What is e-commerce? Simply explained - fynax

On the couch or in bed, on the desk or in the kitchen: everyone knows it, almost everyone does it and most people love it: e-commerce! Online retail has boomed in recent years and e-commerce has seen unstoppable growth to date. In addition to big sellers such as clothing and electronics, consumer goods such as food, medicines and cosmetics are increasingly finding their way across the world's virtual store counters.

E-commerce has long been familiar to most people. Not only generations Y and Z, but also boomers in their 50s and 60s now enjoy shopping online. However, this raises the question: what exactly is e-commerce? After all, shopping alone only covers one of many areas of e-commerce. What structures are behind it, what does it mean to operate e-commerce and which innovations will unleash completely new potential in the future? This blog will give you an insight into the basics of e-commerce, introduce you to common e-commerce terminology and show you some of the benefits of launching your own e-commerce business.

The definition of e-commerce - what is it anyway?

Electronic commerce encompasses all trading activities that take place electronically. This includes the purchase and sale of goods and services, but also payment processing via online banking, the coordination of logistics and customer service via chat, telephone or email. It is therefore characteristic that transactions are initiated and carried out via the internet. Business partners come into contact with each other over long distances on an online platform.

For a long time, e-commerce was clearly differentiated from brick-and-mortar retail. However, this dividing line between the two areas is becoming increasingly blurred, as so-called multichannel marketing is once again linking online and offline transactions more closely.

What advantages does e-commerce offer?

Both users and providers benefit in many ways from the shift of trade to e-commerce platforms. On the customer side, aspects of convenience and security in e-commerce are particularly important:

AccessibilityThe old joke about whether the Internet is still open today contains the most important advantage of online shopping: both B2C and B2B customers are not bound by opening hours, but can browse and obtain information whenever it suits them during the day - or night.

AssortmentOnline stores often offer a much wider range of goods than local stores. It is therefore less likely to not receive the desired product or the required size during a visit than in a store.

DistancesRegional goods from all over the world are just a mouse click away. Consumers do not have to travel for international specialties or niche products of precisely defined quality.

InformationThanks to detailed descriptions in text or video form and reviews, target groups can get an accurate picture of products and services before making a purchase decision.

Price comparisonThe prices charged by various competitors are listed transparently and are easy to compare - not least thanks to price comparison portals, which show the total costs including shipping.

ConveniencePCs and mobile devices bring the whole world into your own living room. No one has to get up from the couch to store for a new jacket, do their weekend shopping or rent a car.

The advantages of e-commerce for online retailers clearly lie in the increase in efficiency and sales

ReachE-commerce is not limited to a customer base within a specific region, city or neighborhood, but (potentially) reaches everyone in the world.

EfficiencySophisticated management systems for inventory, cash flow and customer base automate a large number of processes along the value chain. This saves time and money.

Cost savingsOnline vendors do not have to pay rent for stores, and there are no costs for sales staff. These savings enable lower sales prices, which in turn are more attractive for customers.

Market diversityIt is not necessary to create an entire e-commerce presence yourself. Established marketplaces such as eBay or Amazon give both large and small suppliers access to millions of potential customers. They benefit from the trust of the platforms among the target groups and from ready-made structures.

AdvertisingWhether through elaborate content marketing including blogs and newsletters, SEA or clever social media posts: In e-commerce, operators have countless opportunities to draw attention to themselves and seamlessly guide prospective customers into a customer journey.

AnalysisTracking tools collect information about target groups and help to create insightful customer profiles. This allows advertising campaigns and channels to be planned much more precisely.

What do you do in e-commerce?

The fields of activity in e-commerce are extremely wide-ranging. Many different tasks are intertwined along the value chain of an online store, for example. As a result, there is a constant interplay between numerous job profiles, areas of expertise and technologies. The core areas generally include: IT (user experience, store system, merchandise management system), purchasing (B2B inventory and new customer support, pricing), online marketing (affiliate, email and social media marketing, SEM, SEO, SEA, display advertising), processing (logistics and fulfillment) and service (customer support, email, chat and telephone service).

In a micro-enterprise, a single person may cover the entire range of these tasks. In small and medium-sized companies and corporations, however, there is usually a finely branched division of tasks that is overseen by a number of e-commerce managers.

What are the current trends in e-commerce?

E-commerce is continuing to develop at a rapid pace. On the one hand, of course, this is due to the progress of digital technologies. However, the driving factor behind this is always the customer experience. That's why it's important to know the preferences and behavior of target groups. Thanks to its tracking options, e-commerce is even more customer-centric than traditional retail stores.

This also means that it is no longer necessarily the quality of a product on offer that determines whether or not a purchase is made, but the way in which the product is offered. If a store creates a smooth shopping experience with transparent information, multimedia highlights and a convenient checkout, target groups identify with an e-commerce offering and are more willing to enter the sales funnel. This contributes enormously to sustainable customer loyalty. It's not what you sell, but how you sell it that matters.

Virtual and augmented reality

Augmented and virtual reality applications are not only able to provide customers with more information, but also present it in an appealing, easy-to-understand and exciting way. Furniture stores such as Ikea and Otto make it possible to place furnishings virtually in the home via smartphone and AR app to get an impression of their effect in their own rooms. At Mister Spex, online shoppers can try on glasses frames virtually. Some retailers also prepare complete 3D shopping environments in which customers can interact using VR headsets.

All of these virtual enhancements serve to compensate for the typical disadvantages of e-commerce compared to brick-and-mortar retail - above all, the ability to experience products first-hand. AR and VR make it possible to pick up, turn and place goods, which was previously the sole preserve of local stores.

Multichannel marketing

AR and VR applications now compensate for certain disadvantages in the e-commerce experience compared to brick-and-mortar retail. However, it is by no means necessary or even expedient to digitize all processes. In some cases, it proves profitable to combine the best of both worlds. For example, stationary showrooms sometimes complement online stores so that prospective buyers can test products - for example, goods that are difficult to explain, such as furniture or perfumes. At the same time, retail stores can also enrich the shopping experience with virtual and augmented reality experiences. These include demo or promo videos that can be called up via a QR code on the product.

Internet of Things (IoT)

In the IoT, the Internet of Things, it is not human users who interact with the online worlds, but smart devices such as watches, cell phones and fitness bands. They independently send information to the internet, helping to automate a variety of processes. In B2C commerce in particular, this creates a more seamless transition between the online and offline worlds. For example, when customers enter a store, the shelves communicate with their smart devices, read certain preferences from the collected data and then draw attention to discounts or direct them to frequently purchased goods in the store. This means tailored advertising and the greatest possible personalization of the shopping experience.

But IoT applications are also helping retailers on the inside. For example, intelligent shelves register when stocks of certain goods are running low and automatically initiate reorders.