In this age of digitalization and global technological advancement, more and more companies from every industry are shifting towards adopting digital processes, pieces of equipment, and solutions in their business operations by the day. This trend is growing continuously at speed and is inclusive of not only the big players but also small businesses and startups.
The general market is equally influenced as well, where now consumer behaviour is no longer the same as it was decades back. E-commerce, the internet of things (IoT), cashless transaction, cryptocurrency, and artificial intelligence, among many other tech developments, are no longer out of reach from the end consumers.
Now that everyone can have access, it has given birth to a digitally literate society on a global scale. The rise of mobile phone usage, for instance, shows how consumers are increasingly becoming digital in their day-to-day tasks. In 2019, the number of mobile phone users is forecast to reach 4.68 billion according to Statista.
The influence of digitalization has also changed the way consumer shop. The buying experience with the help of mobile devices has migrated online as compared to an actual visit to brick-and-mortar shops. This is supported in a report by Statista, where 21.8% (around 1.66 billion) of the world’s population buys online.
The growing trend of online shopping is undeniably most impactful towards the retail industry. eCommerce is one major example of how the retail industry has transformed in catering to the need to shop online among consumers. The popularity of eCommerce is evident with the success of leading companies such as Amazon and Alibaba.
Another report affirmed that in 2018, eCommerce sales accounted for 11.9% off all retail sales worldwide and is expected to reach 17.5% by 2021. This means that eCommerce offers a huge pool of potential buyers for retail businesses. Therefore, it is becoming increasingly common to see retail businesses to have both a physical store and eCommerce platform.
With that said, there is still a portion of the retail industry who are slow in adopting eCommerce into their business practices or even opted to maintain the traditional way of selling offline altogether. The question of how to remain competitive is then becoming a real challenge.
This is when eCommerce is no longer about keeping up with the trend, it is now the key to growing your business while at the same time maintaining a competitive run. A report by MDEC has shown that eCommerce outgrows offline business by 13 times. This solidifies the perks and advantages a business could get when by diving into eCommerce as compared to staying offline.
Another prominent advantage of eCommerce is how it is positively shown to improve productivity and work efficiency. eCommerce increase productivity level by 15% for B2B market and 80% for B2C market as compared to traditional businesses according to MITI and MDEC report.
Before digging further into the market potential that eCommerce holds for your business growth and scalability, let’s first start with understanding how eCommerce work as a whole, how it is different from traditional business practices, and how it can help businesses to grow.
What is eCommerce?
eCommerce is not a novel concept to the general market as it has been around for more than two decades back. It is undeniable that over the years, the eCommerce business model has gone through multiple transformations and has evolved into what we are familiar with today.
However, despite all the changes and upgrades, the concept of eCommerce in definition remains essentially the same. The term eCommerce is shortened from ‘electronic commerce’ or internet commerce which refers to the buying or selling of goods or services via the internet, and the transfer of money and data to execute the said transactions.
Often used to refer to the sale of physical goods and products online, eCommerce can also describe any kind of commercial transaction that is facilitated through the internet which means inclusive of services, and business/ market solutions.
It is important to note as well that although eCommerce is closely linked to e-business, the two business models are completely different from one another. eCommerce applies specifically to the transaction of goods and services while e-business refers to all aspects of operating an online business.
In other words, eCommerce businesses could have both offline channel in the form of a physical store for instance; and online channel such as an online platform at the same time. With that said, there are also eCommerce businesses with business model that operates purely via an online channel without having any offline counterpart to their business operation.
In order to have a deeper understanding of eCommerce, it is best to start by breaking it down according to the different types of eCommerce you can find out there.
Types of eCommerce
When speaking about eCommerce, the majority of the market would agree that B2C eCommerce is leading in terms of volume and revenue with close to USD 2.5 billion in sales worldwide in 2018.
Putting B2C eCommerce aside, there are other types of eCommerce business model with buyers that could be other businesses and institution/organization bodies besides the end consumer.
Generally, there are 6 major types of eCommerce as listed below;
1. Business-to-Business (B2B)
B2B eCommerce refers to all electronic transactions and dealings related to the goods and services between companies. The retail industry is one example of how B2B eCommerce could work. Participants involved in B2B eCommerce are such as manufacturers, suppliers, wholesalers, distributors, retailers, business owners, etc.
Transactions in B2B eCommerce are higher in volume and value in terms of basket size as compared to eCommerce targeted for the end consumer.
To name a few examples, Alibaba (China), India Mart (India), eWorldTrade (US), Thomasnet (US), Global Source (Hong Kong), and EC21 (South Korea), are some of the world’s top B2B eCommerce marketplaces.
2. Business-to-Consumer (B2C)
B2C eCommerce is related to the transaction and relationship between businesses and the end consumers at an individual scale. Examples of leading B2C eCommerce companies are such as Amazon (US), Alibaba (China), Taobao (China), and Walmart (US), among many others.
The B2C eCommerce has evolved extensively where one could find scores of online shopping platforms and virtual stores with the end consumers as the target market.
B2C eCommerce is similarly profiting well in the retail space, with goods and products being sold from a myriad of categories ranging from gadgets, electronic devices, household items, to clothes and apparels, plus many more.
3. Consumer-to-Business (C2B)
C2B eCommerce is the exact opposite of B2C eCommerce. It is a reversal to the common selling and buying process where the buying decision is in the hand of businesses over products or services offered by an individual consumer.
The relevance of this type of eCommerce model usually is heavily applied for crowdsourcing projects. One way to do it is when consumers will generate the requirements for businesses to fulfill.
For example, a user posted a request for a product/ service or project requirement and multiple companies will make offers and bids to win the project, such as the case for Elance (US), an eCommerce website for freelancers.
4. Consumer-to-Consumer (C2C)
C2C eCommerce model is pretty straightforward where it refers to the transactions of products or services between two end consumers. In short, consumer sells to another consumer with the help of an eCommerce platform to facilitate the transaction.
Popular C2C eCommerce platforms are such as Alibaba (China), eBay.com (US), Carousell (Singapore), and Mudah.com (Malaysia), to name a few.
5. Business-to-Administration (B2A)
B2A eCommerce might be among the type of eCommerce models that are less familiar to the general market. For starters, administration here refers to public administration or government entities.
This also includes the procurement department and other related arms of governing bodies sourcing from businesses through a third-party online platform to perform the transaction of goods or services. One example is Synergetics Inc. (US), a company that provides contractors and services for government agencies.
6. Consumer-to-Administration (C2A)
C2A eCommerce is a type of business model that allows governing bodies and the authorities to source for products or services from individuals i.e. end consumers.
A typical example would be individuals paying taxes or paying tuition fees to educational institutions through an online platform. It is understandable that this type of eCommerce is more niche and not as commercial in nature.
List of advantages of eCommerce vs traditional retail
In comparison to conventional business practices for almost all industries – not limited to retail, eCommerce offers a host of high-value benefits and advantages that could catapult your business towards immersive growth and scalability.
Let’s find out how eCommerce could be advantageous in a few areas of your overall business practices as per listed below;
1. Eliminates Geographical Limitation and Time Constraint
The first major perk of eCommerce poses a stark difference in terms of the location factor of your business. eCommerce has positively eliminated geographical limitations by allowing consumers to purchase anywhere. This will cater to a significant portion of potential consumers who prefer to shop on-the-go.
By eliminating geographical limitations, you open up a wider coverage for your business which eventually presents to you with the possibility of branching out to the international market and target audience without having to set up any new operating base overseas.
The ability to purchase around the clock as well, be it before or after the standard operating hour of brick-and-mortar physical stores could lead to a higher potential of conversion in terms of sales and purchases.
The increasing use of mobile devices among consumers has also contributed in making this particular eCommerce advantage, a significant upgrade from the conventional practice. It is reported that in Q3 2018, mobile phones accounted for 61% of retail site visits worldwide as reported by Statista.
Also termed as mobile commerce, research has shown that mobile devices are now more preferred for shopping online. Mobile accounts for 45% of online orders and desktop accounts for another 61%. These findings further solidify the logics behind eCommerce booming popularity.
2. Cost Saving
eCommerce proves to be highly cost effective as well due to the fact that it requires lower investment or business capital as compared to setting up a physical store where you need to fork up your budget on costly monthly rental and maintenance.
If you are setting up an online business, it will only require you to set up a web-based platform and probably an office for operation, and you are then sufficiently equipped to kickstart your business.
Additionally, the number of employee required is also relatively lower as compared to conventional businesses where most of the business processes are fully or partially automated. Hence, reducing the need for human resources to make sure that your business operation is functioning well.
On a different note, eCommerce can also cut down on your marketing cost tremendously without compromising on the results – you could get the same if not better results from conventional marketing efforts.
At a portion of the cost, online marketing strategies (inclusive of digital marketing) could be effective when executed either through paid advertising or through organic reach and engagement targeted to your audience.
Regardless, both are still going to cost your business much lower than having to pay for advertisement on conventional medium such as print media, television or radio advertisement, etc.
The core factor allowing eCommerce to gain the upper hand from conventional businesses lies in its convenience. Convenience is an important value that is largely demanded by modern consumers today.
The ability to shop faster, easier, require little to no effort, and time saving, is the key that pushes forward eCommerce relevance among the general consumers.
The features offered by most eCommerce platforms are designed to provide consumers with the best user experience in terms of convenience. eCommerce features allow consumers to locate specific products easier and quicker with search bar functionality.
Consumers can also refine and customize the search option to directly view relevant products. The convenient browsing experience enables consumers to explore, research and compare products for a better decision making process before making a purchase.
This is one example how the features on eCommerce platforms promote convenience on top of the apparent perks of enabling you to skip all together the hassle of physically visiting a store which will cost consumers on travel expenses and their time.
4. Online Visibility
eCommerce websites are largely dependant on new and organic traffic to prosper, therefore online visibility is of extreme importance. Conventional businesses without any online counterpart are indefinitely missing out on having online presence which is a huge loss of potential revenue.
eCommerce especially for online retail, it is driven by traffic from search engine as compared to traditional retail that relies only on branding, referrals, and pre-formed relationship.
On the other hand, by gaining online visibility through an eCommerce platform, it allows businesses to gain and pull new visitors cum consumers through embedded HTML linking to your webpage, search engine optimization, backlinks from other sources such as collaborative partners or social media platforms.
5. Enables Promotions, Discounts, Coupons, and Group Buy
eCommerce has made easier for businesses to come up with promotions, discounts, and group buy marketing strategies. The convenience gained from selling online enables you to launch these marketing strategies with higher frequency with lesser time required to churn out marketing collateral and materials.
Consumer buying experience is also improved when they are able to be instantly notified for any new promos, deals, etc., through email marketing and newsletter subscription. In return, this will strengthen your brand awareness along with increasing product sales conversion.
6. Ability to Sell Niche Products
Another advantage of eCommerce especially within the B2B space is the ability to create a new market for niche products. It paves a pathway for businesses that sell products that are new, rare, or scarce to find especially in physical stores.
At times, buyers and sellers of niche products can find it difficult to find and source from each other. However, with the help of online visibility and search engine optimization, it is easier for your niche businesses to pop up first as relevant searches.
7. Information Abundance
eCommerce is advantageous when information is put at stake. There are limitations to the amount of information that can be displayed in a physical store but this is not the case for eCommerce websites. It promotes information abundance without limitations.
Additional information available on eCommerce platforms are such as product images, product descriptions, product specifications, product availability, delivery fulfilment information, payment method, and user review, plus more.
The information abundance affects consumers in a way that it promotes buyers’ autonomous purchasing experience by allowing them to conduct independent product research and comparison when given with sufficient information.
The need for product information is highlighted in a report by KPMG where 65% of consumers look up for price comparisons on mobile while they are in a physical store.
8. Allows Targeted Communication
Targeted communication across a huge pool of consumer database is another significant benefit of eCommerce. The sign up feature for users allows businesses to gather data, create a database, and analyze the data to understand your target market better.
Hence, allowing you to understand your consumers’ user behaviour and plan out on how to communicate to a specific target audience based on your data collection.
Eventually, it gives businesses the ability to craft more effective marketing strategies and efforts such as email marketing, member-only promo, product suggestion, etc. It also allows businesses to establish a community revolving around their eCommerce platforms.
9. Cost Effective Inventory Management
Better and improved inventory management at a lower cost is another direct benefit of eCommerce business model within the B2B space. The more organized and streamlined the inventory management, the lower the cost inflicted on your business.
With eCommerce, businesses comprising of merchants or vendors can save cost of handling inventory by leveraging on automated inventory management within the eCommerce platform.
Automated inventory management here refers to the eCommerce features that allows businesses to monitor and track their inventory level, purchase history, and order status inside the user account.
This helps businesses to conduct stocktake, cross check orders, and restocking in a more efficient manner with better accuracy by reducing the chances of human error.
Case Studies of Top Retail eCommerce Businesses On A Global Scale
In a world where virtual engagements is the currency of trade. Countless business models and varieties had come to front and most of the time, they ceased to impress or simply could not keep up with the competition. However, eCommerce the new business blue chip that had taken the industries by storm and competition is definitely high.
Malaysia B2C eCommerce
Now that we have gotten the technicalities out of the way, as mentioned in the earlier part of this article, it is time to take a closer look at the 3 companies that have spearheaded the eCommerce space in the country.
In this case, Lazada MY, Zalora MY and 11 Street MY were chosen as the centerpiece of this case study. All of these companies shared an alarming similarity, they heavily utilize a third party online retailers that gathers the consumers personal data and in result, finding an easy and straightforward way to reach the customer.
However, Lazada is distinctive to both 11 Street MY and Zalora MY in terms of delivery or shipping services where these are their forte. Lazada partnered with established courier company in local and international courier service provision (L2C) and easily delivers order on time as desired by customers and allows customer to track at their own discretion.
Zalora on the other hand, provides more monetary value in their promotional vouchers as compared to the former two companies.
Meanwhile, the rich experience in eCommerce possessed by the individuals behind 11 Street has given them the additional edge over the two previous companies. This is evident by the company’s online retailing site ability in handling massive daily traffic through effective marketing strategies.
Malaysia C2C eCommerce
Meanwhile, for local C2C eCommerce scene, Lelong.com is one of the earliest online retailing sites in Malaysia. While their business model is almost similar to that of Lazada and etc, the mere difference was that the operation was perpetrated by private individuals rather than the involvement or collaboration with any goods or services-selling companies.
So, what is it that gives this long-established company the X factor? Unlike other companies which might provide partial information for their product listings, Lelong display exact quantities of the items sold for better a more transparent purchasing experience.
Global B2C eCommerce
At this point, the explanation for B2C is pretty much self explanatory. The only difference in this case, is that whether the subject managed to achieve or gain global success and whether or not it has rise as a prominent powerhouse in this industry.
Amazon for instance, is an example of a world renowned online retail platform that utilizes the B2C business model. The question is then, how did they do it to be as huge of a business as they are now?
What was it that separates Amazon from the other competitor companies? It all began on 1995 when Amazon initially started out as an online bookstore, the reception to them was exceptional and within a month of its introduction Amazon’s stock soared and they manage to ship tonnes of books to over 40 different countries.
Perhaps this success can be attributed to the CEO impeccable sense of timing in exploiting the novel innovation at that time. Moreover, Amazon has managed to maintain this success and kept the momentum to the present day due to their dedication in providing world class service to their clients.
Global C2C eCommerce
eBay’s business model is relatively similar to that of Lelong. While it can be noted that the business model borders on B2C, it is generally used as a C2C instead. Their selling point lies in their strong international presence to a larger consumer base with a localized operations in over 30 countries.
Now you might wonder, how eBay’s business model got the global recognition far ahead of its competition?
Well, experts explained on the smart move eBay took by utilizing to its full advantage on the flexibility and opportunity of allowing individuals or businesses to list new or used items for auction for a very low fee.
eBay then had a massive positive reputation in the toys collector market as they become a primary source to locate rare toys and the rest is history as we know it.
Case Studies of Top Services eCommerce
Air Asia, a household name in the country and one of the pioneers in the low cost airline industry. They have held the crown the world’s best low-cost carrier for 10 years in a row for international travel and airline awards, including the latest award for 2018.
The leading travel e-merchant for flight tickets is venturing further into eCommerce with AirAsia BIG Loyalty and OURSHOP. Consequently, this collaboration yields a sensational result, AirAsia BIG Loyalty has been named Best eCommerce Merchant (Travel/Hospitality) at the 2018 Asia eCommerce Awards, its first ever eCommerce award.
So, how did AirAsia landed themselves in such a desired position? The answer to this question lies on the genius that is Tony Fernandes. It was the CEO/founder’s exceptional strategic management skills that allows Air Asia to achieve its commercial success.
Last but not least, the dramatic rise of Airbnb over the last decades has seen the demand for community-based online platform for listing and renting local homes to rise as well. This success could be attributed to its successful establishment and practice of the dual merge of B2B and B2C business models.
Furthermore, their commitment in providing the best service besides introducing a new hospitality service to their customers serves as some of the catalysts that propelled the company to its success.
On A Final Note
Looking back at the advantages of eCommerce model be it business-to-business (B2B), business-to-consumer (B2C), consumer-to-business (C2B), consumer-to-consumer (C2C), business-to-administration (B2A), or consumer-to- administration (C2A), it is not an exaggeration to conclude that eCommerce trumps over traditional retail in several key aspects.
Eliminating geographical limitations and time constraints, cost saving, better convenience, increasing online visibility, enabling online-based marketing strategies, creating a market for niche products, providing abundant information, allowing targeted communication, and cost-effective inventory management, are some of the advantages that can be gained by adopting eCommerce into your business.
There are numerous other advantages of eCommerce that could be explored but is dependent and exclusive to a certain type of businesses, markets, or industries. The benefits might differ according to the way it is modeled to help your business growth and scalability.
It’s time for all businesses that have yet to board the eCommerce train to start digging further into the concept, mechanics, outcomes, and the overall potential of eCommerce and what it could offer to help you to not only remain competitive but also positioning your business as a market and industry leader.
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