What is eCommerce, and Why is It Important?

What is eCommerce?

Technology developments have contributed to a cultural shift in how humans do everything, from domestic to commercial and political activities. One of the changes apparent in how we do business is the technological shift of traditional markets to more digital online selling that makes up what is now known as eCommerce. What is eCommerce?

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ECommerce is a term for electronic commerce. It involves the exchange of goods and services for value, usually money, electronically via the internet. It is not only limited to the buying and selling of goods and services but also includes such online activities as auctions, ticketing, and banking.

ECommerce business has different types. ECommerce platforms, where eCommerce activities take place, are segregated by the type of eCommerce activities transacted on the platform. ECommerce platforms are online marketplaces for buyers and sellers of goods and services to meet and transact electronically, without any physical contact.

Growth of eCommerce

The eCommerce industry is growing rapidly. In the year 2020, global retail eCommerce sales amounted to approximately 4.2 trillion U.S dollars globally and is projected to grow by over 75% to a whopping 7.4 trillion U.S dollar by the year 2025.

It is very essential for all businesses, both large and small to key into this trillion-dollar business model for businesses that cannot evolve and adapt to this model will suffer a lot of set back in their growth, success, and customer retention.

As internet adoption is spreading like wildfire, so is the number of digital buyers skyrocketing. The ease and convenience that comes with digital buying have never been matched by any other forms of transaction which make it obligatory for every business to adopt.

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Different Types of ECommerce

ECommerce types are defined by the type of parties transacting with each other. These parties could be any consumers, businesses, and administration. The parties involved in the transaction chain help define the type of eCommerce. The following are thus the types of eCommerce business.

  • Business-to-Business ECommerce (B2B): this is an eCommerce activity that involves the exchange of goods and services between two business entities. While this type of eCommerce activity is dominated by one business selling raw material to another business to make a finished product, it also involves a service-delivering business selling its services to another business. Goods can also be supplied between two businesses. The nature of the transaction between any two businesses depends on the nature of the value that the businesses offer.
  • Business-to-Consumer (B2C): arguably the most common type of eCommerce business, business-to-consumer eCommerce is the type where shoppers buy goods or services from a business online, with the exchange taking place on the business’s eCommerce platform or a shared eCommerce platform.
  • Consumer-to-Business (C2B): in this type of eCommerce business, the consumers sell their goods or services to a business. While this is not a very common form of eCommerce business, it still exists. A typical example will be a farmer selling their farm produce to an agro-allied business. Another example is a freelance content writer, graphic designer, website designer, data analyst, or other individual service seller selling their services to a business.
  • Consumer-to-Consumer (C2C): a more recent and fast-growing type of eCommerce, consumer-to-consumer eCommerce involves the exchange of goods and services between two consumers on a shared e-commerce platform. Popular eCommerce platforms where consumers can meet to sell among themselves are Craigslist and eBay.
  • Consumer-to-Administration (C2A): this is a type of eCommerce business that involves the exchange of goods and services between consumers and public administrations. This is usually a service-based transaction, where consumers pay a public administration for some services like taxes and the certification or preparation of legal or policy documents.
  • Business-to-Administration (B2A): This eCommerce type describes an exchange of goods or services between a business and public administration. This is also a service-based eCommerce business that can occur in employment, legal, and social security areas.

Different Forms of ECommerce

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Different functional forms of eCommerce are defined by the products or services being exchanged or the relationship of the transaction. Some of the common forms of eCommerce transactions are:

  1. Wholesale: This is a form of physical products eCommerce involving a business selling its products in bulk to a retail company or individual, who then sells them to the consumers. Wholesalers buy directly from the manufacturers and are often called distributors.
  2. Retail: retail businesses or individuals buy products in bulk from the wholesalers and sell directly to the consumers.
  3. Physical Products: Physical products require inventory—warehousing—and physical shipping, even though the transactions are executed online.
  4. Digital Products: Digital products are transacted online and delivered to the consumers as downloadable goods. Examples of digital products are music files, courses, eBooks, software, and templates.
  5. Subscription: this form of eCommerce involves a recurring transaction—weekly, monthly, or yearly—that is executed automatically subject to an initial agreement between a business and its consumer. The customer makes a recurring purchase and is charged automatically at an agreed due date. The products are mostly always service or digital products.
  6. Dropshipping: this form of eCommerce involves a business outsourcing the manufacturing and shipping of its product to another company. The business sells directly to the consumer but hires another business to produce and deliver what the consumer wants.
  7. Crowdfunding: In this form of eCommerce, money is collected for a product as its capital prior to the product being available. It is the collation of small amounts of capital from many individuals to create a new product or form a new business.
  8. Services: this is the eCommerce form that deals with the exchange of services for values. The amount of the value to be charged is mostly determined by the nature of the service and the time spent delivering it.

Importance of eCommerce

ECommerce is now a vital component of every modern business strategy. What are some of the importance that eCommerce offers businesses?

  1. Cost Reduction: online stores do not necessarily require businesses to have their products displayed in a physical place. The absence of a physical space or office means that businesses can save on the cost of owning or renting a space and the associated bills like electricity, water, and parking. Even when businesses do have spaces for an online business, they are usually smaller than traditional brick-and-mortar business spaces. All of these help businesses save costs.
  2. Improved Reach: eCommerce helps businesses to transcend the limitations of localization and have a global reach. A business in Europe can sell to consumers living over other continents. The business or its executives/staff do not have to travel to reach the consumer and show them the goods or deliver them. Businesses can reach wider audiences through eCommerce. ECommerce also eliminates the barrier of languages as eCommerce contents can be easily translated into multiple languages suitable to the consumer accessing the information.
  3. Reduce Overheads and Risks: lower startup cost, no rent cost, no salesperson hire, and bill reduction are some of the common characteristics of eCommerce businesses, especially in retail. With reduced overhead costs, retail eCommerce businesses are able to sell at competitive prices and still maintain profitability.
  4. Easy marketing and Insights: ECommerce businesses are exposed to tools and services that help to improve their business intelligence without much ado. SEO tools, pay-per-click ads, SEM tools, email marketing, and other digital marketing tools help eCommerce businesses to reach wider consumer bases, improve sales and, at the same time, get data-backed insights to help their decision-making.
  5. Round-the-clock Availability: eCommerce businesses can stay open all the time, twenty-four hours a day and seven days a week. This is because of the automated nature of online businesses that enables transactions even when the business owner is not online. This helps eCommerce businesses to overcome the limitations of geographical time differences.
  6. Ease and Convenience: eCommerce businesses are easier to run as they do not take as much time and effort as physical stores. It is also easier and more convenient for consumers to shop for multiple products online and have them delivered to their homes without leaving the comfort of their homes and offices. The time and stress of walking around and selecting a product are non-existence in eCommerce. Moreso, consumers can see more products than they will see in physical stores before deciding on which to buy.
  7. Easy Feedback: knowing what consumers think of your business in order to know what to sell more or improve can be difficult with physical stores as there is scarcely an avenue to collect Feedback. It is easy to collect customers’ feedback in eCommerce through product reviews and other forms of collecting feedback. Customers feel valued when their opinions matter, and taking Feedback can help businesses serve their customers better.
  8. Secure Transaction: ECommerce businesses allow secure transactions between businesses and consumers. Data encryption of SSL certificates of all eCommerce websites allows for the security of keys and passwords and consumers’ sensitive data. The risk of getting robbed is also reduced as eCommerce does not entail a physical exchange of cash. Continuous investment in eCommerce security and technological improvement will make eCommerce even more secure for consumers and businesses.
  9. Multi-Choice: With eCommerce, consumers have more options to explore and choose from, allowing them to make a more satisfying selection. The time to explore options is also not limited, like in physical stores. Consumers can take their time exploring the different options available before deciding on one to purchase. They can even read the reviews of past consumers who have used the products to help them make better quality, utility, and cost choices.

Disadvantages of eCommerce

Like everything that has advantages, eCommerce also comes with some disadvantages that physical stores do not have. What are some of these disadvantages?

  1. Limited/Expensive Personalized Services: eCommerce businesses are more mass reach businesses that cater to everyone simultaneously. ECommerce businesses do not enjoy the direct interaction with salesclerk that physical businesses enjoy and do not generate enough personalized services. Technology can be leveraged to get some level of personalized service in eCommerce, but this comes at additional costs that are usually expensive.
  2. Shipping and Delivery Time and Cost: In physical shopping, consumers only have to pay the cost of the product they are buying. In eCommerce, there are additional charges for shipping and delivery, and this cost can most times be more than the cost of transportation to a physical store. When purchasing goods physically, you get the product as soon as you pay. In eCommerce, consumers have to wait a while for shipping and delivery. ECommerce is limited in this regard and is not suitable for urgent purchases.
  3. No Physical Feel: Yes, consumers cannot feel the product or try it before making a purchase in eCommerce. There is always the problem of size. Some consumers do not know their sizes, and pictures can look bigger than they are really. These are not problems in physical shopping.
  4. Return Difficulties: Returning goods when they do not match consumers’ expectations or swapping for a bigger or better product is not easy in eCommerce businesses compared to physical shopping.
  5. Internet Fraud and identity theft: eCommerce businesses can expose consumers to internet fraud when hackers penetrate the security of eCommerce platforms, hijacking the payment processes. They can also access the consumers’ sensitive information like social security numbers and use it to assume their identity.


ECommerce businesses are now popular and abundant. The ease of transaction that eCommerce affords and the level of global internet penetration have continued to see a rise in the number of businesses transacted online. ECommerce businesses are easy to set up and run, and as such, continue to be a good source of income for millions of people globally. Despite the disadvantages, eCommerce advantages are more overarching. With technological improvement, the disadvantages of eCommerce are greatly improved days and out.



General eCommerce FAQ

What do you mean by e-Commerce?

Ecommerce is the buying and selling of goods or services online. It’s short for “electronic commerce.” Most eCommerce transactions happen on the internet, but phone orders and text messages are also considered eCommerce.

What are the 3 types of e-commerce?

​​The 3 main types of eCommerce: business-to-business (B to B), business-to-consumer (B to C), and consumer-to-consumer (C to C).

Is Amazon an eCommerce?

Yes, Amazon is definitely an eCommerce company. In fact, they are the largest online retailer in the world.

How do I start an eCommerce business?

There are a few key things you need to do in order to start an eCommerce business. First, you need to choose a niche or product that you want to sell. Once you have your niche or product, you need to create a website and start driving traffic to it. You can drive traffic to your website through various marketing channels such as SEO, social media, or paid advertising. Once you have the traffic coming to your site, you need to convert that traffic into sales. You can do this by offering a great product or service at a competitive price, and by providing excellent customer service. If you can do all of these things, you’ll be well on your way to starting a successful eCommerce business.

Which is the best eCommerce platform?

There are a lot of eCommerce platforms out there, but the best one depends on your business needs. If you are just starting out as an eCommerce business owner, it’s best you choose an eCommerce platform that is easy to use and does not need too much customizations to optimize for sales and suit your business purpose. Two major options that are beginner-friendly are Shopify and BigCommerce.