What is Ecommerce?
E-commerce is the activity of buying or selling of products on online services or over the Internet.
Electronic commerce draws on technologies such as mobile commerce, electronic funds
transfer, supply chain management, Internet marketing, online transaction processing, electronic
data interchange (EDI), inventory management systems, and automated data collection systems.
Modern electronic commerce typically uses the World Wide Web for at least one part of the
transaction's life cycle although it may also use other technologies such as e-mail. Typical e-
commerce transactions include the purchase of online books (such as Amazon) and music
purchases (music download in the form of digital distribution such as iTunes Store), and to a less
extent, customized/personalized online liquor store inventory services. There are three areas of e-
commerce: online retailing, electric markets, and online auctions. E-commerce is supported
by electronic business.
E-commerce businesses may also employ some or all of the followings:
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Online shopping for retail sales direct to consumers via Web sites and mobile apps,
and conversational commerce via live chat, chatbots, and voice assistants
Providing or participating in online marketplaces, which process third-party business-to-
consumer or consumer-to-consumer sales
Business-to-business buying and selling;
Gathering and using demographic data through web contacts and social media
Business-to-business (B2B) electronic data interchange
Marketing to prospective and established customers by e-mail or fax (for example,
Engaging in pretail for launching new products and services
Online financial exchanges for currency exchanges or trading purposes.
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Ecommerce, also known as electronic commerce or internet commerce, refers to the buying and
selling of goods or services using the internet, and the transfer of money and data to execute these
transactions. Ecommerce is often used to refer to the sale of physical products online, but it can
also describe any kind of commercial transaction that is facilitated through the internet.
Whereas e-business refers to all aspects of operating an online business, ecommerce refers
specifically to the transaction of goods and services.
The history of ecommerce begins with the first ever online sale: on the August 11, 1994 a man
sold a CD by the band Sting to his friend through his website NetMarket, an American retail
platform. This is the first example of a consumer purchasing a product from a business through
the World Wide Web—or “ecommerce” as we commonly know it today.
Since then, ecommerce has evolved to make products easier to discover and purchase through
online retailers and marketplaces. Independent freelancers, small businesses, and large
corporations have all benefited from ecommerce, which enables them to sell their goods and
services at a scale that was not possible with traditional offline retail.
Global retail ecommerce sales are projected to reach $27 trillion by 2020.
Types of Ecommerce Models
There are four main types of ecommerce models that can describe almost every transaction that
takes place between consumers and businesses.
1. Business to Consumer (B2C):
When a business sells a good or service to an individual consumer (e.g. You buy a pair of shoes
from an online retailer).
2. Business to Business (B2B):
When a business sells a good or service to another business (e.g. A business sells software-as-a-
service for other businesses to use)
3. Consumer to Consumer (C2C):
When a consumer sells a good or service to another consumer (e.g. You sell your old furniture
on eBay to another consumer).
4. Consumer to Business (C2B):
When a consumer sells their own products or services to a business or organization (e.g. An
influencer offers exposure to their online audience in exchange for a fee, or a photographer
licenses their photo for a business to use).
Examples of Ecommerce
Ecommerce can take on a variety of forms involving different transactional relationships
between businesses and consumers, as well as different objects being exchanged as part of these
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The sale of a product by a business directly to a customer without any intermediary.
The sale of products in bulk, often to a retailer that then sells them directly to consumers.
The sale of a product, which is manufactured and shipped to the consumer by a third
The collection of money from consumers in advance of a product being available in order
to raise the startup capital necessary to bring it to market.
The automatic recurring purchase of a product or service on a regular basis until the
subscriber chooses to cancel.
6. Physical products:
Any tangible good that requires inventory to be replenished and orders to be physically
shipped to customers as sales are made.
7. Digital products:
Downloadable digital goods, templates, and courses, or media that must be purchased for
consumption or licensed for use.
A skill or set of skills provided in exchange for compensation. The service provider’s
time can be purchased for a fee.
In the United States, certain electronic commerce activities are regulated 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. 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. As a result, any
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.
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).
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.
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In Australia, Trade is covered under Australian Treasury Guidelines for electronic commerce and
the Australian Competition and Consumer Commission regulates and offers advice on how to deal
with businesses online, and offers specific advice on what happens if things go wrong.
In the United Kingdom, The Financial Services Authority (FSA) 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. 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
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 released, is the first administrative regulation 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 The 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
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Contemporary electronic commerce can be classified into two categories. The first category is
business based on types of goods sold (involves everything from ordering "digital" content for
immediate online consumption, to ordering conventional goods and services, to "meta" services to
facilitate other types of electronic commerce). The second category is based on the nature of the
participant (B2B, B2C, C2B and C2C);
On the institutional level, big corporations and financial institutions use the internet to exchange
financial data to facilitate domestic and international business. Data integrity and security are
pressing issues for electronic commerce.
Aside from traditional e-commerce, the terms m-Commerce (mobile commerce) as well (around
2013) t-Commerce have also been used.
In 2010, the United Kingdom had the highest per capita e-commerce spending in the world. As
of 2013, the Czech Republic was the European country where e-commerce delivers the biggest
contribution to the enterprises´ total revenue. Almost a quarter (24%) of the country's total turnover
is generated via the online channel.
Among emerging economies, China's e-commerce presence continues to expand every year. With
668 million Internet users, China's online shopping sales reached $253 billion in the first half of
2015, accounting for 10% of total Chinese consumer retail sales in that period. The Chinese
retailers have been able to help consumers feel more comfortable shopping online. e-commerce
transactions between China and other countries increased 32% to 2.3 trillion yuan ($375.8 billion)
in 2012 and accounted for 9.6% of China's total international trade. In 2013, Alibaba had an e-
commerce market share of 80% in China. In 2014, there were 600 million Internet users in China
(twice as many as in the US), making it the world's biggest online market. China is also the largest
e-commerce market in the world by value of sales, with an estimated US$899 billion in 2016.
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Recent research clearly indicates that electronic commerce, commonly referred to as e-commerce,
presently shapes the manner in which people shop for products. The GCC countries have a rapidly
growing market and characterized by a population that becomes wealthier (Yuldashev). As such,
retailers have launched Arabic-language websites as a means to target this population. Secondly,
there are predictions of increased mobile purchases and an expanding internet audience
(Yuldashev). The growth and development of the two aspects make the GCC countries to become
larger players in the electronic commerce market with time progress. Specifically, research shows
that e-commerce market is expected to grow to over $20 billion by the year 2020 among these
GCC countries (Yuldashev).
The e-commerce market has also gained much popularity among the western countries, and in
particular Europe and the U.S. These countries have been highly characterized with consumer-
packaged-goods (CPG) (Geisler, 34). However, trends show that there are future signs of a reverse.
Similar to the GCC countries, there has been increased purchase of goods and services in online
channels rather than offline channels. Activist investors are trying hard to consolidate and slash
their overall cost and the governments in western countries continue to impose more regulation on
CPG manufacturers (Geisler, 36). In these senses, CPG investors are being forced to adapt e-
commerce as it is effective as a well as a means for them to thrive.
In 2013, Brazil's e-commerce was growing quickly with retail e-commerce sales expected to grow
at a double-digit pace through 2014. By 2016, eMarketer expected retail e-commerce sales in
Brazil to reach $17.3 billion. India has an Internet user base of about 460 million as of December
2017. Despite being third largest user base in world, the penetration of Internet is low compared
to markets like the United States, United Kingdom or France but is growing at a much faster rate,
adding around 6 million new entrants every month. In India, cash on delivery is the most preferred
payment method, accumulating 75% of the e-retail activities. The India retail market is expected
to rise from 2.5% in 2016 to 5% in 2020.
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The future trends in the GCC countries will be similar with that of the western countries. Despite
the forces that push business to adapt e-commerce as a means to sell goods and products, the
manner in which customers make purchases is similar in countries from these two regions. For
instance, there has been an increased usage of smartphones which comes in conjunction with an
increase in the overall internet audience from the regions. Yuldashev writes that consumers are
scaling up to more modern technology that allows for mobile marketing. However, the percentage
of smartphone and internet users who make online purchases is expected to vary in the first few
years. It will be independent on the willingness of the people to adopt this new trend (The Statistics
Portal). For example, UAE has the greatest smartphone penetration of 73.8 percent and has 91.9
percent of its population has access to the internet.
On the other hand, smartphone penetration in Europe has been reported to be at 64.7 percent (The
Statistics Portal). Regardless, the disparity in percentage between these regions is expected to level
out in future because e-commerce technology is expected to grow allowing for more users. The e-
commerce business within these two regions will result in a competition. Government bodies at
country level will enhance their measures and strategies to ensure sustainability and consumer
protection (Krings, et al.). These increased measures will raise the environmental and social
standards in the countries, factors that will determine the success of e-commerce market in these
countries. For example, an adoption of tough sanctions will make it difficult for companies to enter
the e-commerce market while lenient sanctions will allow ease of companies. As such, the future
trends between GCC countries and the Western countries will be independent of these sanctions
(Krings, et al.). These countries need to make rational conclusions in coming up with effective
The rate of growth of the number of internet users in the Arab countries has been rapid – 13.1% in
2015. A significant portion of the e-commerce market in the Middle East comprises people in the
30–34 year age group. Egypt has the largest number of internet users in the region, followed by
Saudi Arabia and Morocco; these constitute 3/4th of the region’s share. Yet, internet penetration
is low: 35% in Egypt and 65% in Saudi Arabia.
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E-commerce has become an important tool for small and large businesses worldwide, not only to
sell to customers, but also to engage them.
In 2012, e-commerce sales topped $1 trillion for the first time in history.
Mobile devices are playing an increasing role in the mix of e-commerce, this is also commonly
called mobile commerce, or m-commerce. In 2014, one estimate saw purchases made on mobile
devices making up 25% of the market by 2017.
For traditional businesses, one research stated that information technology and cross-border e-
commerce is a good opportunity for the rapid development and growth of enterprises. Many
companies have invested enormous volume of investment in mobile applications. The DeLone and
McLean Model stated that three perspectives contribute to a successful e-business: information
system quality, service quality and users' satisfaction. There is no limit of time and space, there
are more opportunities to reach out to customers around the world, and to cut down unnecessary
intermediate links, thereby reducing the cost price, and can benefit from one on one large customer
data analysis, to achieve a high degree of personal customization strategic plan, in order to fully
enhance the core competitiveness of the products in company.
Modern 3D graphics technologies, such as Facebook 3D Posts, are considered by some social
media marketers and advertisers as a more preferable way to promote consumer goods than static
photos, and some brands like Sony are already paving the way for augmented reality commerce.
Wayfair now lets you inspect a 3D version of its furniture in a home setting before buying.
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Logistics in e-commerce mainly concerns fulfillment. Online markets and retailers have to find
the best possible way to fill orders and deliver products. Small companies usually control their
own logistic operation because they do not have the ability to hire an outside company. Most large
companies hire a fulfillment service that takes care of a company's logistic needs.
Contrary to common misconception, there are significant barriers to entry in e-commerce.
Impact on markets and retailers
Store closing flags outside a Toys R Us in New Jersey. Despite investments, the chain struggled
to win market share in the age of digital commerce.
E-commerce markets are growing at noticeable rates. The online market is expected to grow by
56% in 2015–2020. In 2017, retail e-commerce sales worldwide amounted to 2.3 trillion US dollars
and e-retail revenues are projected to grow to 4.88 trillion US dollars in 2021. Traditional markets
are only expected 2% growth during the same time. Brick and mortar retailers are struggling
because of online retailer's ability to offer lower prices and higher efficiency. Many larger retailers
are able to maintain a presence offline and online by linking physical and online offerings.
E-commerce allows customers to overcome geographical barriers and allows them to purchase
products anytime and from anywhere. Online and traditional markets have different strategies for
conducting business. Traditional retailers offer fewer assortment of products because of shelf space
where, online retailers often hold no inventory but send customer orders directly to the
manufacture. The pricing strategies are also different for traditional and online retailers.
Traditional retailers base their prices on store traffic and the cost to keep inventory. Online retailers
base prices on the speed of delivery.
There are two ways for marketers to conduct business through e-commerce: fully online or online
along with a brick and mortar store. Online marketers can offer lower prices, greater product
selection, and high efficiency rates. Many customers prefer online markets if the products can be
delivered quickly at relatively low price. However, online retailers cannot offer the physical
experience that traditional retailers can. It can be difficult to judge the quality of a product without
the physical experience, which may cause customers to experience product or seller uncertainty.
Another issue regarding the online market is concerns about the security of online transactions.
Many customers remain loyal to well-known retailers because of this issue.
Security is a primary problem for e-commerce in developed and developing countries. E-
commerce security is protecting business' websites and costumers from unauthorized access, use,
alteration, or destruction. The type of threats include: malicious codes, unwanted programs (ad
ware, spyware), phishing, hacking, and cyber vandalism. E-commerce websites use different tools
to avert security threats. These tools include firewalls, encryption software, digital certificates, and
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Impact on supply chain management
For a long time, companies had been troubled by the gap between the benefits which supply chain
technology has and the solutions to deliver those benefits. However, the emergence of e-commerce
has provided a more practical and effective way of delivering the benefits of the new supply chain
E-commerce has the capability to integrate all inter-company and intra-company functions,
meaning that the three flows (physical flow, financial flow and information flow) of the supply
chain could be also affected by e-commerce. The affections on physical flows improved the way
of product and inventory movement level for companies. For the information flows, e-commerce
optimised the capacity of information processing than companies used to have, and for the
financial flows, e-commerce allows companies to have more efficient payment and settlement
In addition, e-commerce has a more sophisticated level of impact on supply chains: Firstly, the
performance gap will be eliminated since companies can identify gaps between different levels of
supply chains by electronic means of solutions; Secondly, as a result of e-commerce emergence,
new capabilities such implementing ERP systems, like SAP ERP, Xero, or Megaventory, have
helped companies to manage operations with customers and suppliers. Yet these new capabilities
are still not fully exploited. Thirdly, technology companies would keep investing on new e-
commerce software solutions as they are expecting investment return. Fourthly, e-commerce
would help to solve many aspects of issues that companies may feel difficult to cope with, such as
political barriers or cross-country changes. Finally, e-commerce provides companies a more
efficient and effective way to collaborate with each other within the supply chain.
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Impact on employment
E-commerce helps create new job opportunities due to information related services, software app
and digital products. It also causes job losses. The areas with the greatest predicted job-loss are
retail, postal, and travel agencies. The development of e-commerce will create jobs that require
highly skilled workers to manage large amounts of information, customer demands, and
production processes. In contrast, people with poor technical skills cannot enjoy the wages welfare.
On the other hand, because e-commerce requires sufficient stocks that could be delivered to
customers in time, the warehouse becomes an important element. Warehouse needs more staff to
manage, supervise and organize, thus the condition of warehouse environment will be concerned
Impact on customers
E-commerce brings convenience for customers as they do not have to leave home and only need
to browse website online, especially for buying the products which are not sold in nearby shops.
It could help customers buy wider range of products and save customers’ time. Consumers also
gain power through online shopping. They are able to research products and compare prices among
retailers. Also, online shopping often provides sales promotion or discounts code, thus it is more
price effective for customers. Moreover, e-commerce provides products’ detailed information;
even the in-store staff cannot offer such detailed explanation. Customers can also review and track
the order history online.
E-commerce technologies cut transaction costs by allowing both manufactures and consumers to
skip through the intermediaries. This is achieved through by extending the search area best price
deals and by group purchase. The success of e-commerce in urban and regional levels depend on
how the local firms and consumers have adopted to e-commerce.
However, e-commerce lacks human interaction for customers, especially who prefer face-to-face
connection. Customers are also concerned with the security of online transactions and tend to
remain loyal to well-known retailers. In recent years, clothing retailers such as Tommy
Hilfiger have started adding Virtual Fit platforms to their e-commerce sites to reduce the risk of
customers buying the wrong sized clothes, although these vary greatly in their fit for
purpose. When the customer regret the purchase of a product, it involves returning goods and
refunding process. This process is inconvenient as customers need to pack and post the goods. If
the products are expensive, large or fragile, it refers to safety issues.
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E-commerce has grown in importance as companies have adopted pure-click and brick-and-
click channel systems. We can distinguish pure-click and brick-and-click channel system
adopted by companies.
Pure-click or pure-play companies are those that have launched a website without any
previous existence as a firm.
Bricks-and-clicks companies are those existing companies that have added an online site for
Click-to-brick online retailers that later open physical locations to supplement their online
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Type of Digital Channels
E-commerce may take place on retailers' Web sites or mobile apps, or those of e-commerce
marketplaces such as on Amazon, or Tmall from AliBaba. Those channels may also be supported
by conversational commerce, e.g. live chat or chatbots on Web sites. Conversational commerce
may also be standalone such as live chat or chatbots on messaging apps and via voice assistants.
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The contemporary e-commerce trend recommends companies to shift the traditional business
model where focus on "standardized products, homogeneous market and long product life cycle"
to the new business model where focus on "varied and customized products". E-commerce requires
the company to have the ability to satisfy multiple needs of different customers and provide them
with wider range of products.
With more choices of products, the information of products for customers to select and meet their
needs become crucial. In order to address the mass customization principle to the company, the
use of recommender system is suggested. This system helps recommend the proper products to the
customers and helps customers make the decision during the purchasing process. The
recommender system could be operated through the top sellers on the website, the demographics
of customers or the consumers' buying behavior. However, there are 3 main ways of
recommendations: recommending products to customers directly, providing detailed products'
information and showing other buyers' opinions or critiques. It is benefit for consumer experience
without physical shopping. In general, recommender system is used to contact customers online
and assist finding the right products they want effectively and directly.
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