ECommerce Business: Definition, Models of Transactions, and eCommerce Environment

What is an eCommerce Business?

eCommerce business 101 — *What is an eCommerce business?*

People often think of eCommerce as websites for buying and selling products like Amazon. However, a broader definition of eCommerce involves much more than that. The UK government, for example, defines eCommerce as below:

“E-commerce is the exchange of information across electronic networks, at any stage in the supply chain, whether within an organization, between businesses, between businesses and consumers, or between the public and private sector, whether paid or unpaid” (Cabinet Office, 1999)

By this definition, we can see that eCommerce business is not only about financial transactions but also about non-financial transactions, together with pre-sale and post-sale activities. Kalakota and Whinston (1997) attempted to list different perspectives on eCommerce:

A communications perspective: the delivery of information, products or services, or payment by electronic means. I.e., Forbes, albeit a website for news, is actually an eCommerce company.
A business process perspective: the application of technology towards the automation of business transactions and workflows. I.e., The emergence of food delivery services like Uber Eats provides a solution to the transportation problem of many restaurants.
A service perspective: Enabling cost-cutting at the same time as increasing the speed and quality of service delivery. I.e., with emails, we no longer rely too much on postal services.
An online perspective: the buying and selling of products and information online. This is too obvious in the case of Amazon or eBay.

Buy-side and Sell-side eCommerce

Moreover, eCommerce transactions are not only between an organization and its customers but also within an organization, and between an organization and its stakeholders, not limited to customers.

In fact, when people use the term eCommerce, they usually refer to the specific selling and buying activities between a company and its customers. This, however, is just one part of the whole picture. When you run an eCommerce business for sales, you can be both a seller and a buyer. You buy products and services from some suppliers; and at the same time, you sell your own products and services to some consumers. This is why when people evaluate the strategic impact of eCommerce on an organization, they often distinguish between buy-side eCommerce, the transactions to procure resources needed from suppliers, and sell-side eCommerce, the transactions to sell products to customers. You can take a look at the following figure to have a clearer picture:

ecommerce business — The distinction between buy-side and sell-side e-commerce

Different Types of Buy-side eCommerce

The buy side of eCommerce refers to the business to business sales, where organizations purchase needed resources from the suppliers. This kind of eCommerce supports the upstream supply chain, i.e. from procurement to inbound logistics. Here are some key types:

The transactions between businesses are called Business to Business (B2B). For instance, a supplier that sells raw materials to a manufacturer. Shopify reported that in most cases B2B is about high volume orders and a tailored solution.
Business to government (B2G) transactions are the transactions between businesses and the government entities. For example, a tech company supplying a government agency with software solutions. Public sector procurement has a critical dependency on this model.
Consumer-to-Business (C2B) involns whereves transactio consumers sell products or sell services to businesses. As an example, a freelance graphic designer who buys services to sell to a company. With the rise of gig economy platforms, this model is becoming increasingly popular.
Consumer to Government (C2G) refers to transactions in which government is the buyer, and consumers are the sellers, supplying services or products. For example a citizen who submitts a bid on a public project.

Buy side eCommerce helps companies optimize their supply chain by reducing costs and improving efficiency. The commerce is an essential shift for businesses to do more quickly, and properly.

Different Types of Sell-side eCommerce

Sell-side eCommerce often involves using Internet technologies to market products or services. The products are not necessarily physical ones like books or clothes. Spotify, for example, does not sell concrete music CDs but music streaming services.

Also, in many cases, the websites are not for the sake of financial transactions but for branding and other marketing activities. It is thus possible to classify the online presence of sell-side eCommerce, or eCommerce websites, into 4 main types:

Transactional eCommerce sites: The main contribution of these sites is through online purchases of products. They can be retail sites (Amazon), travel sites (Air BnB), and online banking services (www.hsbc.com).
Services-oriented relationship-building websites: These sites mainly serve as the place where people come to get information about the business. They stimulate offline sales and general inquiries or leads from potential customers.
Brand-building sites: Products are not typically available for online purchase on these sites. They support branding, and they are typically suitable for low-value, high-volume fast-moving consumer goods (FMCG brands). Some examples of this type are Tango (www.tango.com), (www.guinness.com).
Portal, publisher, or media sites: NYTimes, Forbes, The Guardian, and similar websites for news and entertainment are also regarded as eCommerce sites. These sites generate revenue through advertising, commission-based sales, or the sale of customer data.

eCommerce vs. eBusiness

Many times eBusiness and eCommerce are used interchangeably, but they have different meanings. eCommerce is centered in online transactions of goods and services. Conversely, eBusiness involves all parts of running a business online, such as marketing, customer service and supply chain management.

According to recent statistics, the global e commerce sales destined to be $6.3 trillion in 2024. The growth in the use of these terms underscores the need to understand the distinctions between them.

Amazon and eBay are examples of eCommerce because transactions take place between customers and sellers. eBusiness examples are companies such as Salesforce, who implement end to end business operation solutions on an online platform.

Recommended reading: What is Cloud eCommerce Solutions?

The Role of Digital Marketing in eCommerce Business

Since all business transactions are now electronically mediated, a new type of marketing also came into existence: digital marketing. It involves the management and execution of marketing using electronic media such as the web, e-mail, and wireless media in conjunction with digital data about customers’ characteristics and behavior.

To put it simply, digital marketing shifts the focus of communications away from traditional means such as newspapers, radio, and television into blogs, podcasts, social networks, SMS, and such-like. But still, all the traditional marketing channels are not necessarily abandoned. Both offline and online channels are important to gaining new customers and maintaining relationships with existing customers. A successful eCommerce business would know how its target customers communicate and put the emphasis on the right channels. That’s the basic principle of marketing.

Benefits of Digital Marketing for an eCommerce Business

Digital marketing offers numerous advantages for eCommerce businesses, helping them reach a wider audience and boost sales. Here are some key benefits:

Global Reach

Digital marketing allows eCommerce businesses to reach customers worldwide. Online marketing is not limited by geography unlike most traditional marketing. It creates new markets or new growth opportunities.

Cost-Effective

Digital marketing is more affordable than traditional marketing methods. Targeted strategies don’t need a huge budget, and can allow small businesses to compete with larger companies. For instance, even no investment is required to start SEO and social media marketing.

Targeted Audience Engagement

Through digital marketing, businesses can target a specific demographic. Data analytics are used by businesses to craft personalized marketing campaigns that are direct to the point. Consequently, conversion rates are higher and the general satisfaction with customers is higher.

Measurable Results

Digital tracking gives you options that traditional marketing lacks, such as measureable tracking of results. Google Analytics is a great tool for businesses to monitor website traffic, conversion rates etc. The data is used in making informed decisions at the level of the business and optimizing marketing strategies.

Improved Customer Connections

Better customer relationships are brought about by digital marketing. Businesses are able to directly engage and gain loyalty from customers through social media and email marketing or other relevant online channels. It results in repeat business and word of mouth referrals.

24/7 Availability

Unlike physical stores, eCommerce businesses can operate around the clock. With digital marketing, products and services are always available for people to purchase, even when the time isn’t right for you to put down your camera.

Enhanced Brand Visibility

With digital marketing, increasing brand visibility and awareness is achieved. SEO, content marketing, and social media are used to improve businesses presence online along with bringing in new visitors.

Competitive Advantage

Digital marketing is a competitive edge for businesses in a crowded online marketplace. Staying on top of marketing trends and using the newest tools and techniques keeps a business in a different class from the competition.

Drivers & Risks of an eCommerce Businesses

The Internet provides significant opportunities for many businesses to build closer relationships with their existing customers and suppliers to help achieve customer retention. In particular, there are a variety of benefits that drive the adoption of eCommerce business models.

1. Competitiveness drivers:

With new communication channels, businesses can reach a larger customer base. They can also encourage loyalty and repeat purchases among existing customers in order not to lose market shares to businesses that already use eCommerce.

2. Cost/Efficiency drivers:

Delivering services electronically helps reduce staff costs, transport costs, operating costs, and costs of printing materials. The speed with which supplies can be obtained and goods can be dispatched will be increased.

But opportunities have to be balanced against the risks of introducing e-business services which vary from strategic risks to practical risks.

Recommended reading: Ecommerce Website Image: 10 Tips to Optimize

3. Strategic risks:

Making the wrong decision about e-business investments, for example, is one of the main strategic risks. You may have lavished your capital on e-business but did not achieve the hoped-for returns, either because the execution of the plan was flawed, or because the planned approaches used for your market were inappropriate.

It is important to know that the impact of the Internet and technology varies by industry. Sometimes, it works like a typhoon force, a ten times force. Sometimes, it is just a bit of wind. Asking yourself whether your business needs Internet adoption is a must before making any decision on e-business investment.

4. Practical risks:

Apart from strategic risks, there are also a couple of practical risks you should know:

Web sites may fail if they cannot handle a spike in visitor traffic.
Hackers may penetrate the system’s security and steal credit card details.
Cold emails may disturb some customers if sent out without their permission. This might sometimes break the privacy and data protection laws.
Customer orders might go missing or be delayed, and disappointed customers will never return.

There are also certain barriers to the development of online technologies, such as the costs for set-up and maintenance, the lack of time/resources, the lack of skills and knowledge (staff), difficulties in integrating IT systems, or difficulties in changing processes. These might as well hinder your business from getting the most out of ICT adoption.

Recommended reading: Top 18 Web Development Companies in Vietnam

The eCommerce Environment

With the rise of eCommerce businesses, not only business models but also the structures of the industry and the marketplace have changed. For example, previously, B2B companies sold their products through a network of distributors. But now with the advent of e-commerce, they can bypass distributors and trade directly with customers via a website. And a new “force” arises and plays certain roles in marketing, which is online intermediaries, specifically search engines, review sites, price comparison sites, social networks, blogs, and other publisher sites.

So to evaluate all the opportunities and threats that an eCommerce business is facing and accordingly make an appropriate strategy, it is important to continually monitor the environment in which the business operates, which includes micro-environment and macro-environment:

b2b ecommerce solutions — *The environment in which e-business services are provided*

1. Strategic agility

In this regard, there is at least 1 concept that every business owner must know: strategic agility. It is the capability to innovate and so gain a competitive advantage within a marketplace by monitoring changes within an organization’s marketplace, evaluating alternative strategies, and then selecting, reviewing, and implementing appropriate candidate strategies. To put it simply, this concept is somewhat similar to Eric Ries’ “lean startup” and the philosophy of Agile project management methodology.

It prioritizes adapting to changes, rather than sticking to an initially projected action plan

It is important to find anomalies in the marketplace where it doesn’t appear as expected and these may represent learnings or opportunities. Detailed customer insights and business performance are necessary to identify these anomalies. By paying close attention to all the changes of the micro and macro environment and adjusting the business plans accordingly, business owners can act rapidly and bring about the best outcomes possible.

Dell Computer, for example, has spent relatively little on research and development but has instead been constantly probing the marketplace, trialing new eCommerce business ideas with multiple probes into the approach. They are an exemplar of a company with strategic agility.

2. Online marketplace analysis

Whenever you want to develop a long-term business plan or create a short-term digital marketing campaign, it is necessary to analyze the marketplace. Right below is a sample map that helps you quickly grasp the linkages between online businesses and traffic flows.

There are four main elements in the above map:

Customer segments:

Knowing how your audiences consume online media, how they buy goods online, and the type of content they often search for from the intermediaries will help you target your marketing campaign in the right direction.

Search intermediaries:

Search engines like Google, Baidu (China), Yandex (Russia), or Naver (South Korea) are the intermediaries where audiences come to look for the content they want. These intermediaries, therefore, provide every eCommerce business with useful data to create personas for key audiences and analyze the current popularity of your website and competitors’ websites. Also, this is going to be a rich source of visitor traffic if you pay attention to SEM (search engine marketing).

Intermediaries and media sites:

These sites attract visitors via search or direct (if they are mainstream brands); thus, it is great if your eCommerce business can assess the potentiality of these sites.

Destination sites:

These eCommerce platforms also have another name, landing pages, where you want your customers to visit and carry out the expected actions (filling in a form, buying a product, and so on).

Conclusion

The ecommerce business landscape is rapidly evolving, with new models and technologies emerging constantly. As statistics go, global ecommerce revenue is expected to surpass to $8 trillion by 2027 proving the immense potential of this sector. This transformation is being led by companies like Designveloper; businesses like ours build upon massive experience in the web and software development to help businesses succeed in the online marketplace.

One evidence of Designveloper’s success is delivering state of the art solutions and projects using the latest tools and technology. Partner with Designveloper to overcome the myriad challenges of an ecommerce environment and leverage cutting edge trends and opportunities.

To find out how Designveloper can support your business to thrive, learn more about us on our website and see examples of our work.