E-commerce:
Definition and Overview
E-commerce refers to both the relationship between online buyers and sellers and the virtual interfaces used to display products. Originating in the United States during the rise of the Internet in the 1990s, electronic commerce has expanded rapidly across nearly all goods and services markets.
E-commerce operates over the Internet or through intranet networks within organizations, communities, regions, countries, or worldwide.
What Is E-commerce?
E-commerce describes two main concepts:
Relationships:
Material goods (food, clothing, equipment) and immaterial services (transportation, healthcare) have always been traded in person. Today, E-commerce represents these same transactions, buying, selling, and exchanging goods and services, conducted online between suppliers and consumers.
Virtual Interface:
Traditional physical marketplaces have been replaced or enhanced by virtual spaces accessible via websites, social media, and mobile applications. Examples include online stores like Cdiscount.com, Fnac.com, Booking.com, Carrefour.fr, Amazon, eBay, and AliExpress.
Different Types of E-commerce
The fundamental principles of E-commerce mirror those of traditional commerce, adapted for the digital world.
B2C E-commerce (Business to Consumer):
The most common model, where companies sell products or services directly to end consumers through online retail platforms.
B2B E-commerce (Business to Business):
Transactions between businesses, whether large or small, involving the sale of raw materials, services, or finished goods for production or resale.
C2C E-commerce (Consumer to Consumer):
Popular on social platforms and marketplaces, where individuals buy and sell goods, both new and used, directly to one another.
G2C E-commerce (Government to Citizen):
Government portals designed to share information, submit tenders, or provide citizen services electronically.
G2B E-commerce (Government to Business):
Platforms through which governments interact with businesses, offering services like tax management, permits, and procurement.
Advantages and Disadvantages of E-commerce
Like any business model, E-commerce comes with both strengths and limitations.
Advantages of E-commerce
- Low Startup Costs:
Launching an online store requires minimal equipment (computer, smartphone, tablet) and a reliable Internet connection. - Ease of Installation:
Products can be easily organized, categorized, and found using search functionalities. - Lower Operating Costs:
Hosting and Internet services are significantly cheaper than maintaining a physical store. Staffing requirements are also much lower. - Continuous Growth:
E-commerce continues expanding across sectors. Entrepreneurs entering now still have opportunities to outpace less digital competitors. - Broader Customer Reach:
Unlike physical stores, E-commerce businesses can target regional, national, or even international markets. - Customer Tracking:
Online platforms provide tools to easily collect customer behaviour data for better marketing strategies. - Time-Saving:
Automation allows merchants more freedom, with stock management, sales tracking, and customer interactions handled digitally. - Automated Transactions:
Orders, payments, stock management, and analytics can all be automated, reducing human error and increasing efficiency.
Disadvantages of E-commerce
- Technical Issues:
Server outages or software problems can disrupt operations and cause loss of sales. - Product Errors:
Discrepancies between product descriptions and actual items can lead to dissatisfaction and returns. - Limited Persuasion:
Unlike face-to-face interactions, E-commerce relies on written descriptions and imagery, limiting persuasive opportunities. - Intense Competition:
The E-commerce space is highly saturated, forcing businesses to compete fiercely on price, service, and visibility. - Customer Service Delays:
Responding to customer inquiries can take time, risking abandoned carts. - Shipping Costs:
Delivery fees can offset price advantages and deter purchases. - Security Concerns:
Trust issues persist for new online stores due to fears of scams and unreliable transactions.
Dropshipping: A Special Model of E-commerce
Dropshipping is a business model involving three key players: the supplier, the retailer, and the consumer.
The retailer sells products online without holding inventory, transferring orders directly to the supplier who fulfills them.
Types of Dropshipping
- Reseller:
Buys stock after receiving customer orders, assuming responsibility for the goods. - Sales Intermediary:
Transmits customer orders to the supplier without holding inventory. - Product Designer:
Combines or modifies supplier products into new offerings, then sells through an online platform.
Differences Between E-commerce and Dropshipping
Although closely related, E-commerce and Dropshipping differ in several ways:
Objective:
Both aim to sell goods or services online.
Structure:
Both use online platforms; however, dropshipping eliminates the need for pre-purchased stock.
Legal Framework:
Customers are protected by the same regulations, but internal supplier-retailer contracts vary.
Inventory Management:
Traditional E-commerce requires stocked inventory, while Dropshipping is order-driven.
Risk Management:
E-commerce businesses risk unsold inventory; dropshippers risk supplier failures.
Product Range:
Dropshipping allows a broader catalog without additional investment.
We will focus on the first two objectives, as the third (increased sales) is often a secondary, subjective goal; many websites are not profit-driven.
E-commerce and Dropshipping in Numbers
Precise statistics are difficult to track due to the rapid evolution of online markets. However:
The global E-commerce market is projected to reach $8 trillion by 2027 (eMarketer), fueled by mobile commerce, digital payments, and the expansion of online shopping.
Social commerce, a growing E-commerce sector, generated $570 billion in revenue in 2023 and is forecasted to hit $1.085 trillion by 2028 (Statista), largely thanks to strategies like affiliate marketing and influencer partnerships.
In 2019, more than 90% of the turnover from the world’s top 10 E-commerce companies was dominated by U.S. and Chinese giants, including Amazon, JD.com, Apple, and Dell.
Dropshipping continues growing, though official global statistics remain limited due to its relatively recent emergence.
Conclusion
Over the last decade, E-commerce has exponentially expanded, becoming integral to modern daily life, from purchasing meals and clothes to booking hotels and managing finances online.
Although there are differences between E-commerce and Dropshipping, they are branches of the same digital commerce tree, sharing more similarities than distinctions.
E-commerce can supplement a physical store or serve as a standalone operation. Despite occasional risks, it remains a high-potential venture for entrepreneurs willing to innovate and adapt.
To succeed in this evolving landscape, leveraging expert resources like Linkage can provide essential tools and strategies for building a thriving online business.