What is e-commerce?

By definition e-commerce refers to businesses and consumers buying and selling products online. The majority of e-commerce websites on the internet are retail stores selling products directly to the public. However there are also a proportion of online stores dedicated to business-to-business (B2B) sales or wholesale activity. E-commerce does not only refer to the selling of physical products, it can also refer to the selling of services where payments for the services are made online. As a general rule an e-commerce website is a website where a transfer of funds is completed electronically - hence e-commerce.

How does e-commerce work?

Because there are hundreds of different products and services for consumers and the multitude of different ways these products and services can be delivered, e-commerce by its nature is varied in the way it works. In its most basic form e-commerce works as follows:

  1. Consumers choose a product or service on a website
  2. Consumers pay electronically on the website (online credit card transactions) or using a third party payment provider such as PayPal
  3. The business owner or merchant receives the order and payment and the order is fulfilled (delivered by post, booked in for services etc)

Making payments online is completed via a secure connection to ensure that sensitive data such as credit card details and personal information are kept private.

What are the benefits of e-commerce to the consumer?

Over the past decade e-commerce has become the preferred method of shopping for a large number of consumers. Online shopping provides a vast array of benefits to the consumer that is otherwise unavailable in standard brick and mortar stores.

Quick, easy and convenient: E-commerce has enabled the consumer to complete transactions from the comfort of their own home, transactions that would usually happen within the walls of a store. Transactions now take only minutes, rather than the hours included in physically getting to the stores.

Product comparisons: Not only are consumers finding it quick and more convenient to shop online but they are also making more comparisons than ever. Comparing the price, delivery time and product specifications have never been simpler. Quickly browsing multi websites that stock products that suite your criteria is as simple as a Google search - consumers can now compare multiple products in minutes.

Lower prices: Many consumers are turning to e-commerce for their needs due to the lower price for many everyday items. Different factors on the merchant's side of the equation allow them to sell products at a lower price compared to a standard store and these cost savings are often passed to the end consumer.

What are the benefits of e-commerce to the merchant?

Reduced costs: End consumers are treated to lower prices and this is all due to reduced costs for the merchant. Online retailing requires no sales staff, hence a reduced labour cost. Electronic payments which are often automatically tracked and linked to accounting software results in reduced paper work and reduced errors in data entry. Costs involved the maintenance of a physical storefront are also removed, with the major cost of e-commerce going to warehousing and product storage.

Shorter time frames: E-commerce allows for highly reduces lead times, as well as the more efficient delivery of products.

Increased consumer reach: E-commerce allows online merchants to stock a larger product range than a traditional store. This larger product range means more products are suited to a larger consumer base and hence greater possible reach. E-commerce stores are also available from anywhere, interstate and international customers are no longer a missed segment - this results in a massively increase possible consumer base.

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