March 5, 2020

What is the Difference Between E-Commerce and Online Retail?

You probably know by now that the ability to properly label and describe your business—and more specifically, the product you sell—is a vital part of sales in your field. When someone asks about your business or begins to search for it online, you need to be able to communicate with confidence regarding whether it is an e-commerce business, or if it is an online retail one.

To begin with a simple definition, both markets involve the selling and purchasing of goods between the merchant and buyer. Online retail is quite similar to physical, brick and mortar retail. Just as a client can go to a store to walk around, browse products and bring them home in a shopping bag, they can do the same with online retail. They can look at color variations, read descriptions, and even follow a detailed size chart to be sure they are getting the size. Many large retail stores even include both physical and online purchase options. E-commerce also involves electronic transactions, but the difference is that it involves many other services that are not physical, such as marketing. Often, it is represented by platforms that provide a space for other merchants to sell their products to consumers for a fee, which is usually a commission.

Examples of Online Retailers

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Some of the main examples of online retailers include some big names you have likely heard of. Forever 21, for example, sells trendy clothes at a very affordable price. They ship worldwide, and have stores in all 50 US states, as well as most European and Asian countries. JC Penney not only ships clothing, but also home goods and outdoor gear. IKEA takes modern Swedish styles and makes them affordable, with displays in little rooms throughout the store and website, bridging the gap between fashion and expense. Everything in their demo rooms are for sale, and can be delivered personally to purchasers.

A unique online retail seller is Warby Parker, which will send five pairs of glasses to their shoppers for free. The customers can try on the glasses, mark the ones they will buy and the ones they don’t want, and then send them back.

Different Types of E-Commerce

Online retail can get creative, and is not as simple as it may seem. However, e-commerce is booming and different categories within the market have emerged. Here are six major types of e-commerce:

Business to Business

Business to Consumer

Consumer to Consumer

Consumer to Business

Business to Administration

Consumer to Administration

Business to Business (B2B)

This is the most common type of e-commerce, and it includes all types of dealings with goods and services. Wholesale is a typical type of Business to Business e-commerce. One company buys a product in large quantities from another company, and the first company then sells that product with some form of retail.  

Business to Consumer (B2C)

This type of e-commerce involves a product that is sold directly between one business and its audience. This is where you can find any imaginable type of electronic shopping site, selling products from clothing to makeup to computers to in-home services, like cleaning and plumbing. This can often be cheaper for the consumer, because they are buying the product firsthand from its original owner. Many online retail stores follow the B2B model, purchasing from other brands and reselling. Macy’s is an example of B2B. To illustrate the difference, take a small business owner. The small business owner creates the product or service, lists it online, and the consumers buy it directly from them.

Consumer to Consumer (C2C)

In C2C e-commerce, the transaction is performed between three parties. It starts with an original platform that invites sellers to participate, for a fee. The first consumer has a product to sell, and the second buys the product from the first. One company that illustrates this is Preply, where language teachers can offer tutoring services at their own price. When a student signs up, they can choose between different teachers, then begin lessons. One C2C platform that has grown exponentially is Etsy. There are now over 2.1 million sellers on Etsy, who are creating their own businesses through the site, selling handmade goods and sending them all over the world.

Consumer to Business (C2B)

C2B e-commerce represents a divergence from what was often considered the norm in commerce in the past. This is one reason e-commerce is rocketing right now. With C2B, an individual offers their product or service to a company for purchase. Photographers and graphic designers fit into this category. They can sell their design, royalty-free, to the company. They are also known as freelancers.

Business to Administration (B2A)

When a business focuses its target audience toward an administration, they fall into the B2A e-commerce zone. One example is Business Services Online, a company that allows organizations to share information with Social Security securely over the internet. If a business receives a mismatch for a Social Security Number from an employee, they can find additional resources from Business Services Online.  

Consumer to Administration (C2A)

These types of transactions generally involve a transfer (performed by the business) of information between the consumer and an administration. Turbotax is an online tax preparation service that receives tax documents from the consumer, and prepares all the documents for filing with the Internal Revenue System.

Benefits of E-Commerce

One major benefit of building and maintaining an e-commerce business is the lower business costs. Marketing can be done with SEO optimization, pay per click, and social media traffic, so that can save a lot of money with advertising. Often, fewer employees are involved, which can allow you to pay a higher wage to fewer employees, which still makes a big difference in cost while producing better quality performance from employees.

Many clients are often more satisfied, and more likely to maintain long-term relationships through e-commerce. They appreciate the convenience and efficiency e-commerce services afford them. Through proper marketing strategies on behalf of the e-commerce business, they can receive timely emails and reminders when any new and exciting updates, deals, improvements, etc. have been made.

Comparing E-Commerce and Online Retail

You may be thinking that these benefits of e-commerce are not far from the benefits achieved with online retail. The difference between e-commerce and online retail is often a fuzzy line, since many online retail businesses fall into some of the types of e-commerce. A big difference is the fact that e-commerce usually involves creating a platform for sellers to list their products or services to consumers.

Take Shopify, for example. Participants in the platform can essentially build their own business through the platform, skipping a lot of the hassle that comes with starting from scratch. The owners of the platform provide a great number of pre-organized tools for building a brand, and setting up the shop. They assist with marketing tips and hefty customer support. The effort it takes to provide all these services is paid off through commissions from their sellers. It is a mutually beneficial marketplace.

Often, much more can be earned by providing this service for small business creators than in the traditional online retail account. Even for sellers on e-commerce companies like Shopify, Amazon, or eBay, the benefits are usually much stronger than starting off on your own. You can quickly expand your customer reach, since e-commerce agencies open up access to other channels of advertising. You are more likely to sell to niche markets, since purchasers in these realms often don’t know where to go to buy their product. Using sites like these can quickly improve your brand image, and get you out on the market to make a name for yourself.

Getting Started With E-Commerce

Photo by Austin Distel on Unsplash

You may be reading this because you are curious about opening up an online business and are curious about which route to take. Now that you have learned about the difference between e-commerce and online retail, you have probably decided on which one you will choose.

If you are beginning with e-commerce, you will need to choose between platforms. To do this, analyze what type of product you are selling, and who you will be selling it to. Ask yourself questions like:

“How much do I want to want to spend?”

“What features do I need?”

“What technologies will I need to incorporate?”

Once you have determined the answers, you will be able to search the differences between leading e-commerce platforms, and make an informed decision.

You will need to carefully and strategically design your website or page, to fit your brand. Some platforms will require you to spend considerable time with a designer for this, while others allow you to pick from a theme and develop it that way. Optimization is necessary, in many different forms. The site must have easy product search capabilities and excellent mobile capacities. Work from the beginning to get good reviews, and to consistently produce quality content.

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