What is e-commerce and how does it work?
Online shopping may not impress anyone today, but just a few years ago, trading over the Internet was something special. What is e-commerce and how was the world changed with its development?
Sales and purchases are usually made through an e-commerce store – a dedicated platform where the seller displays their products, similar to a store shelf. Customers browse the offer, compare products, buy, and then the ordered goods or services are delivered to the location selected by the recipient.
However, having a dedicated tool is not necessary today. The development of the e-commerce industry and its growing popularity means that online sales are no longer just for businesses. In modern e-commerce, there are no barriers to entry. Anyone can start selling, and anyone can set up their own online store or list goods through a marketplace, with payment and final delivery handled electronically.
In summary, the term e-commerce includes commercial transactions conducted over the Internet. This ranges from online stores and advertising sites to social media groups.
Types of online stores
In order to better understand what e-commerce is, where the popularity of e-commerce came from, and how e-commerce platforms work, it is worth systematizing these issues.
One can divide e-commerce into types according to the relationship between the seller and the buyer:
- B2C – Business-to-Consumer is a retail, direct-to-consumer model. This can include, for example, books, furniture, food, or services. Everything that is available to regular customers in stores. There is also the reverse form – C2B, where private individuals post their offers, and companies purchase, for example, the services of influencers.
- B2B – Business-to-Business is a type of trade focused on business relationships. These are, for example, wholesalers, suppliers of production materials or ready components for further use.
- Marketplace (C2C) – e-commerce is not only about stores. They are also platforms that mediate transactions, rather than offering services directly. They can take the form of traditional product listings with the option of instant purchase or online auctions. This type of sale is available to both companies and individuals. The most popular examples of such platforms in Poland are Allegro or Olx.
- Social Commerce – what does it mean? This is a relatively new form of e-commerce that involves social media transactions. Trading on groups, making a purchase from another user, or selling directly through the platforms.
…or distinguish its different types by sales models:
- Instant purchase – products and services are ordered once. There is also a single payment made. Just like in a traditional store.
- Subscription – subscription in e-commerce is defined as a recurring payment for a particular service or product without the need for a standing order. It can be music streaming, access to an online service, or a box diet. There is nothing stopping you from experimenting with other products from the offer, such as… heated seats, already famous in the automotive industry.
Growing popularity of online trade
Since the first $10 sale in the 1990s, from $3.5 billion in 2019 to over $6.3 billion in 2023, the market for online products and services has grown exponentially. What was the reason for the rapid growth of e-commerce?
- The most obvious driver of the development of the e-commerce market was the pandemic. Lockdowns, social distancing, closed stores. Both sellers and consumers had to cope somehow, which is why shopping moved to the virtual world. Marketplaces flourished, companies began to develop stores that were often already available on their websites, and those who were not yet online began to consider implementing e-commerce.
- An important factor in the development of e-commerce has been the spread of smartphones and other mobile devices, and with them, the growth of digital accessibility for many people. Currently, mobile commerce accounts for about 40% of all online transactions.
- For many companies, especially on the European market, it is also an opportunity to relatively easily expand their target group and conduct business abroad. The relative ease of doing business is why e-commerce across borders is booming and has become a way to increase sales. More than 30% of Europeans buy goods and services online outside their home country.
- On the technology side, e-commerce offers a relatively simple and low-cost opportunity to expand abroad and reach more people. If we already have a stable sales platform in one country, what we need to do is to prepare another base store on the same platform and adapt it to a given market – by that I mean translations, adapting processes to the legal requirements of a given country, as well as ensuring that the store is customer-friendly, for example by offering payment methods popular in the country or customer service in the language of our customers. We can prepare all of this remotely, which makes it a relatively easy and fast way to increase our reach and target audience – says Alicja Sloma, Business Solution Lead at Hicron.
- Direct-to-customer is a business model adopted by many organizations entering the e-commerce market. It involves bypassing intermediaries, distributors, or stores and selling the product or service directly to the recipient. Thanks to the simplification of the purchasing process, time and money are saved.
- Although Generation Z is still young in the minds of many people, in reality it is already a large group of young adults earning their own money. They move seamlessly through the network, using all available devices. As a result, they are much more likely to make purchases online. They are also much more aware of their choices and determined to fight for what they believe in.
E-commerce in the B2B industry
A new generation entering the market means a new perspective on sales. In the business-to business-model, 83% of young people are more likely to choose instant purchase and payment than the traditional purchasing model. They strongly prefer self-service to talking to representatives.
Their demands have also increased.
In business, Customer Experience is very important, because customers place orders for higher amounts, so it pays to make sure they stay with us by providing the right online service. B2B customers already expect standards similar to B2C – the expert reminds.
The offer should be presented in a transparent and user-friendly manner.
For young managers, loyalty is less important than performance. 90% of Gen Z B2B buyers would turn away from a supplier who does not pay attention to trends[1].
Is this the end of traditional sales? No, on the contrary. Experts from the B2B eCommerce Association agree that the omnichannel model will survive, and sales will not move entirely to the Internet. But to avoid being left behind, it is worth following the latest e-commerce trends.
Business-to-business e-commerce in SAP
The implementation of the platform itself offers tremendous opportunities for capturing customer, sales, or product data, but it is only the integration of e-commerce with SAP that brings real synergies. Many processes can be automated while reducing the risk of human error. Connection with an ERP system also means a new level of Customer Experience for users, who can check, for example, the availability of a particular product before ordering. They also gain a full overview of their order, fulfillment status, and forwarding service, if applicable.
For omnichannel organizations, integrating an ERP system with their e-commerce platform is crucial for proper operation. The need to verify data from multiple sources, simultaneous transactions, and payment processing must take place in an orderly and seamless manner.
If you are running a business and want to start taking advantage of the opportunities offered by e-commerce, security is an important issue you should pay attention to when choosing an integration partner or implementing a platform. When connecting an online store with the company’s internal system, it is important to make sure that it is implemented as well as possible.
Hicron’s e-commerce consulting also brings experience on both sides of the integration – the platform and SAP. Especially for large projects, this is an advantage that will improve communication, raise the quality of services, and facilitate coordination of activities.
Contact us and see how we work.
[1] Pivotal Trends and Predictions in B2B Digital Commerce in 2023, commercetools
FAQ
E-commerce: what is it?
E-commerce is all transactions carried out using the Internet. It includes classic online stores and advertising websites that use dedicated e-commerce solutions, but also groups or marketplaces on social media. Sales can be made by both business entities and individuals.
What are the types of e-commerce?
E-commerce can be divided according to the relationship between the seller and the buyer or by sales models.
Sales models include instant purchase or subscription, while the breakdown by relationship comprises B2B (Business-To-Business), B2C/C2B (Customer-To-Business), C2C/Marketplace (Customer-To-Customer), and social commerce, i.e. trade via social media.
What is the difference between B2B and B2C e-commerce?
Modern B2B e-commerce still lags behind direct-to-consumer sales, but the differences are slowly blurring. This is because the expectations of users are growing, and they expect the same convenience in everyday work as in private shopping. Business is paying more and more attention to Customer Experience, and the involvement of sales representatives in sales is becoming less important.
