Introduction to E-commerce

What is E-commerce ?
Ecommerce is the online exchange of goods and services over the
internet. It involves online transactions between businesses
(B2B), businesses and consumers (B2C) as well as between
consumers and consumers (C2C). Ecommerce encompasses a
wide range of activities, including electronic business, online
shopping, online marketplaces, electronic payments, online
banking and online auctions.

Ecommerce is an integral part of the modern global economy.

Over the past couple of decades, it has transformed both the way
we shop and the way we do business. In fact, eCommerce is on
track to take over traditional retail sales altogether. According to
Nasdaq, by 2040, eCommerce could facilitate as much as 95% of
all retail sales. By 2027 it’s on track to account for around 23% of
all retail sales.

Ecommerce (short for “electronic commerce”) is an umbrella term

for any transaction done over the internet. Ecommerce can
involve the sale of physical or digital products as well as services
of all types, from scheduling a yoga class to booking a hotel. It’s
like a digital marketplace that’s always open.

In an increasingly digital world, eCommerce, as a type of

business, is more prominent than ever. The U.S. Census Bureau
reported that eCommerce sales totaled $277.6 billion during the
second quarter of 2023 alone. And according to Statista, global
eCommerce sales are forecast to reach $8.1 trillion by 2026.

Defining e-commerce

The term was coined and first employed by Robert Jacobson,

Principal Consultant to the California State Assembly's Utilities &
Commerce Committee, in the title and text of California's
Electronic Commerce Act, carried by the late Committee
Chairwoman Gwen Moore (D-L.A.) and enacted in 1984.
E-commerce typically uses the web for at least a part of a
transaction's life cycle although it may also use other
technologies such as e-mail. Typical e-commerce transactions
include the purchase of products (such as books from Amazon) or
services (such as music downloads in the form of digital
distribution such as the iTunes Store). There are three areas of e-
commerce: online retailing, electronic markets, and online
auctions. E-commerce is supported by electronic business. The
existence value of e-commerce is to allow consumers to shop
online and pay online through the Internet, saving the time and
space of customers and enterprises, greatly improving transaction
efficiency, especially for busy office workers, and also saving a lot
of valuable time.

When did eCommerce start?

Ecommerce traces its roots back to the late 1970s and early
1980s, when foundational technologies like Electronic Data
Interchange (EDI) began to shape digital transactions.
EDI allowed businesses to exchange documents like purchase
orders and invoices digitally, replacing traditional paper forms and
streamlining operations. Around the same time, teleshopping
emerged as a precursor to online retail, enabling consumers to
order products through television broadcasts and phone hotlines.

The 1990s marked a turning point in eCommerce, driven by the

widespread adoption of the internet and the emergence of
pioneering platforms like Amazon and eBay. Founded in 1994 and
1995 respectively, these companies revolutionized online
shopping by connecting buyers and sellers on a global scale.

How does eCommerce work?

Here is a simplified overview of how an eCommerce transaction

works:

1. A customer visits an eCommerce website, marketplace or

app and browses the products or services offered.
2. If the customer finds something they want to buy, they add
it to their shopping cart.
3. The customer proceeds to checkout, where they enter their
shipping and billing information and select a payment
method.
4. The eCommerce merchant processes the payment and ships
the product or provides the service to the customer.

Each of these steps could look a little different depending on the

exact nature of your eCommerce business. For example, you
could partner with a third-party logistics company to handle
packaging and shipping for you. Or instead of selling retail goods,
you may choose to sell online services or courses that don’t
require any physical inventory.

At its core eCommerce includes:

 Supply chain ecommerce management

 Inventory management
 Data collection and security
 Electronic funds transfer
 Shipping services

Ecommerce now comes in many shapes and sizes and often

involves multiple players. It also involves a variety of touchpoints,
including a well-built website.

What is an eCommerce website?

If you want to succeed in your endeavor, it’s crucial to know how

to create a website that’s tailor-made for eCommerce. Simply put,
an eCommerce website allows your business to sell products and
services online. It’s a digital storefront where your customers can
browse, select and purchase items (see eCommerce website
development). A typical eCommerce website includes features,
such as:

 A desktop and mobile Interface

 A product catalog with product descriptions and images
 A shopping cart software system for customers to keep track
of the items that they want to purchase
 A checkout process where customers can enter their
shipping and billing information
  Secure website security features to ensure the protection of
your data and that of your customers
 Secure payment processing
 Order tracking and customer support resources

Governmental regulation
In the United States, California's Electronic Commerce Act (1984),
enacted by the Legislature, the more recent California Privacy
Rights Act (2020), enacted through a popular election proposition
and to control specifically how electronic commerce may be
conducted in California. In the US in its entirety, electronic
commerce activities are regulated more broadly by the Federal
Trade Commission (FTC). These activities include the use of
commercial e-mails, online advertising and consumer privacy.
The CAN-SPAM Act of 2003 establishes national standards for
direct marketing over e-mail. The Federal Trade Commission
Act regulates all forms of advertising, including online advertising,
and states that advertising must be truthful and non-deceptive.
[10]
Using its authority under Section 5 of the FTC Act, which
prohibits unfair or deceptive practices, the FTC has brought a
number of cases to enforce the promises in corporate privacy
statements, including promises about the security of consumers'
personal information.[11] As a result, any corporate privacy policy
related to e-commerce activity may be subject to enforcement by
the FTC.
The Ryan Haight Online Pharmacy Consumer Protection Act of
2008, which came into law in 2008, amends the Controlled
Substances Act to address online pharmacies.[12]
Conflict of laws in cyberspace is a major hurdle for harmonization
of legal framework for e-commerce around the world. In order to
give a uniformity to e-commerce law around the world, many
countries adopted the UNCITRAL Model Law on Electronic
Commerce (1996).[13]
Internationally there is the International Consumer Protection and
Enforcement Network (ICPEN), which was formed in 1991 from an
informal network of government customer fair trade
organisations. The purpose was stated as being to find ways of
co-operating on tackling consumer problems connected with
cross-border transactions in both goods and services, and to help
ensure exchanges of information among the participants for
mutual benefit and understanding. From this came
Econsumer.gov, an ICPEN initiative since April 2001. It is a portal
to report complaints about online and related transactions with
foreign companies.
There is also Asia Pacific Economic Cooperation. APEC was
established in 1989 with the vision of achieving stability, security
and prosperity for the region through free and open trade and
investment. APEC has an Electronic Commerce Steering Group as
well as working on common privacy regulations throughout the
APEC region.
In Australia, trade is covered under Australian Treasury Guidelines
for electronic commerce and the Australian Competition &
Consumer Commission[14] regulates and offers advice on how to
deal with businesses online, [15] and offers specific advice on what
happens if things go wrong.[16]
The European Union undertook an extensive enquiry into e-
commerce in 2015–16 which observed significant growth in the
development of e-commerce, along with some developments
which raised concerns, such as increased use of selective
distribution systems, which allow manufacturers to control routes
to market, and "increased use of contractual restrictions to better
control product distribution". The European Commission felt that
some emerging practices might be justified if they could improve
the quality of product distribution, but "others may unduly
prevent consumers from benefiting from greater product choice
and lower prices in e-commerce and therefore warrant
Commission action" in order to promote compliance with EU
competition rules.[17]
In the United Kingdom, the Financial Services Authority (FSA)
[18]
was formerly the regulating authority for most aspects of the
EU's Payment Services Directive (PSD), until its replacement in
2013 by the Prudential Regulation Authority and the Financial
Conduct Authority.[19] The UK implemented the PSD through the
Payment Services Regulations 2009 (PSRs), which came into
effect on 1 November 2009. The PSR affects firms providing
payment services and their customers. These firms include banks,
non-bank credit card issuers and non-bank merchant acquirers, e-
money issuers, etc. The PSRs created a new class of regulated
firms known as payment institutions (PIs), who are subject to
prudential requirements. Article 87 of the PSD requires the
European Commission to report on the implementation and
impact of the PSD by 1 November 2012.[20]
In India, the Information Technology Act 2000 governs the basic
applicability of e-commerce.
In China, the Telecommunications Regulations of the People's
Republic of China (promulgated on 25 September 2000),
stipulated the Ministry of Industry and Information
Technology (MIIT) as the government department regulating all
telecommunications related activities, including electronic
commerce. On the same day, the Administrative Measures on
Internet Information Services were released, the first
administrative regulations to address profit-generating activities
conducted through the Internet, and lay the foundation for future
regulations governing e-commerce in China. On 28 August 2004,
the eleventh session of the tenth NPC Standing Committee
adopted an Electronic Signature Law, which regulates data
message, electronic signature authentication and legal liability
issues. It is considered the first law in China's e-commerce
legislation. It was a milestone in the course of improving China's
electronic commerce legislation, and also marks the entering of
China's rapid development stage for electronic commerce
legislation.

Types of eCommerce businesses

The main types of ecommerce include the following:

Business to consumer (B2C)

Business to consumer is one of the most common types of
eCommerce models. B2C businesses sell goods and services
directly to the end customer, and can include anything from
physical products to online services. Think: Amazon, Nike or an
online tutoring business.

Business to business (B2B)

Business-to-business models are also very common, and refer to
companies that provide goods or services for other businesses.
B2B eCommerce covers a wide range of businesses, including
wholesalers, raw material manufacturers and service providers.

Consumer to consumer (C2C)

Any transaction done between two people, rather than business

entities, is considered consumer to consumer. This type of
business model includes transactions done on platforms such as
eBay or Craigslist, or on social media marketplaces like Facebook
Marketplace.

Consumer to business (C2B)

Consumer to business covers services provided by individuals, for

businesses. This model is often used to include freelancers and
other small service providers. A common form of C2B is when a
business purchases stock images, videos or music created by
individuals.

Consumer to government (C2G)

Consumer to government involves individuals using online

platforms to interact with governmental services, such as paying
taxes or fines. Examples include filing taxes through IRS e-file or
paying parking tickets via municipal websites.

Business to government (B2G)

Business to government provides products and services for the

federal or local government to purchase. These include a wide
range of sectors like cyber security, waste management, urban
planning, etc.

Government to business (G2B)

Government-to-business transactions reverse the B2G model. This

model is often used to refer to information that companies can
purchase access to, such as blueprints or legal files.

Examples of eCommerce business models

There are several types of common eCommerce businesses that operate under the
structures listed above. A useful way of breaking them down is by explaining the
various types of products or services they offer.

Dropshipping

Drop shipping is a business model in which you can sell products online without
physically holding any inventory. Think of it as being the middle-person who
connects the customer with the manufacturer or supplier.
When a customer places an order for a product in your online store, the order
details are forwarded to a trusted supplier, like Modalyst. (Alibaba, Taobao and
Aliexpress are China based suppliers and wholesalers popular with global drop
shippers). The supplier then ships the product directly to the customer. When you
start a dropshipping business, you don’t have to stress about logistics,
manufacturing, inventory, warehousing or order fulfillment. You’re also not
limited by space—you can sell an unlimited array of products.

Print on demand (POD)

The print-on-demand business model is a form of dropshipping. As a business

owner, you’ll create designs and artwork, then select what products you want those
designs printed on. A third-party supplier or print on demand company like Printful
handles the actual printing, fulfillment and shipping.

When starting a print-on-demand business, you can choose from all kinds of
products to offer, spanning T-shirts, hats, coffee mugs, phone cases, stickers and
more. Plus, you have the freedom to experiment with designs until you hit your
stride with one that takes off with your customer base.