What Is Ecommerce? Definition, Types, Advantages, and Disadvantages

What Is Ecommerce?

Customers shop online around the world
Ecommerce or electronic commerce is the trading of goods and services on the internet. It is your bustling city center or brick-and-mortar shop translated into zeroes and ones on the internet superhighway. This year, an estimated 2.14 billion people worldwide will buy goods and services online, and the number of Prime members shopping Amazon stores now tops 150 million.

Ecommerce one way among many that people buy and sell things in retail. Some companies sell products online only, but for many, ecommerce is a distribution channel that’s part of a broader strategy that includes physical stores and other revenue streams. Either way, ecommerce allows startups, small businesses, and large companies to sell their products at scale and reach customers across the world.

What is an ecommerce website?

An ecommerce website is your digital storefront on the internet. It facilitates the transaction between a buyer and seller. It is the virtual space where you showcase your products, and your online customers make their selections. Your website acts as the product shelves, sales staff, and cash register of your online business channel.

Businesses might create a branded store experience on a store like Amazon, build their own commerce site on a dedicated domain, or do it all for a multi-channel approach.

What are the types of ecommerce?

Amazon trucks get ready for delivery outside of a fulfillment center
Ecommerce takes as many different forms as there are various ways to shop online channels. A few common business models that shape the world of ecommerce are:
  • B2C – Businesses sell to individual consumers (end-users). The most common model with many variations.
  • B2B – Businesses sell to other businesses. Often the buyer resells products to the consumer.
  • C2B – Consumers sell to businesses. C2B businesses allow customers to sell to other companies.
  • C2C – Consumers sell to other consumers. Businesses create online marketplaces that connect consumers.
  • B2G – Businesses sell to governments or government agencies.
  • C2G – Consumers sell to governments or government agencies.
  • G2B – Governments or government agencies sell to businesses.
  • G2C - Governments or government agencies sell to consumers.

Where and how does ecommerce take place?

Customer shopping online stores from the couch
Online shopping evolves and shifts daily. People shop from their computers, phones, tablets, and other devices. They patronize websites, visit social media pages, and participate in thriving virtual channels. Here’s an overview of three distinct methods of conducting ecommerce today.

M-commerce

Online transactions that take place on mobile devices are known as mobile commerce or “m-commerce.” With portable devices in the hands of consumers worldwide, it's no wonder m-commerce is expected to overtake non-mobile commerce in 2021.

Many people now do their product research and online purchasing through their phones. This trend shows no signs of slowing, so it’s essential to optimize your online store for mobile.

Enterprise ecommerce

Enterprise ecommerce is the buying and selling of products to large companies or organizations. If a large business sells many different types of products or has multiple brand lines and transitions into selling online, then it is participating in enterprise ecommerce.

Social media ecommerce

Social media can help you market and promote ecommerce stores to a broad audience. Just as social media enables you to connect with friends and family, it also has the potential to attract customers to your business. Done well, social media marketing engages customers in an informal setting.

Social media can help you:
  • Attract new customers
  • Build brand awareness
  • Generate online sales

What are the advantages and disadvantages of ecommerce?

Ecommerce retail seller celebrates an online sale
As a business grows, most ecommerce brand owners reach a crossroads: Should you scale up in-house operations and find a way to store, manage, and ship more inventory, or enlist a fulfillment service? Here are three potential solutions:

Benefits of ecommerce

Conducting sales online has some significant advantages. Among the top benefits, ecommerce:
  • Is growing rapidly
  • Offers global marketing reach
  • Provides the ease of ordering products online
  • Generally involves lower operating costs
  • Gives direct-to-consumer access
All of these points offer strong incentives to participate in ecommerce. Let’s explore each in detail.

Retail ecommerce is growing rapidly

In the 12 months ending May 31, 2020, small- and medium-sized businesses in the U.S. sold more than 3.4 billion products in Amazon stores, up from 2.7 billion year-over-year. Overall, ecommerce sales surged by over 30% in 2020. While much of the recent uptick in online spending is due to the COVID-19 pandemic, experts predict this trend will continue.

Global marketing reach

In the past, a business’s reach was limited by the number of people able to physically enter through a store’s front doors. Today, ecommerce allows you to reach customers across the world. The rise in internet usage and the growth of social media have made it easier for ecommerce business owners to reach a diverse new mix of customers.

Did you know?

Amazon Advertising helps grow businesses and brands of all sizes to get their products in front of the 150 million Amazon Prime members that shop on Amazon.

Ease of ordering products

With all the different types of ecommerce, customers can browse options and make purchases from anywhere with just a few clicks. Amazon makes it easy to sort and compare products by price or features. Online payment innovations like Amazon Pay further streamline the checkout process.

Lower operating costs

Creating and maintaining a website is less expensive than running a traditional brick-and-mortar store. You can start an ecommerce business channel without leasing retail space, hiring a team of employees, or having a large warehouse.

All of these advantages add up to low overhead. You don’t need to pay rent or worry about building maintenance. Once online, your store is open 24 hours a day—without the need to be monitored or staffed like a physical store.

You can use website building tools and services to establish your own ecommerce store quickly, or you can forgo building a website and launch your brand on social media or a store like Amazon. Many businesses sell on numerous online channels.

Direct-to-consumer access

Because of the internet, ecommerce brands can directly build relationships with their target audience. You don’t need to pay for a giant billboard or TV ad campaign to capture your audience’s attention. You can tailor your brand and marketing to fit your customers’ wants and needs down to special offers and personalized product recommendations.

Challenges of ecommerce

Ecommerce retail seller planning his next move
Despite a lot of advantages, ecommerce does have downsides. Some businesses may try to avoid ecommerce due to challenges like:
  • Limited face-to-face interaction
  • Technical difficulties
  • Data security can be a challenge
  • Shipping and fulfillment at scale

Limited face-to-face interaction

Face-to-face interaction is really important for some businesses and transactions. Depending on your product, service, or sales style, it may be challenging to bring the full force of your personality into an online space.

While there is no magic solution, keeping your brand story at the fore of all you do can help you maintain authenticity online. Alternatively, if you prefer communicating with customers via email or phone, this drawback might be a huge plus!

Technical difficulties

Technical challenges beyond your control can negatively impact sales. Just as a hiccup in your supply chain can prevent timely delivery of products, internet issues, or a hard drive failure can cost you time and money.

Remember, for every technical issue that may arise, there’s likely a solution or a preventative measure you can take. Be sure to backup your data regularly. Using a store like Amazon can help mitigate these risks with an established, trusted technical infrastructure.

Data security concerns

Customers are increasingly wary of how their information is stored and shared. Build customer trust by giving details on your privacy policy. Doing so demonstrates transparency and reassures customers that you will safeguard their personally identifiable information.

Amazon has worked for decades to create a secure shopping experience, and businesses that sell on Amazon benefit from long-standing customer trust. When you host an ecommerce store on your own domain, you need to find a secure payment processing service to avoid putting customer data at risk.

Shipping and fulfillment at scale

It may be easy to pack and ship orders from your garage or spare room when you’re starting out in ecommerce. But as your business grows, order fulfillment becomes a much more time-consuming process. Sudden increases in orders can leave you scrambling to fulfill orders. Using a service like Fulfillment by Amazon can help reduce the strain on your business and keep customers satisfied.

Learn how to choose the right ecommerce fulfillment service to grow your business.

Did you know?

Amazon Project Zero leverages the combined strengths of Amazon and brands to drive counterfeits to zero.

What makes an ecommerce store successful?

An array of tools representing common implements of ecommerce
A few key ingredients go into every high-performing ecommerce business. To set yourself up for success, focus on your products, first and foremost. Also, consider your brand messaging, your target audience, and your store’s user experience. You should also consider your fulfillment process, ensuring the timely delivery of products for maximum customer satisfaction. Let’s explore each of these critical components in detail.

Great products

High-quality, reliable products, and services are at the heart of every successful ecommerce brand. Your product should solve an unmet customer need or challenge. You must also offer it at a compelling price point.

Your products’ quality and pricing will make or break your ecommerce business. Do some market research to get a sense of what types of products your competitors are selling, as well as the market value of similar items.

A compelling brand story

Unique brands stand out, but a great brand takes more than a great product. To catch a customer’s attention, convey your business’s purpose and vision.

Ask yourself, why does your business need to exist? How will your products make your customers’ lives better? Your branding should convey the answers to these questions.

Spend time thinking about the look and feel of your brand. Dig deep and find a simple, powerful way to convey the origin and mission of your business.

Did you know?

A+ Content and other tools allow businesses to create a uniquely branded shopping experience within the Amazon store.

A target audience

Define your target audience to help attract loyal and enthusiastic customers. Who do you want to serve with your products? Aim your marketing efforts at that group.

Once your business gains steam, keep the momentum going by considering who will be moved by your brand story. Instead of chasing after buyers who don’t need your product, focus your efforts on an audience that will appreciate your brand.

A smooth online experience

Online stores should be user friendly. When the online experience of a store is well-designed, making a purchase feels effortless. If customers have to jump through too many hoops, they will abandon their carts before completing the transaction, and your sales will suffer.

Successful ecommerce stores keep the spotlight on their products by streamlining the checkout process. Remove any unnecessary steps, make your user experience intuitive and straightforward, and bask in the glow of happy customers.

Did you know?

Amazon’s pioneering 1-Click ordering can help you sell products faster?

Amazon’s game-changing 1-Click ordering simplifies the online shopping experience, making it easier for customers to buy your products. Amazon securely stores the credit card information and shipping preferences of customers. This process minimizes the number of decisions a customer must make on their path to check out.

Timely order fulfillment

Customers want speed and efficiency, especially when shopping online. No matter what you sell, customers want their purchases delivered intact and on time.

Fulfillment includes every step in the customer journey from the moment a customer presses the “buy” button to the moment they unbox the item. Successful ecommerce shops pay careful attention to the fulfillment process and make sure they have enough product on hand to fulfill their orders, even during their busiest seasons.

How New Republic grew their ecommerce business with Amazon

Dee Murphy, co-founder of the fashion brand New Republic, built upon his success by partnering with one of the best sites for selling: Amazon. Dee brought his brand's flavor and story to his new Amazon store.

“When we launched on Amazon, I had expectations that Amazon would be about 10% to 20% of our total business. Within the first six months, it was 50%,” says Dee. “It just exploded. And it really changed the way I thought about the future of our business.”

The team had some help from Amazon account managers, too. “I don't think we would've gotten to this point this quickly if it wasn't for our Amazon team,” adds Dee.
Ecommerce retail manager considers trends and statistics at a whiteboard

Ecommerce is growing

The tidal wave of online retail sales in recent years shows no sign of receding, and are projected to grow to $6.54 trillion in 2022.

Holiday sales

During the 2020 holiday season—including Black Friday to Cyber Monday—independent businesses selling on Amazon gained over 50% year-over-year growth in worldwide sales.

Amazon Statistics

Prime Day

Amazon designed Prime Day 2020 to provide buyers with impressive savings and support small businesses by helping them connect with more customers and grow sales.

COVID-19 drives ecommerce growth

The COVID-19 pandemic has disrupted daily life and changed the way we shop. More people are purchasing their goods online: Ecommerce saw a 30% surge in 2020, and the impact of this shift to online purchasing will likely be long-lasting.

Ecommerce FAQ

What is ecommerce marketing?
Ecommerce marketing is a set of strategies that direct customers to your online store. Incorporating social media into your business or personalizing your customer's experience are examples of effective ecommerce marketing.
What time are people shopping the most online?
The biggest spikes in online purchasing occur early on Mondays and Thursdays, between 8 p.m-9p.m.
How many purchases are made online each year?
Is ecommerce still growing?
Yes. This year, over 2.14 billion people worldwide are expected to buy goods and services online, up from 1.66 billion in 2016, an increase of almost 30%.
What percentage of ecommerce is mobile?
Mobile ecommerce (or m-commerce) will reach $488 billion, or 44% of the total e-commerce market by 2024. Amazon is a trusted shopping app with 150.6 million mobile users.
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