7. Electronic Commerce

Learning Objectives

By the end of the chapter, you should be able to:

  1. Define Ecommerce
  2. List alternative forms of Ecommerce
  3. Explain the pros and cons of Ecommerce
  4. Experience using an Ecommerce platform
  5. Contrast Ecommerce with traditional business models

What is Ecommerce?

There are many definitions of Ecommerce but they all share a common theme.  Following is a description of Ecommerce as offered by one of Canada’s leading Ecommerce providers -Shopify:

Ecommerce, also known as electronic commerce or internet commerce, refers to the . 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.[1]

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.[2]

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.

  • 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).

  • 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)

  • 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).

  • 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[3]

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 transactions.

  • Retail:
    The sale of a product by a business directly to a customer without any intermediary.

  • Wholesale:
    The sale of products in bulk, often to a retailer that then sells them directly to consumers.

  • Dropshipping:
    The sale of a product, which is manufactured and shipped to the consumer by a third party.

  • Crowdfunding:
    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.

  • Subscription:
    The automatic recurring purchase of a product or service on a regular basis until the subscriber chooses to cancel.

  • Physical products:
    Any tangible good that requires inventory to be replenished and orders to be physically shipped to customers as sales are made.

  • Digital products:
    Downloadable digital goods, templates, and courses, or media that must be purchased for consumption or licensed for use.

  • Services:
    A skill or set of skills provided in exchange for compensation. The service provider’s time can be purchased for a fee.

Pros and Cons of Ecommerce

There are many arguments about the pros and cons of Ecommere and they are evolving as the technology does. The following is a discussion of pros and cons of Ecommerce as provided by a leading analyst on the subject.

You don’t need to be a business expert to know that e-commerce has reshaped the modern marketplace in recent years. While it’s a dominant model, selling goods or services online comes with its own set of advantages and disadvantages compared to traditional brick-and-mortar businesses.

Therefore, businesses need to look beyond the hype and develop their own perspectives on the value of e-commerce. How does it help businesses and why do consumers love online shopping? It’s important to explore both perspectives because advantages for consumers might end up becoming a disadvantage for e-commerce businesses. The most successful companies understand all the benefits and drawbacks well before they begin to see growing sales figures.

Advantages and Disadvantages of eCommerce[4]

By Ajeet Khurana (https://www.thebalancesmb.com/ajeet-khurana-1141298) (2019, November 20) in The Balance Small Business (https://www.thebalancesmb.com/ecommerce-pros-and-cons-1141609)

You don’t need to be a business expert to know that e-commerce has reshaped the modern marketplace in recent years. While it’s a dominant model, selling goods or services online comes with its own set of advantages and disadvantages compared to traditional brick-and-mortar businesses.

Therefore, businesses need to look beyond the hype and develop their own perspectives on the value of e-commerce. How does it help businesses and why do consumers love online shopping? It’s important to explore both perspectives because advantages for consumers might end up becoming a disadvantage for e-commerce businesses. The most successful companies understand all the benefits and drawbacks well before they begin to see growing sales figures.

E-Commerce Advantages

The internet might be the single most important facet of modern society. It plays a primary role in everything from political discourse and higher education to the way we conduct ourselves and our businesses. It’s no wonder, then, that switching to an e-commerce model comes with significant advantages.

E-commerce eliminates the need for physical stores and allows businesses to expand their customer base. On top of eliminating the possibility of long lines, e-commerce sites offer a huge advantage to both shoppers and stores that aren’t located in major urban areas. Even if you are located in a big city, e-commerce opens up new markets, allowing you to develop a new business model geared toward your expanding consumer base. Many businesses have found particular success in developing good e-commerce Search Engine Optimization, which drives more traffic to the site.

Your business can also save money on rent, utilities, maintenance, and other costs associated with physical stores. Your e-commerce store can essentially remain open 24/7 without hiring employees to watch over the store and protect items. Since you aren’t confined to a set amount of shelf space, there is no limit to the number of items that can be sold online, and your store’s stock can expand exponentially. Physical products will still have to be stored somewhere, but storage spaces are often cheaper than retail spaces, and you won’t have to worry about factors like foot traffic and parking spaces.

Digital products can be sold online with little-to-no overhead cost. Thanks to e-commerce, consumers can purchase music, videos, or books instantaneously. Stores can now sell unlimited copies of these digital items, without having to worry about where they’ll store the inventory.

E-commerce also allows your business to scale up easier than physical retailers. When a brick-and-mortar store grows, it needs to consider how it will serve more customers in the same small space. More employees are needed to expedite check-outs, more of the floor gets dedicated to forming lines, shoppers feel more crowded as customer base and inventory grows. Of course, logistics always get tougher as a business grows, no matter how the business operates. With the right choice of a third-party logistics provider, however, e-commerce companies can manage this growth without worrying about the physical store aspects.

Keeping in contact with customers is often easier for e-commerce businesses. Since the e-commerce merchant captures contact information in the form of email, sending out both automated and customized emails is simple. Let customers know about a sale, promote a new product, or just check in with customers for a personal touch—all with minimal effort. Additionally, web tools like cookies allow for superior store customization and consumer behavior analysis.

The benefits consumers enjoy are shared by e-commerce companies when it comes to the supply chain. Consumers like online shopping because they don’t have to deal with cash, worry about schedules, or wait in long lines. Those benefits also apply to entire supply chains interlinked with business-to-business e-commerce systems. Procurement becomes faster, transparent, and there’s no need to handle currency notes or cash. The result is cheaper, easier transactions with fewer opportunities for accounting errors.

Finally, e-commerce allows your business to track logistics, which is key to a successful e-commerce company. Having everything digitized makes it easier to automatically collect data and crunch numbers. While you can benefit from knowing what’s selling best, you can also afford to take more risks on low-volume goods. The conventional retail strategy focuses on stocking fast-moving goods, but the economics of e-commerce permits slow-moving and even obsolete products to be included in the catalog. Storage is less expensive, and displaying the product is as easy as adding another item page to your site.

E-Commerce Drawbacks

While it may initially seem like e-commerce will solve all your business problems, there are disadvantages to switching from a physical location to an online store.

Many consumers still prefer the personal touch and relationships formed at a brick-and-mortar shop. This can be especially valuable to customers shopping for specialized products, as they may want to consult an expert about the best product for their needs. A solid customer service hotline can’t replace face-to-face interaction with a specialized sales rep. Additionally, many customers want to experience the product before purchase, like when shopping for clothes.

Security and credit card fraud are also huge risks when dealing with online shopping. Consumers run the risk of identity fraud and similar hazards every time they enter their details into a site. If your site doesn’t convince shoppers that the check-out process is secure, they could get scared out of buying. On the other hand, businesses run the risk of phishing attacks and other forms of cyberattacks. If one of your employees opens just one malicious link, it could compromise your website functionality, financial information—or worst of all, your customers’ information.
If shopping is about instant gratification, then consumers are left empty-handed. They often have to either pay more for expedited shipping or wait for several days until the product arrives. The wait could drive away customers. For businesses, the shipping becomes extra complicated when a customer wants a refund. Growing e-commerce businesses need to expand their reverse logistics functions, meaning the shipping back of goods and refunding of costs.

Speaking of costs, there’s a multiplicity of regulations and taxes that come with opening an e-commerce shop (and a fair amount of confusion, as well). On June 21, 2018, the U.S. Supreme Court ruled that states can charge sales tax on e-commerce transactions. But the Supreme Court left it up to states to decide what size of online retailers must pay sales tax, and what that tax rate will be. That’s just one example of the regulatory confusion that has stemmed from e-commerce’s rapid growth, and it doesn’t even touch on international trade laws. The result is a regulatory patchwork that retailers are responsible for learning, no matter how complicated.

Good for Consumers, Bad for Businesses[5]

Some aspects of e-commerce don’t fit nicely into just the pro or con side of the argument. Unique issues present an advantage to shoppers while adding difficulty for businesses. Customers might be buying, but the business could suffer in other ways.

Price comparison is a major advantage for online shoppers that can restrict businesses. Consumers can compare prices with a simple click, rather than crossing town to check another store. Many shoppers will search for the absolute lowest price, and if you can’t offer it, you will probably lose the sale.

Even if you can offer lower prices, businesses who compete in these price wars will see their profits decline. Though there is nothing about e-commerce that’s intrinsically tied to discounts, the way online business has evolved has led to lower prices. Buyers love the lower prices, but sellers—not so much.

Shipping is convenient for consumers, but it adds inconvenience to the business. Shoppers love having things delivered right to their doorstep, but the logistics of delivery adds substantial strain to the e-commerce business operation. The more you ship, the bigger the burden becomes. Logistics and management can become a nightmare, even as the business enjoys steady profit growth and customer retention.

Ecommerce Platforms

There are many ecommerce platforms in the marketplace today.  These platforms make it easier for businesses to deliver Ecommerce to their clients.  There are also many analysts each with opinions about which platform is the best and why.  The following content is drawn from The Balance Small Business, an organization focused on exploring and advising about alternative Ecommerce platforms.  It discusses three alternatives including one which will be used in this course for a key assignment where you will develop an Ecommerce site!

Best Ecommerce Platforms[6]

The quest to discover the best ecommerce platform out there has been our ongoing goal here at ecommerce-platforms.com ever since the site was established. We invest real hours each week to test and examine each platform, all in an effort to find out how viable they are among the top ecommerce platforms in the market.We’re doing all this testing so that you don’t have to.

The resource you’re reading right now is a summary of our findings + how to pick the perfect ecommerce solution for your individual needs!

No time to read? Here’s our no.1 pick when it comes to the absolute best ecommerce platform in the market:

Shopify (https://ecommerce-platforms.com/go/TryShopify?utm_content=EP%2Farticles%2Ftop-6-ecommerce-platform-reviews-2012-shopify-volusion-bigcommerce-magento-bigcartel-3dcart) is the most flexible, feature-rich and the most complete ecommerce platform of the bunch. Out the box, it already offers everything you might need to run an effective store, and also lets you customize your design and add various feature extensions.You can also sell pretty much whatever you wish, including physical products, digital products and downloads, services, and even do drop-shipping.

Screen shot of Shopify home page promoting a free trail illustrated with ecommerce pictures

All of that starting at the price of $29 / month, or as low as $9 / month if you’re okay with not having an online storefront but instead selling via social media and other channels. I wouldn’t have a problem recommending this platform to anyone looking to get started in the ecommerce industry.

Overall rating: 10/10


Ecwid (https://ecommerce-platforms.com/go/Ecwid?utm_content=EP%2Farticles%2Ftop-6-ecommerce-platform-reviews-2012-shopify-volusion-bigcommerce-magento-bigcartel-3dcart) is the only sensible free option in the market right now. Though, it’s not without flaws. Chiefly, you don’t get any interchangeable themes/designs for your store – you can only adjust the stock design by changing fonts, colors, etc. There’s also no support on the free plan, and you can only have up to 10 products.

best ecommerce platform ecwid homepage

It might be a good place to start for some online stores. However, once your store gets off the ground and starts earning money, you’re probably still better off switching to a different platform.

Overall rating: 7/10

As hard as it might be to believe, there are over 120 different shopping cart software platforms out there, and they all have their place in the market. We should know, after all, our work is to test them all out. And we’ve been doing that … a lot. So far, we’ve covered each of the top platforms in individual reviews (https://ecommerce-platforms.com/comparison-chart) plus created a comprehensive comparison chart looking through the most crucial traits of each platform. We’ve also ranked all platforms based on their SEO effectiveness (https://ecommerce-platforms.com/compare/best-ecommerce-platform-seo).

What you’re reading here is an all-in-one summary of which is the best ecommerce platform, plus what makes each of the contenders great. After reading this guide, you will know exactly how to pick the right ecommerce solution for your store.

Here are the best ecommerce platforms that we’re testing:6

  1. Shopify (https://ecommerce-platforms.com/go/TryShopify?utm_content=EP%2Farticles%2Ftop-6-ecommerce-platform-reviews-2012-shopify-volusion-bigcommerce-magento-bigcartel-3dcart)
  2. BigCommerce (https://ecommerce-platforms.com/go/TryBigcommerce?utm_content=EP%2Farticles%2Ftop-6-ecommerce-platform-reviews-2012-shopify-volusion-bigcommerce-magento-bigcartel-3dcart)
  3. Ecwid (https://ecommerce-platforms.com/go/Ecwid?utm_content=EP%2Farticles%2Ftop-6-ecommerce-platform-reviews-2012-shopify-volusion-bigcommerce-magento-bigcartel-3dcart)
  4. Volusion (https://ecommerce-platforms.com/go/TryVolusion?utm_content=EP%2Farticles%2Ftop-6-ecommerce-platform-reviews-2012-shopify-volusion-bigcommerce-magento-bigcartel-3dcart)
  5. 3dcart (https://ecommerce-platforms.com/go/Try3dcart?utm_content=EP%2Farticles%2Ftop-6-ecommerce-platform-reviews-2012-shopify-volusion-bigcommerce-magento-bigcartel-3dcart)
  6. Big Cartel (https://ecommerce-platforms.com/go/TryBigcartel?utm_content=EP%2Farticles%2Ftop-6-ecommerce-platform-reviews-2012-shopify-volusion-bigcommerce-magento-bigcartel-3dcart)

Key Takeaways / Important Terms and Concepts

  1. Ecommerce refers to the buying and selling of goods or services using the internet, and the transfer of money and data to execute these transactions..
  2. There are four main types of ecommerce models that can describe almost every transaction that takes place between consumers and businesses – business to consumer (B2C), business to business (B2B), consumer to consumer (C2C), and consumer to business (C2B)
  3. There are many advantages to using Ecommerce including the possibility of eliminating the need for physical stores, the ability to access and the ability to reach more customers.  See the full list above.
  4. There are disadvantages to using Ecommerce including technical complexity and security issues (see the full list above)
  5. There are many  platforms available in the marketplace today which help business adopt Ecommerce.  One such platform, and a Canadian technology success story, is Shopify.
  6. You will experience using Shopify in a kay assignment for this course!



Icon for the Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License

The Business Environment Copyright © 2020 NSCC Edition by NSCC, eCampus Ontario, Pamplin College of Business and Virgina Tech Libraries is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License, except where otherwise noted.

Share This Book