Think Etsy, eBay, or Facebook Marketplace. A consumer-to-consumer sale consists of one consumer selling a good or service to another directly. It’s a model best utilized for one-off transactions or smaller quantity sellers but can be used to create a larger business.
Consumer-to-business sounds backward, but there are opportunities for individuals to sell goods or services directly to businesses. This often takes the form of doing contract work for a company.
Companies may hire an individual to design a logo or optimize their website. Participating in an affiliate marketing program also falls under the header of consumer-to-business ecommerce.
Business-to-administration ecommerce occurs when a business sells its goods or services to a public administration like the government. This can be the sale of goods like office supplies but may also come in the form of services performed.
Business-to-administration ecommerce often allows businesses to bid on open contracts made available by an administration.
Consumer-to-administration ecommerce is best understood as the way that individuals may interact with institutions. It is a transaction like filing taxes or scheduling an appointment with a doctor.
Distance learning or eLearning would also fall under the category of consumer-to-administration ecommerce.
Choosing Your Type of Ecommerce
You will want to consider several different things about your business as you decide which approach to take. Consider the following when making your decision:
What Are You Selling?
Before making any decision about your customer base, you’ll want to figure out what it is that you are selling. Understanding what you are offering and how capable you will provide that product is essential to determining your business’s details. Figure out what it is that you want to sell before making any decisions about your business model.
Who Are You Selling To?
Once you know what your product is, you can start to focus on who your audience is. Is your product going to serve consumers best directly, or will you sell it to other businesses? Consider the expectations of each potential audience and who you would most like to serve with your product. Your best shot at success comes from understanding the product you are offering and how it helps your customer, so target an audience you can speak to and understand.
How Much Can You Produce?
Some products lend well to scale. They can be manufactured fast and sold to lots of people or in large quantities. Other goods or services are more specialized. Determine a feasible scale for your product as well as what your production capabilities are. The last thing you want to do is produce too much of something with little demand or too little of something with high demand.
What Does the Market Look Like?
To make the most of your e-commerce business, you need to understand the rest of the market and your potential competitors. Are you offering something that they aren’t? Is there room for your product alongside others like it? More established businesses may have an advantage against you if you are entering a crowded space.
Conversely, if you seek an underserved market, you may ask why no one is filling the void you’ve found. Perhaps there is a reason no one else is trying it. Get a full look at the landscape before you decide on your business.
How To Develop an Ecommerce Strategy for Your Type
Once you have decided which type of e-commerce business you would like to start, you can begin developing your strategy. This will vary depending on your product and your type of e-commerce.
Stock Your Product
The first thing that you should do is make sure that you have your product available to sell. Once you launch your ecommerce business, you want to be able to fulfill orders as soon as they come in.
Determine how much you need on hand and how quickly you can get the additional products if needed. Keep scale in mind, as you are going to want to be able to grow.
Market Your Product
Once you have your ecommerce business ready, you will need to find your buyers. One of the best ways of doing this is through marketing, though different business types have different marketing needs.
Business-to-consumer ecommerce has shorter sales cycles, so you want to use targeted marketing in short bursts. Business-to-business ecommerce has longer cycles and niche markets, so you can advertise your services for longer periods and in more specific ways. Consumer-to-consumer and consumer-to-business marketing often utilize social media to advertise products and find an audience.
Sell and Deliver
As your product starts to find its audience, it’s time to deliver your goods. At this point, you’ll need to know what your delivery method is exactly. You can sell direct to consumers, offer wholesale, provide drop shipping, or set up a subscription model.
Pick the delivery method that best suits your product and allows you to reach your customers efficiently.
Pros & Cons of Ecommerce
There are both advantages and disadvantages to launching an e-commerce business, depending on what avenue you choose to take and how you decide you want to execute your business strategy.
- Ecommerce Has A Wide reach. Ecommerce allows you to reach a global market without needing to set up shops worldwide or make a major up-front investment. Your potential customer base is anyone with access to the internet.
- Ecommerce Allows Direct interaction. One of the best parts of e-commerce is the ability to interact directly with your consumer. This allows for more communication, better targeting of your market, personalized care and support, and a simpler supply chain.
- Less Overhead With E-commerce. Because you won’t have to maintain a physical storefront that must be staffed and operational, e-commerce allows you to get started with much lower costs. You can often find cheap solutions for facilitating your business needs, from storage to third-party customer support platforms allowing you to provide all of the trappings that your customers expect of your business.
- Ecommerce Businesses Have a Lot of Competition. The e-commerce world is huge, which means there is likely a competitor in the niche that you are trying to fill. It also makes it difficult to stand out in the crowd, especially for a business just getting started.
- Consumer E-commerce Concerns. While tons of transactions are completed through e-commerce, some consumers are still hesitant about it. They are concerned about their data, privacy, and security. It can be difficult to quell these concerns without taking extra steps to implement safety measures.
- Ecommerce Lacks Fraud Protection. Ecommerce comes with some risks as a business, as well. Scams like chargebacks and illegitimate disputed charges can hurt a business and cost a considerable amount both in time and lost product. There are also few protections for businesses that experience these problems.
E-commerce is electronic commerce boiled down to its simplest form. It is the sale of goods and services over the internet. While it sounds like a specialized field, it’s something that you run into every day.