E-commerce involves the use of the Internet, mobile apps, and browsers running on desktop computers to trade. Often synonymously used, the words ‘Internet’ and ‘Web’ do indeed mean very different things. The ‘Internet’ is a giant network of smaller networks, and the ‘Web’ is one of the Internet’s more popular functions, providing access to the world’s websites. An app is the term used when we are referring to mobile applications. However, it’s sometimes used to refer to PC applications as well. More formally, e-commerce can be described as digitally enabled commercial transactions between and among organisations and individuals. The exchange of value is critical for understanding the functionality of e-commerce. Without the exchange of value, no commerce occurs.
UNIQUE FEATURES OF E-COMMERCE TECHNOLOGY
Before e-commerce, the marketing and sales of products/services was a mass-marketing and salesforce–driven activity. Marketers/sellers typically viewed consumers as soulless targets of advertising and branding campaigns sought to influence their long-term product perceptions and immediate purchasing intent. Companies sold their products via isolated channels, and consumers were confined by geographical and social boundaries, unable to search widely for price/quality variations. Information related to pricing and costs could be hidden from the consumer, creating profitable information imbalances for the sellers. In traditional retailing, it was cost-prohibitive to change regional prices, such that one national price was expected, and no dynamic pricing for the market existed. In the traditional environment, manufacturers prospered by relying on substantial production runs of products that could not be customised/personalised.
E-commerce technology makes it possible for sellers to know a vast amount more about consumers and use it to make more complex/profitable marketing decisions. Online sellers can now use this information to develop new information imbalances, level-up their ability to brand products/services, charge premiums for high-quality services, and segment the market into an endless number of subgroups, each receiving a different price. What’s more, is that the same technology also makes it possible for sellers to know more about other sellers than ever before. This presents the possibility for sellers to collude on prices rather than compete and drive overall average prices up.
PERSONALISATION AND CUSTOMISATION
E-commerce technology permits personalisation; sellers can laser-target their marketing messages to individuals by personalising the message to their name, interests, and past purchases. Today this can be achieved in a fraction of a second and followed by an advertisement based on the consumer’s profile. The technology also permits customisation; changing products/services to suit individuals preferences or prior online behaviour. Given the now individualised nature of e-commerce technology, a tremendous amount of information about a consumer can be obtained in the online marketplace at the time of purchase.
With the explosion of information density inherent with e-commerce, information about the consumer’s past purchases and behaviour can be stored and used by sellers. This results in a level of customisation previously unthinkable with traditional commerce. Customisation and especially personalisation allows sellers to identify market segments and adjust their messages with purpose precisely, and react to the feedback loop.
TYPES OF E-COMMERCE
There are several types of e-commerce and many different ways to characterise them. Generally, we distinguish e-commerce by the nature of the relationship to the market; who is selling to who.
BUSINESS-TO-CONSUMER (B2C) E-COMMERCE
The most familiar type of e-commerce is business-to-consumer (B2C) e-commerce, in which online businesses attempt to reach individual consumers. B2C e-commerce includes purchases of retail goods, travel and other types of services, and online content. Even though B2C is still emerging, it is the type of e-commerce that most consumers are likely to experience. Online sales growth (not total sales) will likely eventually decline. However, that is a long way off, especially now that COVID-19 is driving so many businesses to the online marketplace. Selling of online content, music, video, medical information, games, and entertainment, have a more extended period to grow before they hit any sales ceilings.
BUSINESS-TO-BUSINESS (B2B) E-COMMERCE
Business-to-business (B2B) e-commerce, focuses on selling to other businesses and is the most massive form of e-commerce. The ultimate size of B2B e-commerce is potentially huge.
CONSUMER-TO-CONSUMER (C2C) E-COMMERCE
Consumer-to-consumer (C2C) e-commerce is a way for consumers to sell to each other, think TradeMe or on-demand service companies such as Airbnb, Uber, for example. In C2C, the consumer relies on a service maker to provide a catalogue, and transaction-clearing capabilities so that products can be easily discovered, and purchased.
MOBILE E-COMMERCE (M-COMMERCE)
M-commerce is the use of mobile devices to carry out transactions. M-commerce involves the use of a mobile network, or WiFi to connect smartphones and tablet computers to the Internet. Once connected, mobile consumers can purchase products and services, make travel reservations, use an expanding variety of financial services, access online content, and much more. Factors that are driving the growth of m-commerce include the increasing amount of time consumers are spending using mobile devices. Others drivers are larger smartphone screen sizes, greater use of responsive web design (enabling e-commerce sites to be better optimised for mobile use) and mobile checkout and payment, and enhanced mobile search functionality.
Social networks and online social relationships enable social e-commerce. Driving the growth of social e-commerce is the popularity of social sign-on (signing onto websites using Facebook / Google profiles), and the sharing of recommendations or disapproval of goods/services. There is now a prevalence of integrated social commerce tools such as Buy buttons, Shopping tabs, and virtual shops on Facebook, Instagram, Pinterest, YouTube, and other social network sites.
Social e-commerce is still in its relative infancy but is gaining tremendous traction. Social e-commerce is often intertwined with m-commerce, mainly as more and more social network users access those networks via mobile devices.
Local e-commerce, as its name suggests, is focused on engaging buyers based on their geographic location. Local sellers can use a variety of online marketing techniques to bring consumers to their stores. Local e-commerce is intertwined with the mobile and social e-commerce wave. It is fueled by an explosion of interest in local on-demand services.