What is Ecommerce
Ecommerce is a shortened version of the phrase “electronic commerce” which essentially describes any type of exchange of currency for goods or services online. Ecommerce is an umbrella term that covers everything there is to do with buying or selling online.
Since the definition of Ecommerce is so open-ended (it literally includes any type of buying or selling of goods or services online) there are so many different types of Ecommerce businesses that exist. In this article we dive deeper into the different options that are available for Ecommerce business owners to run Ecommerce businesses.
The Types of Ecommerce Business Models
First things first, when you ask yourself, “What is Ecommerce?” the best way to begin to describe different Ecommerce businesses, and the different types of Ecommerce businesses, is to break them down into the types of business models that exist.
Ecommerce business models can be differentiated into three main categories:
- What types of products are sold?
- Who the products are sold to?
- Where the products are sold on?
Let’s look into these three identifiers further:
WHAT TYPES OF PRODUCTS ARE SOLD
Every Ecommerce business can be differentiated by the types of products that it sells. There are four main products that any Ecommerce business can sell and they are:
- Physical Products
- Digital Products
Every single Ecommerce business online can fit into one or more of these categories, and this basically just tells you what type of products they sell to their customers.
Some Ecommerce businesses sell physical products which means that the business has actual tangible products that they ship to their customers, and when their customers open the shipping package there will be a physical product they can touch, feel and see.
Digital products, on the other hand, are something Ecommerce businesses can sell online but they’re not an actual physical product that can be shipped to their customers. Often, once a digital product is purchased online a customer can download the digital files straight away with no need for the business to actually ship anything to the customer.
Businesses can also provide digital or in-person services that their customers can purchase online. These services can include anything from design services or streaming services (both are digital services) to home improvement services or dog-walking services (which are in-person services). Any business that provides a service, rather than a physical or digital product, can be included in this category.
Finally, Ecommerce businesses can also earn commissions via affiliate links which pay them a portion of the revenue for facilitating a sale. Ecommerce businesses that earn affiliate commissions could be blogs, influencer websites, or even websites like Canopy that curate products sold online for consumers.
WHO THE PRODUCTS ARE SOLD TO
Next, Ecommerce businesses can be differentiated by who the business is selling their products to. While it might be common thinking to assume that all products are sold to consumers, that isn’t always the case. Sometimes the “consumer” can be another business.
These are the three main categories that businesses sell their products or services to:
- B2B: This stands for Business-to-Business. Ecommerce businesses that sell physical or digital products or services to other businesses fall under this category. For example, this could include manufacturers or suppliers that provide materials or products for other businesses.
- B2C: This stands for Business-to-Consumer. Ecommerce businesses that sell physical or digital products or services to consumers fall under this category.
- B2G: This stands for Business-to-Government. Ecommerce businesses that sell physical or digital products or services to government institutions or agencies fall under this category. For example, this could include businesses that create specialised software, office furniture, uniforms, etc.
While most businesses generally sell their products to one of these categories, it’s entirely possible for Ecommerce businesses to sell to more than one category of consumers. It’s important for businesses to understand who exactly they sell their products to because it impacts important decisions such as their marketing, their branding, their shipping procedures, their margins, etc.
WHERE THE PRODUCTS ARE SOLD ON
Finally, Ecommerce businesses can also be differentiated based on the way they sell their products to their customers. These options are:
- Branded Ecommerce Stores: These are Ecommerce stores that are owned and operated by the founder(s) or creator(s) of the store, and they sell their own products on their own terms to their customer base.
- Ecommerce Marketplaces: Ecommerce businesses can also sell through online marketplaces such as Amazon, eBay or Etsy. For the business, this is kind of like renting space in a mall; the mall handles the marketing and brings in the foot traffic, which means the merchants don’t have to invest much time or money bringing customers their shops. They do, however, have to abide by the mall’s rules such as their opening hours, what products they can and cannot sell, etc.
- Conversational Commerce: With social media being a main part of consumer’s daily routines, social media platforms are making it easy for consumers to shop through the posts on their newsfeed. Instagram, Facebook, Pinterest and Snapchat all have conversational commerce options that Ecommerce brands can sell their products through.