According to Websters, ecommerce is simply the conduct of "commerce on the Internet". The Britannica encyclopaedia explains ecommerce as "maintaining relationships and conducting business transactions that include selling information, services, and goods by means of computer telecommunications networks".
The scale of ecommerce business
eCommerce accounted for 16.1% of all retail sales in the US in Q2, 2020 (source US Census Bureau Quarterly Retail E-commerce Sales 3rd Quarter 2020), following years of strong growth since 2010 when it was 4.4% (source: US Census Bureau 2010 E-commerce Multi-sector Data Tables). Even before the explosive growth seen in 2020 as a result of physical stores being closed during the pandemic, ecommerce had been growing strongly since its inception in the 1990's. Adobe's Digital Economy Index report shows ecommerce sales in July 2020 were $66.3b, a 55% rise over same month 2019. US Census Bureau's latest figures show $209.5bn of seasonally adjusted sales in Q3, 2020 and $738.1bn in the last four quarters.
Types of ecommerce
While it is tempting to think of ecommerce as a single phenomenon, there are several different types of ecommerce and learning the terminology can help you talk more knowledgeably to technology vendors and service providers, help you secure a job in ecommerce, or secure funding for a venture.
B2C - Business-to-consumer
B2C ecommerce is the selling of products and services by a business to consumers. If you or I visit a typical retailer's website and order goods or services for ourselves or our family or friends, this is B2C commerce. B2C ecommerce relies on the merchant running a web store on an ecommerce platform, or selling through a marketplace, or both.
B2B - Business-to-business
B2B ecommerce is the selling of products and services by a business to another business. While some B2B commerce operates in a similar way to the B2C websites you may be familiar with, much B2B commerce operates in a significantly different way, for example when customers are pre-approved before they can order, customers are given a unique price list for their orders, when orders can be placed up to a credit limit without payment at time of order, when multiple staff from the customer organization can login and build orders but only some of them can approve the final execution of that order.
Social commerce is conducting ecommerce within a social networking site such as Facebook or Instagram. Almost all social commerce is B2C commerce, that is commerce directed at individual consumers as the customer. Statista lists the most popular social networking services (in descending order of monthly active users worldwide, as of October 2020) as Facebook, YouTube, WhatsApp, Messenger, WeChat, Instagram, TikTok, QQ, Douyin, ranging from 600m to 2.7b active users per month. Hootsuite reports that there are 3.7 billion monthly active social media users in the world, accounting for 83% of the 4.5 billion Internet users, of whom 75% have conducted an ecommerce transaction. The opportunity is therefore huge to provide social commerce given such a large audience.
Instagram launched Checkout By Instagram in 2019 to enable retailers to build capabilities to showcase and sell their products directly from their Instagram presence. Facebook Shops offers the facility to load a product catalog and present a store within Facebook so that users do not have to leave the familiar Facebook environment.
F-Commerce - Facebook Commerce
F-Commerce is the selling of products on Facebook. That is, F-Commerce is a specific type of Social Commerce, conducted through pages on the Facebook social media network.
C2C - Consumer-to-consumer
C2C ecommerce is the ecommerce experience that allows a consumer to sell a product to another consumer, similar to a garage sale in the physical world. eBay is the most well-known example of a C2C ecommerce site in the US, where a consumer can post a description of a product they have for sale, and other consumers can search and find those products and buy them. C2C works well when the website brokering these transactions has massive scale, as eBay does, so that products can be seen by huge numbers of potential buyers. The website operator typically charges its fees to the seller not the buyer, charging a listing fee and a percentage of the final sale price. eBay offers both fixed price sales listings as well as an auction format where the seller can list a product for fixed duration with an optional reserve price. Multiple consumers indicate, within the fixed auction listing period, the maximum price they are willing to pay and the winner is the one that has bid the most. The transaction is completed on the website after which the seller ships the product to the buyer.
Given the opportunity for both buyers and sellers to enter into fraudulent transactions, for example by selling fake goods, eBay maintains strict rules and provides a customer service function that protects buyers from issues. Trust of both parties in the intermediary is a key enabler in C2C ecommerce.
B2B2C - Business-to-business-to-consumer
B2B2C ecommerce refers to a business selling products to another business that will sell them on to a consumer. An example of this is a consumer electronics manufacturer selling gadgets to a retailer who will then sell them to a consumer. That is, the products being sold by the manufacturer are not for consumption by the business buying them, rather they are intended to be sold as part of its business with consumers. The nature of this type of ecommerce relies on being clear about the quantity being purchased, the price, delivery and other terms associated with the sale, and other commitments such as minimum quantity, speed of delivery and delivery locations.
B2B2B - Business-to-business-to-business
B2B2B ecommerce refers to a business selling products to another business that will sell them to another end customer business. While this may sound like a convoluted way of doing business, the classic distributor model is an example of B2B2B, where products are sold by the manufacturer to distributors that are geographically dispersed, or that are set up to serve customers in different sectors of industry. The products are either delivered to the distributor for them to then distribute to the end customer business, or the contractual arrangements between manufacturer and distributor allow for the manufacturer to deliver directly to the end customer, often for the very largest customers.
C2B2C - Consumer-to-business-to-consumer
C2B2C ecommerce is a form of buying and selling where a consumer sells a product (often a used or second-hand product) to a business which in turn refurbishes it and sells it on to another consumer. We have a separate article on C2B2C giving more depth on this model.
B2G - Business-to-government
B2G ecommerce (sometimes called B2A Business-to-administration) is the selling of products and services by a business to a government organization as the buyer. The US government spent $597 billion in 2019 on services from private sector businesses. Governments in many countries globally also spend heavily on services from the private sector.
It is tempting to believe government only buys from mega corporations, given these total contract value figures from 2019 (source Bloomberg Government): Lockheed Martin $48.3b, Boeing $28.1b, General Dynamics $21.0b, Northrop Grumman $16.4b. However the US General Services Administration publishes guides to help private sector businesses, including small businesses, to compete for government contracts through its Federal Acquisition Service (FAS).
When these contracts are advertised and concluded online, this is B2G ecommerce.
M-Commerce - Mobile Commerce
M-Commerce is a term used to describe the use of mobile devices by customers to place their ecommerce orders. According to Pew Center Research, 84% of American adults own a smartphone and 52% of them own a tablet. In December 2019, Business Insider predicted sales conducted by a mobile device would reach 45% of all US ecommerce sales by end of 2020, up from 12% in 2015. This growth rate exceeds the growth rate of ecommerce as a whole, implying customers are increasingly shifting their ecommerce behaviour towards using mobile devices. Adobe reports 60% of ecommerce visits were through a mobile device during month of August 2020. M-Commerce as a concept has therefore largely been deprecated now; B2C ecommerce is so often mobile commerce there is no need to distinguish between them. Google stresses how important it is for retailers to ensure a good experience for mobile visitors.