What is E-Commerce? Everything You Need to Know [2022 Guide]

The e-commerce industry has become an indispensable part of global retail sales.

In fact, according to this Statista report, e-commerce revenues are projected to grow to 5.4 trillion U.S. dollars in 2022. So it’s no surprise that as those numbers skyrocket, more people are showing an interest in e-commerce and the opportunities associated with it.

If you’re interested in learning more about what e-commerce means and how it works, this article’s for you.

In this guide, we’ll cover all of the e-commerce basics you need to know. We’ll also take a look at some successful online stores—and share a little bit about how they came to be.

Here’s an overview of what you’ll learn:

• What is e-commerce
• History of e-commerce
• How does e-commerce work
• Types of e-commerce businesses
• What is an e-commerce website
• Best e-commerce platforms for store building
• Must-have e-commerce tools
• Examples of successful e-commerce stores
• FAQs about e-commerce

What is E-Commerce?

E-commerce is the simple act of buying and selling goods or services online. Instead of going into a physical store, finding an item, and purchasing it, you instead visit a website and do the same thing.

Have you ever bought a product on Amazon or ordered groceries online? If so, you’ve engaged in e-commerce.

While “e-commerce” commonly refers to the sale of physical products online, any commercial transaction on the web that is facilitated through the internet can be considered e-commerce.

The History of E-Commerce

Phil Brandenberger completed the first e-commerce transaction in 1994 when he used his Mastercard to buy a Sting CD online. A major historical milestone, Phil’s transaction was the first time encryption technology was used to make an online purchase.

Word of Phil’s transaction spread around the globe, announcing to everyone that the online marketplace was open for business.

Shortly after, what are now large e-commerce conglomerates Alibaba and Amazon opened their first digital stores.

While some brick-and-mortar stores became obsolete, other retailers took to the world wide web to save their businesses. As more online stores opened, employment in the e-commerce sector continued to rise. In 2006, Shopify and other e-commerce platforms that help traditionally brick and mortar businesses go online made their first mark on the web.

As technology improved and online activity increased, the number of e-commerce stores continued increasing right alongside them.

Now, the e-commerce industry is worth trillions of dollars, with revenues projected to steadily increase each year.

How Does E-Commerce Work?

E-commerce works similarly to offline retail stores, except that the entire experience—from finding and deciding on an item to paying for it—happens online. But from a purely transactional standpoint, here’s how e-commerce works:

Step 1: customer places an order

The first step of e-commerce is where customers place an order through an e-commerce website (online store or marketplace).

Step 2: retailer processes order information

In the next step, the storeowner processes payment information and prepares the item for delivery.

Step 3: order is shipped to the customer

The last step is where shipping is carried out. All the logistics elements — from product handling to information and control — play an essential role in ensuring successful delivery to the customer.

And that’s essentially how e-commerce works. If you get the basics right and find ways to reduce friction at each step, you are more likely to be successful.

Types of E-Commerce Businesses

You can categorize e-commerce businesses based on the type of products or services they sell online. Here’s a look at the most common types of e-commerce merchants:

1. Digital Products Retailers

These merchants sell digital products online. Some examples of e-goods include graphics, white papers, studies, reports, e-books, software, and music downloads. Digital products are essentially data-based and non-physical.

Some examples of e-commerce stores that sell digital products include:

• The Lux Lens: An online store that sells tools and online courses for photographers.
• Life is Messy and Brilliant: An online store that sells digital planners and digital stickers for event planners.

2. Stores Selling Physical Goods

These merchants follow the typical online retail business model. From swimsuits to sportswear and office equipment, shoppers can add what they need to their online cart and then buy it. Afterward, the store delivers the product directly to the customer.

Some stores use drop shipping for order fulfillment. This is a fulfillment method where the merchant purchases the product from a third-party supplier and gets it shipped directly to the customer. Dropshipping removes the need to buy or stock inventory.

Some examples of e-commerce stores that sell physical products include:

• Outerknown: An online store that sells men’s, women’s, and sustainable apparel.
• iTech Deals: An online store that sells iPads, Macbooks, Chromebooks, and tech accessories.
• Helix Sleep:An online store that sells mattresses, bedding, and bed frames.

3. Service-Based E-Tailers

Service-based e-tailers sell services online. They may sell services through an online store or platform, a subscription-based model, or they may send you an invoice in exchange for services rendered.

For instance, contractors, consultants, and freelancers that sell services online are considered service-based e-tailers. SaaS companies, language learning platforms, and freelance marketplaces are also considered service-based e-tailers.

Some specific examples of service-based e-tailers include:

• Contena:An online platform that sells tools, training modules, and job search services for content writers.
• Donut: A subscription-based app that helps teams discover new rituals that foster camaraderie, collaboration, and community.
• Preply:An online language learning platform that pairs students with private tutors.

What Is an E-Commerce Website?

An e-commerce website is a virtual storefront that facilitates transactions via the means of funds and data transfer over the internet. It utilizes a platform, database, and payment gateway to function effectively.

Types of E-Commerce Websites

E-commerce websites can be classified by the business model they use to carry out operations. Typically, e-commerce stores fall into one of the following categories.

1. Business to business (B2B)

In this model, an e-commerce store sells products and/or services to another business. For instance, Chocomize sells customized chocolates and corporate gifts to businesses looking to express their gratitude for their clients.

2. Business to consumer (B2C)

In B2C, an e-commerce business sells products and/or services directly to consumers. A good example of this is Nearly Natural. The artificial floral retailer sells plants, flowers, and baskets directly to the end-user, with no middle person involved in the process.

3. Consumer to consumer (C2C)

In C2C e-commerce, a consumer sells a good and/or service to another consumer. One individual may use a platform like eBay to sell or auction goods to another person.

4. Consumer to business (C2B)

In C2B e-commerce, a consumer sells a product and/or service to a business or organization. For instance, a person who sells their car to Carvana, an automotive e-commerce company, would be engaging in C2B e-commerce.

5. Consumer to government (C2G)

C2G e-commerce happens when consumers pay bills, insurance, or taxes online to a government or public entity. For instance, if you get your water from the city, you’re engaging in C2G e-commerce every time you pay your water bill online.

What Are The Best E-Commerce Platforms?

Starting an e-commerce business requires building an online store where you showcase your products or services. This is done with the help of an e-commerce platform that allows you to manage your website, sales, and operations. Popular e-commerce platforms include:

• Shopify: Offering exceptional ease-of-use and extensive functionality, Shopify allows you to sell both physical products and services. You can access themes built specifically for your industry. Features range from inventory tracking to AI personalization. Shopify also has a robust App Store where you can find add-ons for dropshipping, SEO, email marketing, and more.
• WooCommerce: This is a free, open-source shopping cart add-on for WordPress users. WooCommerce makes it easy to implement various third-party themes and plugins, access a mobile-optimized shopping cart, and geo-location support.
• Magento: A leading open-source e-commerce platform, Magento is a popular pick for companies with established demand. There are more than 5000 extension options to choose from and various options for customization, but Magento requires more insight from developers. This platform for global selling also comes with site search functionality, catalog management, and one-click purchase.
• Shopify Plus: The B2B version of Shopify, Shopify Plus allows enterprise companies to sell huge amounts of products and services to bigger buyers. Shopify Plus has the same ease of use as the original Shopify software. Yet, it’s stocked with features suitable for large-volume sellers, from unlimited product listings to inventory tracking and real-time product statistics.

Examples of Successful E-Commerce Stores

The world of e-commerce has seen countless success stories. That’s because the effort required to ramp up a virtual storefront and build a business around it is often so much easier than it used to be—certainly more so than a traditional physical storefront. Here are some successful e-commerce retailers you can gain inspiration from:

Premier Estates Wines

Budge Dhariwal, the founder of Premier Estates Wines, was once a taxi driver who craved a career change.

His first step? Picking up an off-license to become an independent wine retailer.

The problem? He couldn’t keep up with large supermarkets during holidays and special events.

So he decided to sell his off-license and start a wine company instead.

Budge spoke with anyone he could about his wine company. He then decided to fly around Europe on cheap flights to approach major wineries about supplying his independent company with wine.

The good news? It actually worked.

Today, Premier Estates Wine is an online wine company that sources award-winning wines and sells them at low prices.

By leveraging partnerships and building positive customer experiences, Budge was able to build one of Shopify’s most renowned e-commerce stores.

Brilliant Life Shop

Brilliant Life Shop was created by mompreneurs Beth Anne Schwamberger and Sarah Korhnak.

During their weekly podcast series, Beth and Sarah interviewed a different mompreneur each week. After surveying their audience about common challenges they face, their community said time management was their biggest challenge.

The result? Beth and Sarah co-wrote a successful book called ‘Time Management Mama: Making Use of the Margins to Pursue your Passions’. They also created their own time management planner and built valuable resources for their community.

Today, Beth and Sarah’s community is closer than ever. Their online store Brilliant Life Shop provides guides, resources, courses, and of course — their book — for fellow mompreneurs.

By creating high-quality content and focusing on giving their audience exactly what they wanted, Beth and Sarah were able to create the store of their dreams.

Frequently Asked Questions About E-Commerce

How many people use e-commerce worldwide?

InternetRetailing reports that there are over 3.4 billion e-commerce users worldwide, and the number is projected to grow to 3.8 billion by the end of 2021.

What is the biggest e-commerce company in the world?

Amazon is the world’s biggest e-commerce company, with an estimated market value of U.S. $1.761 trillion as of September 2021.

What percentage of e-commerce is mobile?

According to Oberlo, mobile e-commerce sales are projected to hit 3.56 trillion U.S. dollars in 2021. Also, mobile is expected to account for 72.9 percent of total e-commerce sales by the end of the year.

What is e-commerce shopping?

E-commerce online shopping is the act of buying goods and/or services online.

Here are some common examples of e-commerce shopping:

• Signing up for a monthly subscription service for movies, music, or software
• Buying your boss’ Christmas present from an online marketplace
• Paying for food delivery using an online platform or app
• Buying your clothes, accessories, and groceries online
• Using a website or platform to buy airline tickets, hotel accommodations, and rent a car

E-Commerce: It’s a Wonderful Thing

If you’ve been interested in learning more about e-commerce, we hope this guide was just what you needed.

Digesting all of that information may get your heart pumping. But when you’re building an e-commerce store from the ground up, the learning and insight help you create an excellent structure and set the store up for success.

Excited about opening up your own store, but still want to do more research? Check out the following resources:

1. Wondering what niche and products to sell? Check out this article.

2. Check out 10 e-commerce tips every new store owner should know.

3. Memorize Shopify’s e-commerce business blueprint.

4. Launch a private label brand with these key tips.

5. Scale up with these 20 tips to supercharge your e-commerce sales.