Ecommerce: History, Types, Revenue Models, Advantages

Published: July 11, 2022

The Ecommerce industry has never been bigger. By the end of 2022, it is estimated that Ecommerce will account for about 22% of all retail sales worldwide, to the value of $6.15 trillion. This huge expansion is attributed to the recent pandemic lockdowns, which encouraged people to buy and sell products online rather than in person.

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Mobile commerce also plays a significant part in the explosion of the Ecommerce market, with more than $3 trillion in sales made from mobile devices in the last year. The industry will only continue to grow, with experts predicting that by 2025, 25% of all sales will be made by online retailers.

But what exactly is Ecommerce? Why are people drawn to starting an online business through an Ecommerce platform?

This article will examine these questions and help you understand the Ecommerce industry by exploring its history, the different types of Ecommerce businesses, and the major advantages and disadvantages of starting an Ecommerce business today.

The history of Ecommerce

When most people think of Ecommerce, they would be forgiven for thinking it all started with Amazon sometime in the late 90s. In its most primitive form, however, the origins of Ecommerce can be traced back surprisingly far.

The 1960s to the 1980s

In 1969, CompuServe was founded. This fledgling digital company is largely recognized as the first example of an Ecommerce platform. Their objective was to provide computer time-sharing capabilities during non-business hours. CompuServe’s pioneering videotex end-user software eventually allowed users to perform early Ecommerce transactions such as ordering tickets and making travel reservations.

In 1979, British entrepreneur Michael Aldrich launched what is conceivably the first instance of online shopping in its most recognizable form. He had grown tired of his weekly trip to the grocery store and developed software that allowed users to purchase food and groceries via videotex. Though it was a struggle to get people to take a genuine interest in his product, he had set the growth of Ecommerce in motion.

The first online marketplace came about in 1982 with the formation of the Boston Computer Exchange. This did exactly as its name suggests, facilitating the buying and selling of used computers through online auctions.

The 1990s

As internet technology continued to grow at a breakneck pace, the 90s saw the earliest iterations of some of the most important players in the Ecommerce market.

Amazon started life as an online marketplace for books for its Seattle customer base. eBay started as AuctionWeb, with a broken laser point as its first Ecommerce product, and Netflix began to rent out DVDs in direct competition with Blockbuster.

These companies have survived numerous shifts and pitfalls to get to the enormous growth they’ve seen today. They’re now considered pioneers of the online shopping experience that many of us cannot live without.

The 2000s to the present day

By the turn of the millennium, there was no stopping the rise of global Ecommerce. The concept of online shopping replacing the in-person shopping experience was catching everywhere.

Spotify launched in 2006 and forever changed how people purchase and listen to music. In 2012, Instacart became one of the first online retailers to utilize a fulfillment system for groceries. In 2014, Apple revolutionized the way consumers pay for goods online with the introduction of its Apple Pay system.

Today, almost all retailers who previously had a physical presence have had to adapt and move online or risk being left behind. Platforms such as Amazon, Etsy, and Shopify have made it easier for individuals to start an Ecommerce business and earn huge revenue by selling services and products online.

What are the nine categories of Ecommerce?

The world of digital commerce is vast, encompassing any monetary business transaction that takes place over the internet. Companies, individuals, and even government agencies all partake in Ecommerce in some form or another every day.

As a result, Ecommerce business models have been divided into several distinct categories. Every online company you can think of will align with one of the categories outlined below.

1. Business-to-business (B2B)

A B2B business model is where one business sells products or services to another. The receiving business usually purchases these services to improve its functionality or efficiency. Software-as-a-service (SaaS) is a prominent form of B2B transaction.

B2B Ecommerce also deals in physical products. For example, a business might sell office furniture directly to other companies.

2. Business-to-consumer (B2C)

B2C is one of the most common Ecommerce business models. B2C is where businesses sell products directly to consumers who usually make a one-off online payment for their purchases. Many B2C Ecommerce business models now also involve subscription plans to generate consistent revenue for the business.

3. Mobile commerce (M-commerce)

M-commerce follows the characteristics of B2B and B2C business models while allowing customers to shop from anywhere through their mobile devices. It’s estimated that almost 34.5% of all Ecommerce takes place on mobile devices, which is expected to grow. Due to the increase in purchases through mobile, online retailers must make their websites as mobile-friendly as possible.

4. Social media commerce

Many people spend most of their time online on social media platforms. As a result, these tech giants are innovating new ways to combine social media browsing with online shopping to encourage consumers to stay on their platforms even longer. Facebook commerce, or F-commerce, is currently the most prominent example.

5. Consumer-to-business (C2B)

With C2B, a consumer sells a product or service to a business. In this model, an individual will offer a service (such as content writing or a consultancy niche) that businesses can use. Freelancing, or lifestyle businesses, are popular online businesses that follow this model.

C2B businesses can also deal in physical or digital products. For example, individuals may create artwork or photography that companies can use for their promotional material.

6. Consumer-to-consumer (C2C)

This Ecommerce strategy involves consumers providing goods or services directly to other consumers via online markets. Ecommerce platforms like eBay, Etsy, and Craigslist are online marketplaces where individuals can sell anything to other consumers through an auction or a direct transactional process.

7. Direct-to-consumer (D2C)

A D2C business model can be considered an offset of the B2C structure. The main difference between the two is that with a D2C model, the selling company designs, manufactures, and ships all of its products in-house rather than relying on shipping partners and external suppliers.

For example, a wine merchant such as Daou Vineyards and Winery will produce its wine from its vineyards and sell it directly to the consumer via its website.

8. Business-to-administration (B2A)

Also known as business-to-government (B2G), B2A is where a business provides a service exclusively used by a government or administration. A B2A model example would be a company that collects data for the government, which can then be used to inform policy and other governmental decisions.

9. Consumer-to-administration (C2A)

At first glance, this business model doesn’t appear to have anything to do with Ecommerce as it doesn’t involve selling products or services. However, it does involve using online monetary delivery methods, just like other Ecommerce models do.

An example of C2A is when an individual must fill out a tax return, pay for health prescriptions, or take a driving test. These transactions occur online, so the consumer is still engaging in Ecommerce.

What are the most common Ecommerce business revenue models?

Just as there are several Ecommerce business models, there are also numerous avenues for an Ecommerce business to generate revenue.

Depending on what the business sells and who is buying the product or service, a company might adopt more than one of these methods at a time. The most popular types of Ecommerce business revenue models are as follows.

1. Sales revenue model

This is the most common revenue model, where physical or digital products and services are sold through a one-off payment. A sales revenue model can involve setting up an online store to drive sales or working with dropshipping suppliers.

2. Subscription revenue model

Many B2B and B2C businesses charge consumers a monthly subscription fee to access their services. This can generate a huge source of passive income for businesses. Some companies use the subscription revenue model to merge services and products in monthly subscription boxes.

3. Affiliate revenue model

The affiliate revenue model involves joining an affiliate program and advertising products made by other companies on your website. If a customer clicks on one of your external links to a partner company and purchases a product, you receive a commission for guiding the customer to the seller’s website.

4. Advertising revenue models

Advertisements have always driven sales for traditional retailers, and they do the same for online retailers. With an online advertising revenue model, a company allows external companies to place ads on their online website or platform. Like with affiliate marketing, the website owner receives a commission if a sale is made through one of the advertisement links.

The advantages of Ecommerce

Ecommerce has significantly impacted businesses worldwide, providing many benefits that traditional retail did not have. For one, Ecommerce has easily opened up businesses to an international audience and facilitated international trade on a scale never seen before.

Ecommerce has also created numerous possibilities for starting a business with little experience or capital. Affiliate marketing and dropshipping are two examples of online businesses that don’t require much upfront capital and are relatively simple to understand, making a great entry point for first-time business owners to make money online.

E-commerce’s flexibility and opportunity have allowed thousands of individuals to pursue their creative dreams and give up the corporate 9-5 life. Business owners can choose their work hours and how much time they wish to commit to their business, with success largely depending on the owner.

Ecommerce has also decreased the risk of complications in the shipping and delivery process. Many business owners can manage their stock and ship packages directly to their customers, removing the need for an intermediary. Dropshipping has made this even more manageable, with suppliers taking care of all shipping and logistics, giving business owners more time to work on marketing and product development.

The disadvantages of Ecommerce

The benefits of Ecommerce are well-documented and essentially universal, but its growth has also been a few disadvantages. Many traditional retailers have had to drastically alter their business plans to adapt to this new form of buying and selling. Some were unable to keep up, resulting in the collapse of several well-established businesses such as Toys R Us.

Ecommerce entirely depends on external information and communication technologies (such as the internet, for one). An interruption in the service could very quickly derail many businesses, as they would have no way of conducting activities. This could potentially result in considerable losses in revenue.

Finally, it is difficult for consumers to ascertain the quality of products over the internet. Trusted retailers do all they can to ensure they’re selling quality products, but it can’t always be guaranteed if they work with third-party suppliers. There is also the risk of products getting damaged during the shipping process.

Summing up

The impact of Ecommerce on consumer behavior has been colossal. There has never been a greater opportunity for budding entrepreneurs to try their hand at running a business. With the vast number of tools and resources available, anyone can create their dream lifestyle and become financially independent thanks to Ecommerce.

At Flippa, we have been helping business owners achieve their financial dreams for over twelve years, thanks to our world-class online marketplace facilities. Whether you are a first-time buyer, or a seasoned veteran looking to sell, we do everything we can to ensure you always get the best deal.

If you have an Ecommerce business you’re looking to sell, feel free to use our valuation tool to see how much you could earn. Alternatively, if you want to buy your first business and require additional guidance, do not hesitate to contact us today.