E-commerce: what is it, how it works, types of e-commerce

E-commerce: the new way of selling

E-business is a unique business model. Thanks to it, online services and web platforms can sell online. Let’s explain what e-commerce is in simple language and analyze it with examples with SECLGroup team.

Online trading covers all commodity-money relations occurring through the global network, namely:

  • supplier search;
  • execution of contracts;
  • buying, selling, or exchanging products.

History of appearance

The founders of e-commerce are systems for automating and managing business processes. One of these was the SABER system, created in the 1960s by the American companies American Airlines and IBM. The technology was used to automate flight bookings. Thus, by optimizing the seat reservation process, the cost of air tickets has decreased and passenger traffic has increased.

An interesting fact is that the first to succeed in selling over a computer network were students at the Massachusetts Institute of Technology (MIT). In 1971, MIT students succeeded in supplying psychoactive drugs to students at Stanford University via the ARPANET, a computer network developed for the US Department of Defense.

The development of e-commerce in the world

In 1979, English inventor Michael Aldrick demonstrated the Videotex online shopping program to the world. He created a new model for communicating with clients by combining television and a telephone line into a single system.

In 1981, the B2B online trading system was created. The following year, the French company France Télécom developed Minitel’s online ordering program based on Videotex software.

The heyday of e-commerce came in the 1990s of the last century. In 1995, the largest e-commerce platforms Amazon and eBay (then AuctionWeb) were created. And already in 1999 – Alibaba Group.

After 5 years, a new DHgate platform for b2b transactions appears on the market. The service has played a significant role in the development of b2b sites. Thanks to the Chinese company, other trading platforms for finding business partners have begun to move away from the yellow pages model.

In 2012, e-commerce sales reached $ 1 trillion, and the number of Internet sites amounted to 32.5 thousand. In 2017, retail sales were already $ 2.304 trillion, which is 230% more than 5 years ago.

With the advent of mobile devices, the e-commerce market has grown by more than 25%. Many companies around the world have begun to invest in mobile applications.

Following current market trends, experts expect a significant increase in e-commerce volumes and an increase in the share of the total retail trade turnover. According to experts, by 2023 the turnover of e-commerce will exceed . ( 5 trillion. It is worth noting that every fifth dollar (22%) will be spent on purchases in the global network.

E-Commerce Examples

The scope of e-commerce is very wide. These are small online stores on Instagram, Facebook with several dozen sales per month, and huge international marketplace platforms, and streaming services like Netflix, and even a local woodworking factory that switched to online sales. And also Apple and Google ecosystem stores and websites of developers selling their own software.

Here are some examples of the most famous e-commerce projects:

  • eBay is an online auction service with 185 million active users. An example of not only b2c but also c2c service: here you can find goods from private sellers, including rare and collectible items.
  • Amazon is the world’s largest retailer with its own delivery service with drones and robots and a huge network of warehouses and sorting centers. An example of a b2c platform in the e-commerce market.

How does e-commerce work?

E-commerce systems simplify the purchase process for customers: it is enough to pay for the purchase online using a bank card or transfer, and the goods will be delivered to the customer’s home or, if it is an electronic purchase, access will be sent by e-mail. It’s much faster and easier than going to the store.

And online shopping on the Internet significantly expands the choice and removes barriers for people with disabilities. For example, for a visually impaired person, walking to the nearest supermarket and choosing food for dinner can be a serious problem. All information on the packages is textual and graphic. And the transitions are not everywhere equipped with signs for people with visual impairments. Online ordering allows you to study the characteristics of products without visual information and choose what you need. And they can usually deliver it directly to your home.

Digital e-commerce is built on the following principle:

  • The client selects a product or service in the catalog, and his device interacts with the browser.
  • When the request arrives at the server, the manager receives it.
  • The manager accesses the database, checks the availability of goods in the warehouse, and confirms the order. This can happen without human intervention – automatically. Depending on system settings.
  • The customer pays for the order with a card. The transaction is processed by a bank or financial system. Approves or rejects it. If the transaction is approved, the order is processed.
  • Then the application is transferred to the warehouse, from where the order is sent to the point of issue or directly to the buyer’s home.
  • Employees of the logistics department pick up the order from the warehouse and deliver it to the client or to the point of issue.
  • When the order is delivered, the client receives an SMS notification or an email.

This is an exemplary e-commerce algorithm, but it is suitable not only for physical goods but also for electronic goods and services. The only caveat is that the goods are not delivered, but they open access for downloading or sending an access key to e-mail. Or they send the date and time of contact with the specialist whose services you paid for.

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