To begin with, it is worth noting that the scope of eCommerce is much wider than the standard idea about it. This is not only the sale of goods or services via the Internet: you can earn on a percentage of transactions, data exchange, etc.
In addition, commodity-money online interactions have an extremely rich history, the roots of which go back to the middle of the last century. Today we will analyze what e-commerce is, consider its types, categories, as well as advantages and disadvantages.
Definition of the term
It is customary to call e-commerce a business process (in a broader sense, the sphere of the economy), including trade or monetary transactions conducted through computer and electronic networks.
Back in the 1950s, American Airlines partnered with IBM to develop a unique system that automates seat reservations on planes. The system exists to this day, is called SABER - at one time it greatly facilitated air travel for passengers, helping to navigate fares, directions, etc. Today, SABER is used by more than 350,000 travel agencies around the world, 400 airlines, 100,000 hotels, 25 car brands and 14 cruise itineraries.
In 1971-72, in order to organize sales and purchases between students at the Stanford Artificial Intelligence Laboratory and the Massachusetts Institute of Technology, the famous ARPANET, a computer network developed by the US Department of Defense to maintain communication in the event of a nuclear war, was used. The monetary relations generated through this network have become one of the preconditions for eCommerce. In 1979, English inventor Michael Aldrich demonstrated the first online shopping system, which consisted of simple transactions between buyers and sellers.
The last two decades have seen an especially explosive eCommerce market driven by the explosion of modern technology, the ubiquity of the Internet, the spread of social networking, and the evolution of Web 1.0 to Web 2.0.
Categories eCommerce
Traditionally, e-commerce on the Internet is divided into three groups, according to the consumer segment: B2B, B2C and C2C. Some call two more categories: B2A and C2A. Consider all 5 types of eCommerce.
1. B2B: " business to business". The essence is simple - one company sells something to another company. The Internet here is able to significantly optimize processes: speed up operations, make relationships more transparent. An example is before your eyes. LPgenerator is a service for creating landing pages for business (although, of course, you can launch a landing page that promotes a person, a personal brand, whatever).
2. B2C: " Business for the client". Here, too, everything is clear. The company sells directly to the individual. Often, goods are sold in this format, sometimes services are sold (learning English via Skype, for example). This is where traditional online stores fit in, as well as the new trend - social trading (search for customers and selling on social media).
3. C2C: " consumer to consumer". An interesting model involving a trading relationship between two people, neither of whom can be called a businessman. The resources that provide this opportunity are like something between a flea market and a classifieds newspaper. The most common format is online auctions. They allow the buyer to save money, the seller - to sell the unnecessary, having beaten off the money.
4. B2A: " Business for administration". A specific format, the essence of which is the interaction of an entrepreneur with some state structures (local, federal). An example is a tender, or some bureaucratic operations that can be automated via the Internet.
5. C2A: " administration client". The most exotic type of e-commerce on the Internet, actively developing today. The essence is in the interaction of state organizations directly with people using certain services. The sphere is rather social. An example is the interactive portals of public service centers that exist in many cities.
Company types
Western researchers identify 8 categories of e-commerce on the Internet.
1. Large retail business. Carry out direct online sales. Such companies have automated delivery, payment, etc. processes.
2. Multifunctional online portals (domestic example: Yandex.Market). You can call them aggregators of goods and services. Give the client access to the range of different brands, charge a commission or placement fee from the seller.
3. Highly specialized portals, occupied only in one area of the market.
4. Internet auctions. Allow the seller and the buyer to "meet" to close the deal.
5. Cybersant - are engaged in the distribution of intellectual, digital property (films, programs, literature).
6. Resources of collective purchases, wholesale discounts - unite people who want to save money by buying a large consignment of goods at once for many participants.
7. Intermediaries for the presentation and repayment of accounts: utilities, insurance, medical care, for a certain percentage.
Usability in eCommerce
There are at least three useful tips, or even trends, the application of which will increase the usability of your resource.
1. Large images
High-quality visual content can be much more expressive than hundreds of words. A large image of the product (or anything related to it / its use) will reveal significant details of the offer, increase the awareness of visitors and, consequently, their level of satisfaction. In short, the right visual content can bring you a lot of additional income.
2. Testimonials that inspire confidence
We are sure that all users reading this article are aware of how important the Internet is in their lives. The global network has opened for people not only a number of cognitive opportunities, but also brought communication between users to a whole new level! Therefore, it was not news to anyone that the Internet began to be used for online business.
At present, almost every serious and diligent person is able to earn with the help of the World Wide Web. "How?" some will be surprised. The answer is simple - with the help of e-commerce!
The concept of e-commerce and its main components
E-commerce- the concept is very broad and includes many categories, which we will definitely discuss later. If we give the most generalized interpretation of this term, we can say that this is a system of economic relations that are carried out using the Internet. In a narrow sense, e-commerce is online entrepreneurship.
E-commerce includes the following global categories:
- online trading
- electronic data interchange (because in the modern world one of the most valuable resources is information)
- electronic banking and insurance services
- money transfers and electronic money
- electronic marketing (systems for collecting user data, electronic catalogs, directories, bulletin boards)
Today, almost every physically existing commercial organization (even the smallest one) has its own website.
It can be a regular information site with basic information about the organization, services, answers to frequently asked questions, contact information. Or it could be.
It all depends on the specifics of the organization, its scope and goals. Also, this direction is a great chance for individual entrepreneurs who decide to try themselves as network businessmen.
In the modern world, more and more processes are becoming automated, so it is obvious that this area of Internet business will continue to develop successfully. Let's talk more about the advantages and disadvantages of network commerce.
Advantages
1) The main advantage is its ability to reach the global market without necessarily implying large financial investments and costs. The restrictions of this type of trade are not defined geographically. This allows consumers to make global choices, get the information they need, and compare offers from all potential suppliers, regardless of location.
2) Through a direct connection with the end consumer, online entrepreneurship reduces the chain of intermediaries, sometimes even eliminating them completely. This creates a direct channel between the manufacturer or service provider and the end user, allowing you to offer products and services tailored to the individual preferences of the target market.
3) E-commerce allows suppliers to be closer to their customers, resulting in increased productivity and competitiveness for companies. As a result, the consumer benefits from an improved customer experience, resulting in greater intimacy as well as more effective pre- and post-sales support. With these new forms of e-commerce, consumers now have virtual stores that are open 24 hours a day.
4) Cost reduction is another very important benefit usually associated with e-commerce. The simpler and more convenient a particular business process is, the more likely it is to succeed. This results in a significant reduction in transaction costs and, of course, prices charged to customers.
Flaws
The main disadvantages associated with e-commerce are the following:
1) Strong dependence on information and communication technologies. This issue is especially relevant for the Russian market. Far from all remote regions have high-speed Internet, which would contribute to the development of online commerce;
2) Lack of legislation that adequately regulates new e-commerce activities both nationally and internationally. This also includes the high percentage of fraud in the field of e-commerce and the lack of effective methods to combat it.
3) Not all consumers are inclined towards e-commerce. For many customers, the ability to "feel" and visually evaluate the product is a key factor when buying certain products. The inability to fully assess the quality of the purchased item is the main factor hindering the development of e-commerce.
4) Loss of loss of privacy by users and insecurity when conducting online transactions. With the development of security technologies, the risk of this factor is significantly reduced. However, losing your money when paying over the Internet is much easier than losing it by personally handing it over to the seller in some store.
5) The threat of problems with the delivery of goods, return processing, etc.
E-commerce in numbers
The birth of e-commerce began to take place smoothly in 1998. Today, after almost 20 years, the total turnover of online commerce amounted to 2.36 trillion dollars. The first place in terms of online sales among all countries, of course, is occupied by China. Russia is only in 9th place, which means that there are development prospects in this area.
E-commerce is conditionally divided into more than 14 types. Let's highlight some of the most common and interesting ones and talk about them in more detail.
- B2B - in decryption, the abbreviation means "business to business"
- B2C - "business to consumer"
- C2C - "relationships between consumers"
- C2B - "relationships between consumers and trade organizations"
- B2A - "business administration"
- C2A - "consumer administration"
Business to Business (B2B)
In this type of e-commerce, both participants are commercial enterprises. As a result, the scope and value of B2B e-commerce can be overwhelming. As an example of such a model, the following situation can be described: a smartphone manufacturing company is looking for wholesalers to sell its products.
Thus, in this scheme, goods are sold for their further resale to end consumers. The main goal of the B2B system is to increase the efficiency of online cooperation between companies.
Any business model is characterized by its own platforms through which trade relations are implemented. For the B2B scheme, such platforms are exchanges, auctions and catalogs.
With the help of the catalog, you can get maximum information about the characteristics and properties of the purchased product. Also, buyers can compare products by price, terms and conditions of delivery, reviews, etc.
Such information transparency can greatly facilitate the choice of the client. Most often, catalogs are created in areas where there is a sale of low-cost goods for which demand can be predicted, and the price of which hardly changes.
Auctions are usually held for items of a unique type. For example, they can be rare items, specialized technical equipment, etc. Pricing here is never fixed and takes place right at the time of the auction.
The seller lists all his lots, and numerous buyers offer an ever-increasing price if they are interested in the product. The auction for the lot ends after a predetermined time, after which the goods are given to the client who offered the highest price last.
On the exchanges, prices are formed in accordance with supply and demand, and therefore they are very rarely stable. The exchange is perfect for selling popular, common and simple products with easily standardized characteristics. The exchange is also suitable for industries where price and demand fluctuate frequently. Often, exchanges provide the opportunity to trade anonymously.
Business to Consumer (B2C)
When we hear the term "e-commerce", most people think of the B2C model. We can say that this scheme is a logical continuation of the B2B system, because it is the B2C type that ensures the delivery of goods to the end consumer.
Thus, the type of "business-to-consumer" corresponds to our ideas about traditional retail. The only difference is that in this case, trading is carried out via the Internet.
This type of relationship is most common in online commerce. There are already many virtual stores on the Internet that sell all kinds of consumer goods such as electronic devices, software, books, shoes, cars, food, entertainment products, services and more.
The business-to-consumer scheme brings many benefits to both the buyer and the seller:
For the seller, this scheme is beneficial mainly because there is no need to hire a lot of paid staff, as is the case in conventional stores. The buyer does not need to spend time visiting the store: any product can be bought on the Internet, having studied the characteristics and reviews.
Another well-known fact - through the Internet, any item can be purchased cheaper than in a regular store. For household appliances, the difference in prices can be several thousand.
Examples of the largest online stores operating on a business-to-consumer basis are: Amazon, ozon, Aliexpress, etc.
Based on the B2B scheme, another offshoot in e-commerce has emerged. Since 2010, the sale of goods through social networks began to actively develop. networks, so this type of trade is called "social commerce".
The B2B type is implemented using the following trading platforms:
- online shopping
- web-showcases
- social media
Consumer e-commerce (C2C)
This area affects trade relations between people who do not conduct entrepreneurial activities. Drawing an analogy with ordinary life, we can say that this is something like an advertisement in a newspaper for the sale of a particular product.
In Russia, well-known bulletin boards act as trading platforms for the C2C format: Avito, Yula, etc. Also, the C2C format began to spread widely in social networks. Special groups are created in which users post ads for the sale of things from any category.
Consider a few more existing schemes. We note right away that they are much less popular and it is very difficult for an ordinary user to make money on them. The following diagrams are presented mainly to broaden the general outlook.
Consumer business (C2B)
This type of e-commerce is very common in projects based on crowdsourcing. A large number of people make their services or products available for purchase to companies looking for these particular types of services or products.
Examples of this practice are sites where designers submit several options for a company logo, and one of them is selected and purchased.
Other platforms that are very common in this type of commerce are marketplaces that sell photos, images, multimedia, and design elements.
Business Administration (B2A)
This part of e-commerce covers all online transactions between companies and the government. This area is typical for areas such as fiscal, social security, employment, legal documents and registers, etc.
Consumer Administration (C2A)
The "consumer-administration" model covers all electronic transactions conducted between individuals and the state apparatus.
This scheme can be applied in the following areas:
- Education– dissemination of information, distance learning, etc.
- Social Security- through the dissemination of information, making payments, etc.
- taxes– filing tax returns, payments, etc.
- healthcare– making an appointment, online consultations, paying for medical services
Both models related to public administration (B2A and C2A) are closely related to the idea of efficiency and usability of services provided to citizens by the government supported by information and communication technologies.
Main conclusions
Based on the information presented in the article, we highlight several key points that characterize the main provisions of e-commerce.
— for the implementation of business transactions, there must be at least two participants. One of them will always act as a seller, and the other as a buyer.
- The B2B system (business - business) - represents wholesale trade, and goods are sold here to legal entities. Type B2C (business-to-consumer) is retail and brings the product to individuals (end consumers)
- Any user without special information and computer training will be able to earn using B2C (business-to-consumer) and C2C (consumer-to-consumer) schemes.
— Type of commerce B2C is the most common type of e-commerce. Each user will be able to earn in this way by creating their own online store. You can read more about creating your own online store without investments in this. We also wrote an article about - this is a great example that personifies the receipt of income through the C2C system.
- In general, there are a lot of online business schemes. You can expand this list to 30-40 schemes, depending on the subjects of economic relations. For example, if we consider the government to be a separate entity, then we can come up with many more types of online commerce: B2G (business to government), G2B (government to business), G2E (government to employees), G2G (Government to government), G2C (government to citizen), C2G (citizen to government). We remind you that all the main and generally recognized types have been considered in this article.
Conclusion
Summing up all the above, we can only say one thing: continues to develop successfully, penetrating into narrower specialized areas of trade. The future belongs to the Internet and technology. Perhaps in a few decades, users will no longer need traditional retail stores at all. In the meantime, this has not happened, you just need to know that e-commerce is a great chance to earn money and create your own business with minimal investment.
The scale of e-commerce has grown, which has made the life of buyers more convenient, and opened up new opportunities for business. Let's take a closer look at what it is and!
Main components of an e-commerce system
In a real store, you just take new jeans and take them to the checkout, where you pay cash, and then leave the store with your purchase. Everything happens in a similar way when you buy online, but there is one important difference: you cannot touch the product until it is delivered to your home.
This creates new problems for retailers. In addition to the fact that they need transaction processing tools, they also need a way to verify that the item you ordered is in stock.
In other words, e-commerce combines three components: a server that manages an online store and processes transactions ( creating appropriate links to bank computers to check the buyer's card details). A database that can check the items that are in stock in the store. As well as a delivery system associated with a warehouse where the goods can be temporarily stored and from where it should be sent to the buyer.
Only the first of these three systems is absolutely necessary for an online store. Many people successfully maintain small online stores without complex databases or logistics systems. All sales are made through a website where they take orders and then ship the goods through more traditional means. For example, small merchants who sell goods on eBay do not know How does an online store work from the inside?. Their "database" is in their head, and their " logistics system is just a walk to the nearest post office.
How E-Commerce Works
Here is one example of how a complex, fully automated e-commerce system can work:
- Sitting at his computer, the client orders a book online. His browser interacts via the Internet with the server that manages the store's website;
- The server sends the order to the manager. This is a central computer that monitors all stages of order processing from its receipt to the dispatch of the goods;
- The order manager queries the database if the item the customer needs is in stock;
- How to work with suppliers in an online store: if the goods are not in stock, then the database can order a new batch of products. This activity may include interacting with the manufacturer's ordering systems. Thus, it turns out the approximate delivery time of the goods, while the client is still sitting at the computer ( in real time);
- The warehouse database confirms that the product is in stock or provides information about when the product can be received;
- If the item is in stock, the manager continues to process the order. It then goes to the financial system that processes the transactions to accept payment from the client;
- The financial system can perform additional verification through the server of the client's bank;
- The bank computer confirms whether the client has enough funds in the account;
- The financial system allows the transaction to continue, although the funds will not be fully transferred for a few more days;
- The manager confirms that the deal was successfully processed and notifies the server about it;
- The server displays a web page to the client, which displays confirmation of the processing of the order and the completion of the transaction;
- The manager sends a request to the warehouse for the goods to be sent to the client;
- The truck of the logistics company picks up the goods from the warehouse and delivers them;
- After the item has been shipped, the warehouse system computer sends an email to the customer to confirm that their item is on the way;
- The goods are delivered to the customer.
All these actions are invisible to the client, except for the computer he is sitting at and the courier who rings his doorbell.
How to create an online store website?
To understand how does an online store work, you need to understand that they should be accessible, have simple and understandable navigation. Reliable, because no one is willing to enter their card details on a site that is not secure.
Setting up an online store is not easy. Not only do you need to create a dedicated website from scratch, you also need to develop your own system that can reliably process customer bank card data.
Anyone can set up an online store within minutes these days. Payment systems such as PayPal provide functionality for processing transactions. Many install virtual storefronts on eBay and then use PayPal.
Some platforms (notably Amazon) allow mini versions of their store to be hosted on their own site for a small fee.
Successful companies like eBay and Amazon have proven that there doesn't have to be an obvious connection between a site's name and the products it sells. The main thing is that over time people recognize, fall in love with and begin to trust the brand, begin to visit its site instinctively.
How you deliver your goods is also fundamentally important: customers love fast delivery. But this does not mean that you need your own warehouse and truck fleet. Companies like Amazon have created sophisticated warehouse and dispatch systems that you can use.
Using e-commerce to sell information
How does an online store work without a warehouse? You can sell not only traditional goods on the Web. Many make money by offering a combination of free and paid services. Yahoo! It is the most famous example of such a platform. Created as a comprehensive directory of other sites, it mutated into a search engine and then into a portal offering access to various types of premium services. For example, you can get free email on Yahoo or pay extra money for a more sophisticated system. You can store your photos on Flickr for free, or pay to have them printed or edited in a variety of ways.
Newspapers, magazines and book publishers are also trying to make money through a combination of free and paid services. Most of them offer basic content for free, earning from ads. Some also offer some of their articles as part of a subscription.
The purchase of an article is a transaction similar to that which a user enters into when purchasing an item on Amazon or eBay.
Advantages and disadvantages of e-commerce
How online clothing stores work. For example, some of them offer free returns if you don't like the clothes. Many people simply cannot live without online shopping. And they don’t even think about going to a real store, where prices are often higher.
For companies, e-commerce also opens up new opportunities. Not many of them can compete with huge businesses like Amazon or eBay. But anyone can open an online store and start trading. Small local stores, threatened by the expansion of large supermarket chains, have found a second life thanks to online sales.
E-commerce also threatens many traditional ways of doing business. When shoppers head online during the Christmas rush, they naturally spend less in physical stores. Realizing this, some companies, such as Wal-Mart, tried to make up for these losses in some way by launching programs such as " bricks and clicks» ( the presence of a real store and a site closely integrated with it).
Customers have also become smarter and more experienced. Before buying a product in an online store, they try and evaluate it in a real store. Or use websites to find local branch stores where they can inspect and purchase exactly the items they need.
Before you start working in an online store, it is important to remember that e-commerce is still only a part of all trade, but its share is steadily growing.
Steady Growth in E-Commerce Share: This chart shows what percentage of total retail sales has been e-commerce from 2006 to present.
As always, customers set the rules, and this will continue to be the case. Some traders have tried to counter the online shopping threat, but protectionist tactics are doomed to failure in the long run.
The mobile future of e-commerce
If you've owned a retail business for a long time, chances are you already have a website where you take orders from customers. But today, something new is reappearing to change those rules: mobile commerce.
More and more people use the Internet through mobile devices:
Amazon, Google and Facebook are seeing the mobile segment as a decisive battlefield over the next few years. Poll conducted by Google in 2012, showed that 74% of users were more likely to return to a mobile-optimized site again, and 67% said they were more likely to buy something from a mobile-optimized site.
Gartner predicts that mobile commerce will account for about half of all e-commerce revenue in 2017.
How to optimize your site for mobile devices?
Before you start working in an online store, you need to check how the site works on a mobile device. There are various emulators and testers that you can use to simulate mobile devices on PC ( including a great tool built into the Google Chrome browser). But it is much better to take a real modern smartphone with a browser or a tablet computer and see how your site actually works.
If your site was designed to run on a standard widescreen laptop, you'll find it looks terrible: columns can shift and overlap, text and links are too small, and so on.
There are four options for optimizing your site for mobile devices:
- Adaptive design: redesigning an existing site so that the same HTML code works equally well on both desktop and mobile. For this, a style sheet is used, which contains rules that are applied depending on the screen sizes of the user's device. You can tell if a site is responsive by viewing it on a desktop as well: if you narrow the width of the browser window, the site will rebuild from desktop to mobile. Responsive sites are easy to maintain and optimized for search engines, but they don't always provide the best user experience as they provide the same pages for all users ( only formatted differently);
- Dynamic display: page construction is slightly different for desktop and mobile devices without changing their address (either with a common style sheet or by linking styles for different devices). To do this, you need to use PHP or ASP. Dynamic display is also SEO friendly practice and provides a good user experience, but it can be difficult to implement;
- Separate mobile site: First determines if the client is using a desktop or mobile device, and then redirects them to the mobile or desktop version of the site. This way, you can optimize your site for mobile users without compromising the experience of desktop visitors. The disadvantage of this method is the need to maintain the second version of the site. Remember that search engines like Google don't like duplicate content, so use canonical URLs to help them figure out where the main version of each page is. You can buy a working online store and use cookies to remember which version of the site to serve for the user when he navigates from one page to another. It is also useful to allow mobile users to view the desktop version of the site. Sites with separate URLs are generally not SEO optimized practice, however, they can provide a good user experience.
- Separate mobile application: Development of a free application for mobile devices that effectively handles the site as a whole. This will incur additional costs for the development of the application. But such a solution gives a much better user experience. It also prevents users from leaving for competitors' sites when clicking on other links. Thus, mobile applications are a great way to "capture" and retain users.
Other technologies are currently being developed, such as AMP (Accelerated Mobile Pages), which allow much faster development of a mobile site, but potentially sacrificing some of its functionality.
Every day, mankind is increasingly beginning to use information technology. To do this, it uses the Internet. Today, almost all organizations open their websites in this system. Do not stand aside and ordinary citizens. They start their own pages in various social networks.
The Internet is an open system with a wide audience that allows for completely new interactions between users. And there is nothing surprising in the fact that it began to be widely used for conducting electronic business. This is a completely new level of not only market and economic, but also socio-cultural relationships between organizations and people.
History of creation
It is an integration of legal entities and individuals who work in the field of e-commerce. All of them are united in a network of entrepreneurship. To date, such a system is being formed at the level of the entire global Internet.
What is e-commerce? Unlike e-business, this concept has a narrower meaning. It implies the use of the Internet as an information channel for the purpose of organizing business processes. In this case, there is no traditional "money-commodity" scheme. It is replaced by "information-information".
E-commerce is nothing but online shopping. Moreover, this type of activity appeared back in those days when mankind was not familiar with the Internet. It happened in 1979, when the American Michael Aldrich decided to link the computer and cable television into a single whole. To do this, he used fixed telephone lines. This technology allowed users to order a product that was shown on the screen. And only in 1990 Tim Behrens invented the first browser. After that, e-business and e-commerce began their rapid development. Thus, in 1992, Charles Stack opened the world's first online bookstore. Amazon.com launched in 1994 and E-bay in 1995.
The development of e-commerce in Russia can be characterized by the following stages:
1. 1991-1993 During this period, the Internet has been a means of communication only between scientists, technical centers, computer specialists and government organizations.
2. 1994-1997 At this time, the population of the country began to be actively interested in the possibilities of the worldwide network.
3. From 1998 to the present, electronic business and electronic commerce have been actively developing with the help of the Internet.
New opportunities
Enterprises that conduct their business along the traditional path are responsible for each stage of their activities. At the same time, they spend huge amounts of money on the development of the product and its production, further delivery and sale of finished products. The material and technical support of the entire implementation process also requires large financial resources.
But then came e-commerce. She began the gradual transformation of the work of enterprises into a network of virtual organizations. Moreover, each of the members of this community has the opportunity to concentrate their activities in the most appropriate areas. This made it possible to deliver the most complete production solution to consumers.
After the emergence of electronic commerce, business has received new opportunities. With the help of this modern tool it became possible:
Organization of video conferences;
- conducting online training;
- development of new marketing models;
- creation of business information environment systems;
- obtaining a variety of information;
- implementation of financial interaction;
- development of new relationships between companies based on electronic technologies;
- opening of new cheap channels;
- strengthening cooperation;
- support for alternative ideas;
- development of a new economy of production and purchase of goods.
The main tasks of trading on the Internet
The use of e-commerce involves:
- establishing preliminary contacts with potential suppliers, clients and customers via the Internet;
- exchange of documents created in electronic form, which are necessary for the implementation of purchase and sale transactions;
- sale of goods or services;
- pre-sale advertising of products and after-sales support of the buyer in the form of detailed briefings on the purchased product;
- electronic payment for the purchased goods using electronic money, transfers, credit cards and checks;
- delivery of products to the client.
Business-to-Business Scheme
There are different types of e-commerce. Moreover, their classification assumes the target group of consumers. One type of e-commerce is business-to-business, or B2B. Such interaction is carried out according to a fairly simple principle. It consists in the fact that one company trades with another.
Despite the fact that today there are other types of e-commerce, B2B is the most actively developing area with the best prospects. Thanks to Internet platforms, the entire trading process becomes more efficient and transparent. At the same time, a representative of the customer enterprise has the opportunity to carry out interactive control of the entire process of performing work, providing services or supplying goods. To do this, he uses the databases of the seller organization.
A feature of the business-to-business model is that in this case, e-commerce is impossible without fully automated interaction between organizations to carry out entrepreneurial activities. And it has a very profitable prospect. While doing business in the B2B sector, the company simultaneously solves the problem of its internal management.
Trading platforms for the business-to-business scheme
In e-commerce, there are special places where transactions are concluded and related financial transactions are carried out. These are the trading platforms, which in this case are virtual. They can be created:
Buyers;
- sellers;
- by a third party.
Today, there are three types of trading platforms for the B2B model. This is an exchange, an auction and a catalog. Let's consider them in more detail.
The creation of a catalog contributes to the use of the search capabilities that modern information systems have. At the same time, the buyer has the right to compare and choose goods by price, delivery date, guarantee, etc. Catalogs are used in those industries where transactions for the sale of inexpensive goods are most frequent, as well as where demand is predictable, and prices change very rarely.
As for the auction, this model of the trading platform is characterized by non-fixed prices. The final cost of the goods is established during the auction process. Auctions are used when the goods or services being sold are unique in their kind. These can be rare items or capital equipment, stockpiles, etc.
The third type of virtual trading platform - the stock exchange - differs in that the prices it offers are regulated by supply and demand, and therefore are subject to strong changes. This model is best suited for the implementation of common items that have a few easily standardized characteristics. The exchange is most attractive for those markets where prices and demand are unstable. In some cases, this model allows you to trade anonymously, which is sometimes important for maintaining competitiveness and price stability.
Experts predict good prospects for e-commerce using this model. First of all, such sales are beneficial to buyers. After all, trading takes place on a corporate commercial portal without the participation of intermediaries. In addition, such a trading platform is characterized by the work of one seller with a large number of buyers.
Recently, new varieties of sales models in the B2B sector have emerged. These are catalog systems that bring together several sellers. Electronic platforms are also starting to work, combining the features of an exchange and an auction. Such e-commerce reduces the time and financial costs of selecting and searching for the best products, as well as closing the deal between the buyer and the seller.
Business-to-consumer schema
E-commerce, built on the principle of B2C, finds its application in the case when the customers of the enterprise are not legal entities, but individuals. Usually this is a retail sale of goods. This way of making a commercial transaction is beneficial for the client. It makes it possible to significantly speed up and simplify the purchase of the thing he needs. A person does not need to go shopping. It is enough for him to study the characteristics of the goods on the seller's website, select the desired model and order the product, which will be delivered to the stated address.
Electronic commerce on the Internet according to the "business-to-consumer" scheme is also beneficial for the supplier. He has the opportunity to quickly track demand, while spending minimal resources on staffing.
Traditional online stores operate according to the B2C scheme. Their activities are aimed at one or another target group of consumers. Since 2010, the so-called social commerce has appeared and began to develop. It covers the scope of sales of services and goods in social networks.
One of the largest B2C enterprises is the American company Amazon.com. It carries out books and has more than a million customers in all countries of the world. Using the business-to-consumer scheme, the company equalized access to goods between customers from different countries. And it does not matter where the customer lives, in a large city or in a remote region.
Marketplaces for the business-to-consumer scheme
In the B2C sector, goods are sold through:
Electronic stores and malls;
- Web showcases;
- specialized Internet systems;
- auctions.
Let's take a closer look at these trading platforms. E-commerce by medium and small businesses, as a rule, is conducted through online stores. These virtual platforms are nothing more than company websites. A more complex structure is Internet series. They host several virtual stores at the same time.
E-commerce in Russia is often conducted through small Web storefronts. These malls are usually owned by small businesses. The main elements of such sites are catalogs or price lists, which describe the product or service itself, as well as a system for collecting orders received from buyers.
Online trading systems (TIS) are used by large holdings, companies and corporations. Such virtual platforms allow enterprises to improve the efficiency of the supply and sales service, as well as build the most rational supply chains to provide the production process with raw materials, materials, equipment, etc.
Many organizations use dedicated Web sites to conduct e-commerce. On them, any seller can put up their goods at the original price. Such Web sites are electronic auctions. Buyers who are interested in purchasing a product can specify a higher price for it. As a result, the seller makes a deal with the organization that is willing to pay more.
Scheme "consumer-consumer"
The development of e-commerce has led to the emergence of C2C transactions. They are made between consumers who are not entrepreneurs. In this e-commerce scheme, sellers post their offers on special Internet sites, which are a cross between a regular marketplace and newspaper ads. For example, in the US, this provider is ebay.com. This is a third party that allows consumers to conclude any transactions in real time. Moreover, they take place directly on the Internet and have the format of an electronic auction. The C2C model has become very popular today. At the same time, buyers are pleased with the prices for goods, which are lower than in stores.
Other schemes
What else can be electronic commerce? In addition to the most common schemes described above, there are several others. They are not very popular, but they find their application in a number of specific cases. Thus, the use of e-commerce became possible through the interaction of both legal entities and individuals with government agencies. This applies to filling out questionnaires and collecting taxes, working with customs structures, etc. Such forms of interaction became possible only with the development of Internet technologies.
A significant advantage of such an e-commerce scheme is to facilitate the work of civil servants and free payers from part of the paperwork.
Basic rules for entrepreneurs
Everyone who wants to have their own business based on information technology should know commerce. There are certain simple rules that should be a kind of multiplication table for any seller. Anyone who wants to become a winner in the competition must:
Create a user-friendly website optimized for search engines;
- turn your visitors into buyers;
- carry out marketing activities that will popularize the site on the Internet;
- analyze sales statistics.
Prospects for the development of e-commerce
Today in Russia there are certain factors that have a significant impact on the development of EC. Among them:
The large extent of the country's territory, which requires reducing the impact of currently existing restrictions on the sale of goods, which are associated with the remoteness of market entities;
- the importance of the increase for the merger of Russian business with the world's information and economic processes;
- the problem of reducing trade costs, which would allow our products to become competitive in the world market;
- the need for more thorough control over the sale of goods by enterprises themselves and fiscal authorities;
- the importance of the dynamic development of the technological base of organizations with the introduction of the most modern informatics tools.
The traditionally high level of higher education contributes to the development of EC in Russia. In addition, the country's financial authorities have already developed the latest banking technologies, the use of which makes it possible to carry out customer transactions. The security of e-commerce in Russia is ensured by the available technical solutions. They involve the use of tools that provide cryptographic protection of information provided by participants in virtual trading.
But in our country there are some problems of e-commerce. Thus, the process of development of virtual trade is significantly slowed down due to:
Low new for us market relations;
- imperfection of the legislative base;
- high degree of monopolization of the economy;
- insufficient development of commodity markets infrastructure;
- imperfections in the system of credit and financial relations.
E-commerce in understandable Russian. How does business work on the Internet?
Recently, more and more projects related to online commerce come across. Studying this direction, I could not find a general and understandable description of the process. Therefore, I decided to make something like a cheat sheet, which you can always refer to in order to understand the procedure in such an area as e-commerce.
I’ll make a reservation right away that I focused on the processes and channels that help bring customers.
E-commerce: what is it about?
Definitions from various sources say something about selling goods or services over the Internet. In simple words, e-commerce is any activity on the network where money appears.
Shopping, selling, insurance, banking, electronic money, everything is here. Take it, sign it.
From the target
In order to understand the issue, I propose to start the journey from the very end. What is the goal of any business? That's right, make money. So, imagine any product, for example, silicone socks. Why not!
I took the first thing that came to mind, it turned out there is this ...
Our task is to make money on these socks. We think about the Internet. Hmm…why not “cut down” the site and that’s how sales will go, just keep me Maldives! But, not everything is so simple.
I really like to draw. It helps to understand the various processes. Let's draw?!
So far our model looks like this. We take socks, put them on the Internet and get money. It's just great! Eyes are burning, palms are sweating and I already want to take up this business. But you need to make a website or a platform for sale?
Website or platform for sale
There are various solutions for placing your product on the World Wide Web. You can create your own website or use third-party sites (groups, pages in social networks, bulletin boards, etc.). Let's stop at the site.
They ordered a website, took a ready-made template, or created it themselves using the constructor (CMS can be googled), it doesn’t matter. Then they placed a bunch of silicone socks of different types and are happy.
Payment systems
But in order for a person to be able to buy from you here and now, it will be necessary to tweak the payment systems. This is a kind of service that allows you to make purchases online through: bank cards, Internet money, mobile phones and a bunch of other things. For this, you will have to share a percentage of transactions, but in this way you will greatly simplify your life.
Choose the service that suits you. Somewhere there will be a higher percentage, and somewhere a subscriber or something else. Just research the question a little. Put yourself the necessary code on the site, link all transactions to your card account and voila!
That would seem to be all. There is a website, product cards, and even the “buy” button works, but something is missing ... There is no flow of customers who will buy.
Customer flows
Where: CAC = New Customer Acquisition Cost. MCC (marketingcampaigncosts) = The total cost of marketing spend to acquire (but not retain) customers. W (wages) = Salary for marketers and sales managers. S (software) = Cost of software used in advertising and sales (eg sales platform, marketing automation, A/B testing, analytics services, etc.). PS (professionalservices) = Cost of professional services provided to marketing and sales departments (design, consulting, etc.). O (other) = Other overhead related to marketing and sales departments. CA (customersacquired) = Total number of customers acquired.
But we must not forget about the quality of the client, LTV will help here.
Important indicators: LTV
Live Time Value, customer lifecycle, is another e-commerce metric to consider. It shows how much income one client brings on average. There are different approaches to the calculation, I chose the actual profit as one of the most accurate.
It is simply the sum of the total purchase history revenue for each individual customer. Add the sum of all customer purchases (transactions) to transaction N, where transaction N is the last purchase the customer made in your company. If you have access to all customer transaction data, then you can easily calculate this using Excel.
LTV = (transaction 1 + transaction 2 + transaction 3… + transaction N) x profit share in revenue.
The calculation of LTV based on net income ultimately shows the actual profit that the client brings to your company. Here, the cost of customer service, the cost of retention, the cost of acquisition, etc. are taken into account. The result is a whole complex of calculations based on individual data. The cumulative profit generated by a single client over time will give you an accurate understanding of your clients' profitability to date.
Other approaches can be found at.
Important metrics: CAC to LTV ratio
To understand the viability of a business, it is very important to look at the ratio of the two mentioned CAC:LTV metrics.
- Less than 1:1 - You are heading towards bankruptcy.
- 1:1 - You lose money on each attracted client.
- 1:2 - Sounds good, but it looks like you're not investing enough and could be growing faster. Launch more aggressive customer acquisition campaigns and achieve close to 1:3 ratios.
- 1:3 - Ideal ratio. You have a thriving business and a strong business model.
Important indicators: ROI is not forgotten
As we discussed above, in e-commerce it is necessary to clearly understand whether it is profitable to use the acquisition channel or not. In addition to LTV and CAC, there is another important indicator, this is ROI. It shows whether your investment paid off, in our case in advertising. That is. how much 1 invested ruble brought us in the end.
For the calculation, a very simple formula is used:
Where “Campaign Revenue” is the difference between the channel revenue and the cost of your product. And to calculate the profit, subtract more advertising costs.
Thus, a more detailed formula would look like this:
ROI = (Channel Revenue - Cost) - Advertising Costs / Advertising Costs x 100%
Read a more detailed example with a calculation. In fact, this simple formula is placed all in the same Excel table, where everything is calculated automatically.
All three indicators that we have analyzed are important in E-commerce. Each of them allows you to find bottlenecks in your streams and work with them. It is in them that the growth potential for the business lies. I added a little more to our model with socks.
It is not possible to fit everything into one material, and who will read it for so long? Later I will make a separate guide on the nuances of e-commerce that can interfere with sales.
Total
In general, you now have a general understanding of online trading or e-commerce. Further, as they say: "The devil is in the details." Study each of the channels separately, calculate the performance indicators and look for new insights in the details. Internet sales to you, yes more! And one more thing from me.
Yes, I almost forgot, Happy New Year to you, dear readers! I wish you great victories and achievements in the coming year!
