Ever since electronic communication became a thing people have been looking for ways to do business using it as a medium. E-commerce has come a long way from the early days of the internet and the systems that preceded it. Today the methods of conducting commerce electronically are nearly as varied as the products and services being sold. So how does e-commerce work exactly, and what is involved with it?
How Does E-Commerce Work
The term ‘e-commerce’ is a shortened version of ‘electronic commerce’ which basically describes what the concept is about. E-commerce refers to any type of commerce that is conducted using electronic means. This includes commerce over the internet, commerce conducted over private networks, and commerce conducted using communication methods such as email. Any type of buying and selling of goods or services that is conducted electronically is classified as e-commerce. E-commerce has been around since the first electronic systems were introduced that allowed transactions to be made. Professionals in e-commerce say that it is a great platform for individuals wanting to sell and raise money online.
So, what different types of e-commerce are there?
– Business to Customer (B2C)
The most common type of e-commerce business is a company selling products and services directly to customers. On the internet this often involves a shopping cart system hosted on the company’s website with the customer placing orders via that shopping cart. In some cases the business may put their products up for sale on third-party marketplaces. This has the advantage that those marketplaces often have a significant number of existing shoppers browsing them on a regular basis, so the company selling the product doesn’t have to use advertising to find customers. Even utilizing an SMS strategy to get people to your website can be a great advantage over the competition.
– Business to Business (B2B)
Businesses need products and services the same as individual customers do, so e-commerce conducted between businesses can involve a huge volume of transactions. Often these transactions are conducted more directly than retail e-commerce and may involve complex multi-year contracts that ensure the business buying the goods or services has a reliable supply of the resources it needs.
– Online Auctions
This type of e-commerce business is generally conducted on online auction websites. In some cases this type of business could be considered to be ‘C2C’ or ‘Customer to Customer’ as it often involves people who are not actually running a business acting as a customer of the auction service to sell unwanted items to other customers of the auction service. Businesses often also use these auction websites to sell goods and services and some transactions involve the business acting as an intermediary between a supplier and customer without actually handling the goods themselves. This latter situation is known as ‘dropshipping’.
– Affiliate Marketing
Some businesses prefer to focus on producing and delivering the products and services they sell and choose to outsource the process of promoting those goods to third-parties. The third-parties doing the marketing tend to be businesses or individuals who prefer doing promotion rather than producing and delivering an actual product. The result is affiliate marketing e-commerce where people act as affiliates to market the products and services of another company. The affiliate marketer is usually paid a percentage or a fixed fee for generating a sale or lead, although in some cases they may be paid by the number of ad views or ad click-throughs they generate for the company they are affiliated with.
– Web Marketing
Most of the internet runs on advertising, with ads providing revenue for the majority of websites. Web marketing e-commerce is the process of providing advertising space and services to enable these online ads. Ads may be paid as a lump sum for daily, weekly, monthly, or even yearly hire of a visible spot on a popular webpage. In many cases, ads are paid for based on the number of ads shown to unique viewers or on the number of click-throughs on an ad, which blends web marketing with affiliate marketing.
E-commerce is a huge industry that may already dwarf conventional bricks-and-mortar styled business, or soon will. Doing business electronically is cheaper, faster, and more convenient than paper transactions and will likely one day make cash purchasing obsolete. So, knowing the answer to the question “How does e-commerce work?” is essential if you want to do any form of business in the modern world.