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E-commerce Explained: With History

and Examples
Tuesday, September 11, 2018

 

Think about the last time you booked a plane ticket or ordered something via the
Internet. You probably do not realize it but by doing so you have taken part in an online
business transaction, or e-commerce.

In simple words, any type of business that involves the exchange of goods for money
and is conducted with the help of the Internet is part of the electronic commerce model,
more commonly known as e-commerce.

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 Whether you are a daily online shopper waiting for those sweet Amazon deals of the
day or an entrepreneur thinking of starting your own online store, you are probably
reading this article because you feel that there is more to e-commerce than just money
changing hands online.

Indeed the field of e-commerce is vast. And trying to comprehend all its aspects and
nuances could be mind-boggling. Therefore, we have composed this comprehensive
guide which will provide you with a solid and structured understanding of e-commerce
today.

If you continue reading below you will learn about:

 What e-commerce is and the types of platforms it can be conducted on

 The different types of e-commerce

 A brief history of e-commerce

 Advantages and disadvantages of adopting e-commerce

 Steps for setting up your own online store

 Examples of successful online businesses that started with almost no capital

Let’s jump right in...

What is e-commerce?

Any retailer that sells their products online is doing e-commerce. Target, for example,
have huge physical stores but also sell online. However, there are many retail

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 businesses that don’t need or have physical stores. Rather, they sell products solely
online. Two famous examples of such companies are Amazon and AliExpress, which
are among the biggest online shopping destinations for Americans.
However, electronic trade is not restricted to online shopping only. Transferring money
through platforms such as PayPal, Google Wallet, or Apple Pay is also an example of e-
commerce.

Generally, all services and products that are exchanged online fall under the definition
of e-commerce.

E-commerce channels

There are three general channels in which online trade takes place. They are:

 Storefronts

 Marketplaces

 Social Media

Let’s look more closely at each of them.

Storefronts

A virtual storefront is a website that allows the user to search for, order and pay for
merchandise online. These websites run on software platforms specialized for e-

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commerce. NopCommerce is one such platform, which helps e-merchants build and run
an online store. Other famous examples include Shopifyand BigCommerce.

You might be wondering how one platform can fit all merchants when they have
different requirements and needs. All e-commerce platforms can have their design
tailored through the use of themes, also called templates. New features and
functionalities can be added through the use of plugins, also called extensions. Ready-
made themes and plugins allow store owners to get their online stores off the ground
quickly and with minimal effort.

Marketplaces

Marketplaces don’t produce or own any inventory. What they do is connect buyers and
sellers and allow them to exchange goods. Amazon, eBay, and Etsy are all examples of
marketplaces that make the business transaction between merchants and customers
possible. Such e-commerce platforms offer a wide variety of goods and more
competitive prices due to the fact that there is a bigger number of providers. 
Marketplaces run on different custom or ready-made e-commerce systems, which are
tailored to support the intricacies of this business model.
Interestingly, nopCommerce for example, mainly known as a platform for creating
storefronts, also has multi-store and multi-vendor features which allow it to run full-
blown marketplaces. If you need to build a marketplace on top of nopCommerce, again
you can tailor it and get off to a quick start by choosing a nopCommerce template that
supports the multi-store and multi-vendor capabilities of the system.

But in most cases, as a retailer, you only participate in a marketplace, you do not need
one yourself. But you should know that even if you sell on Amazon or eBay or Etsy, it is
generally a good practice to also have your own online storefront. Which one, the

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marketplace or your online store is your main retail channel, will largely depend on the
products you sell and your business model. But in most cases, these two channels
should be complementing one another. Marketplaces give you immediate exposure to a
large audience of potential buyers but at the same time have certain rules that you need
to observe, and fees, which are usually a percentage of your sales. With your own e-
commerce website, you have full control over your online operation and you will not be
forgoing a fixed percentage of your revenue with every sale. This, of course, comes at a
price. You will need to invest much more resources into marketing your website.

Social media

Social media has a significant impact on the preferences of customers. Data from
the International Journal of Market Research shows that consumers have greater trust
and are more inclined to buy a product after it has been recommended by their peers or
influencers on platforms such as Instagram, Twitter, or Facebook. 

Therefore, social media is largely used by e-commerce companies to advertise their

products and increase the popularity of their brands.

But retailers don’t only use social media as an advertising tool. Facebook, for example,
now offers the so-called buy button that can be added to ads or even Facebook
Messenger conversations. With one click, people can order from their News Feed or
from a chat window in Messenger. 

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Additionally, Instagram now has a feature that allows users to click on an item they like
and immediately get redirected to a page where they can buy it.

Therefore, social media can also be considered a major e-commerce platform.

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M-commerce

Whether it is a storefront, a marketplace or social media it is important to note that

nowadays more and more people use their mobile phones and tablets to interact with
these channels and buy online. This phenomenon is called mobile commerce, also
known as m-commerce, and is the single most important factor in the rapid growth of e-
commerce.

According to Statista, in 2017 online sales reached $2.304 trillion and 58.9% ($1.357
trillion) were done on mobile devices. E-commerce sales are predicted to reach $4.848
trillion by 2021 and m-commerce is expected to account for 73.3% ($3.556  trillion) of
these.

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Statista: Source 1, Source 2

The catalyst for the sudden and rapid growth of m-commerce is the responsive design
technology that allows websites to adjust to different screen resolutions and preserve
their content and features on smaller screens.

Everyone with a web store needs to make sure they are using a responsive design or
they will be losing a substantial number of their potential customers.
Moreover, Google recently launched their mobile-first index. In simple words, when
people do a Google search on their phone, Google serves results only from websites
that are mobile-friendly. This means that if your website does not have a responsive

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 design or in other words is not mobile-friendly, it will not only provide a bad user
experience but also will not appear in searches done on mobile.
Another important factor in the rise of m-commerce is the development of technologies
such as Apple Payand Android Pay. Both technologies allow cashless payments in-
store or on the web. Many ATM providers have also started adopting Apple Pay and
Android Pay so that users can withdraw cash from ATMs by just using their phones.

Now that you have a good understanding of where e-commerce takes place let’s look at
the different types of e-commerce out there.

Types of e-commerce

There are two main ways in which e-commerce can be classified. It can be done based
on:

 the sold goods

 the involved parties

Types of e-commerce based on the sold

goods

There are two main categories of products sold online:

 Physical Goods
Walmart, Wish, and AliExpress are three of the most popular online shopping sites that
sell physical goods. There are countless examples of this type of e-commerce. If people

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 want to buy clothes online, they may go to Asos. If someone wants to order food
supplements for fitness programs, they may go to My Protein. 

When physical goods are involved in the shopping process always goes through the
following three stages:

1. Online order and payment

2. Preparing the goods for shipping

3. Delivery
 Services
Buying services online is now becoming a global practice.  Have you booked an Airbnb
apartment for some of your travels recently? Are you subscribed to Netflix?

If the answer to any of these is yes then you have bought an online service.

 Digital Products

E-books, online courses, graphics, and software all fall into the category of digital
products.

Slack, for example, is a software for communication and collaboration between team
members.
Coursera is a platform that provides online courses and degrees on a wide variety of
subjects such as humanities, business, economics, computer science, etc.

Please note that when digital products and services are considered the common
distinction between these two types of offerings is substantially blurred. In the physical
world a product exists in space and time while a service does not. But in the digital
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 world this is no longer valid. So instead of passing down the terminology from the
physical world to the digital, we can label digital products and services with one
common term, which is “digital offering”.

Types of e-commerce based on the involved

parties

E-commerce can be divided into six categories based on the involved parties:

 Business-to-Consumer (B2C)
This is the most common category. Nike, IKEA, and Sephora are all examples of this
business model.

Typically, the B2C e-commerce refers to businesses that sell goods to the public
through the Internet through the so-called shopping cart model.

 Business-to-Business (B2B)

This model refers to companies that sell their services to other businesses.

An example of B2B is Nop-Templates. If a webshop owner needs a specific theme for

their online store, Nop-Templates will either provide a selection of already created
themes or design and build a custom theme.

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 Consumer-to-Business (C2B)
Unlike other more traditional models (such as B2C), here the roles are inverted: the
consumer takes on the role of a seller while the business becomes the buyer. C2B
happens when a consumer offers their own price for the company’s product or sells a
service to a business.
One example of C2B is bloggers who review products on YouTube. In return, these
bloggers either receive money or the products themselves free of charge.
Most of the hiring websites like Upwork or Freelance.com are also an example of C2B.
There, individuals offer different services like web design or software development to
businesses. 
An interesting example of a platform where C2B happens is Kickstarter. Kickstarter is a
platform where startups raise money from the public to launch their products. This
process is called crowdfunding.

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 For example, Pebble is one of the successful companies that started their business
through Kickstarter. The company that produces smart watches manufactured its first
product with the help of two crowdfunding campaigns. 
 Consumer-to-Consumer (C2C)

This one is pretty straightforward. Any business transaction that happens between two
consumers is C2C e-commerce.

Craigslist and eBay are two of the most famous platforms where C2C e-commerce
takes place.
 Business-to-Government (B2G)

Business-to-Government e-commerce involves businesses that are paying for services

provided by the government.

If a business pays its taxes online, for example, it is doing B2G e-commerce. This
model is also known as Business-to-Administration (B2A) and the two acronyms (B2G
and B2A) can be used interchangeably. 
 Consumer-to-Government (C2G)

This one is similar to B2G. The only obvious difference is that this model involves
individuals and not businesses that are paying for services provided by the government.

Such services may include taxes, social, security, health, or education.

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Now that you know what e-commerce is, let’s build on our understanding of it by looking
back at its history and main stepping stones.

A brief history of e-commerce

E-commerce dates farther back than you might think and its story is quite an interesting
one. 
Here’s a brief timeline of the more important events that shaped e-commerce:
1969

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The first major Internet provider company in the United States, CompuServe, was
launched. The company is famous for developing the so-called Videotex technology -
one of the earliest systems to deliver interactive content and display it on a video
monitor. 
1984
When a 72-year-old British grandmother ordered groceries from her local supermarket
using her TV remote control, she had no idea she was making history. Part of an
initiative to help the elderly, she was probably one of the first people to shop online from
home. The lady used the Videotex system, which connected her TV to a telephone line
and then to a retailer computer, which would process the transaction. BBC published an
article on the discovery that started with an order for margarine, eggs, and cornflakes
and that shaped the way e-commerce looks today.
That same year, CompuServe launched Electronic Mall, which resembled a
contemporary e-commerce platform.

1992
Book Stacks Unlimited, the first online bookstore, was launched by Charles M. Stack. It
offered 500,000 titles as well as daily literary journals, book recommendations from staff
and search options by title, authors, subject, keyword, or ISBN number. Later, it was
purchased by Barnes & Noble.
1994

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The first ever e-commerce sale which involved a secure online financial transaction
happened in 1994 when Dan Kohn sold a CD, the “Ten Summoners’ Tales” by Sting
over his website NetMarket. The order plus shipping cost buyer Phil Brandenberger
$12.48.

1995

Jeff Bezos launched Amazon, the largest internet retailer in the world. Originally, it was
only selling books and someone will ring a bell in the office every time an order was
placed. Within weeks, orders were so frequent that the employees couldn’t keep up with
ringing the bell and had to shut it off.

Another e-commerce giant released in the same year is eBay. Originally it appeared
under the name AuctionWeb. The first thing bought on eBay was a broken laser
pointer. Some other interesting purchaseson eBay are a yacht for $168 million, an
airplane, and the town of Bufford, Wyoming.
1997

Netflix, the world’s leading streaming entertainment service, was released. It started out
as a service that would send DVDs to its subscribers on demand. It wasn’t until later in
2007 when Netflix began providing a streaming service. 

1998
PayPal was launched. Interestingly enough, PayPal was voted one of the 10 worst
business ideas of 1999. Needless to say, PayPal has had a great impact on the way e-
commerce looks today. It was bought by eBay in 2002 but spun off and became a public
company again in 2015.

Currently, PayPal operates in 31 countries with over 40% of its users from the U.S.

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1999

Alibaba was launched in China by Jack Ma. He set the platform with $60,000 borrowed
from 18 people. Currently, Alibaba dominates not only the e-commerce landscape in
China but also is a major pioneer in the field of Artificial Intelligence (AI).

In the city of Hangzhou (with a population of over 9 million people), for example, Alibaba
is a major partner for the “City Brain” project. The project aims to improve the life of
citizens by tracking their social activity, daily commutes, purchases, etc.

By collecting such information City Brain has developed a network around the city,
which allows it to inform citizens and authorities of crime, road accidents, and even
traffic congestion.

In terms of e-commerce, the City Brain project helps Alibaba gain more insight into the
behavior and preferences of consumers.
2005

Etsy was founded in Brooklyn, New York. Originally, its core requirement was that
everything posted on the website must be handmade by the seller. Thus, Etsy
expanded the business world of small sellers and crafters. As of 2013, this rule was
dropped.

2006

Shopify was launched. Initially, the company was an online store that sold snowboard
equipment. However, when co-founder Tobias Lütke couldn’t find a suitable software for
the online store (which was called Snowdevil) he built one himself. This is also when he
realized that he can offer this software to other retailers.

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2007
Magento was launched. The story of this famous PHP e-commerce platform actually
starts in 2001 when Roy Rubin, then a student at UCLA started Varien, a web
development company doing a little bit of everything including CMS and e-commerce.

At the time another e-commerce platform, OsCommerce, was ruling the PHP e-
commerce market and Roy realized that there weren’t many companies providing
services on top of OsCommerce and most of these services were not really
sophisticated. Varien became a leading OsCommerce development company, but the
more Roy and his team worked with OsCommerce the more they realized that the
system was lacking.

Finally, in 2007 Varien decided to develop a much more refined and versatile e-
commerce platform and launched Magento in August 31st the same year.

Magento went on to become the most popular open source e-commerce system and in
2011 was acquired by eBay for 180 million dollars.

In June 2018, Adobe acquired Magento from eBay for 1.6 billion dollars.

2008
NopCommerce, the most popular .NET open-source e-commerce platform, was
launched in Yaroslavl, Russia. Similarly to Shopify, NopCommerce originated as an
online store.

Founder Andrei Mazulnitsyn, a .NET developer by profession, ran an online flower shop
for a short period of time, before realizing that the .NET technology space was missing
a ready-made e-commerce platform.

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This is when he started nopCommerce, the first .NET open source e-commerce
platform. Now, 10 years later, nopCommerce has become the Magento of the .NET
world.

2009
Jack Dorsey and Jim McKelvey founded Square, Inc. The company started with the
creation of an affordable credit card reader for small to medium size retailers to accept
card payments.

This technology was later complemented with contactless payments as well as products
such as Square cash, which allows users to transfer money using Square’s Cash App.

2012
Apoorva Mehta, a former Amazon employee, started InstaCart to provide same-day
grocery delivery service. Customers can order groceries through the InstaCart app or
website and the order is delivered by a personal shopper. Customers can pay with
Android Pay or Apple Pay.

Initially, InstaCart personal shoppers would simply go to a store and purchase the
ordered items at a retail price and then add the delivery fee plus a 10 to 20 percent
markup. But as the company grew InstaCart established relationships with grocery
companies which share their markup and allow InstaCart users to shop at in-store
prices.

2014

Apple Pay was launched allowing users to make payments online or in-store using their
mobile phone. Apple Pay keeps credit cards information within its digital wallet service.
It uses the near-field communication (NFC) chips embedded in your Apple device

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(phone or watch) to communicate with card readers (which also use NFC) to make
contactless payments.

You can also use Apple Pay to pay in apps or on online stores. You can even withdraw
cash from ATMs provided the ATM supports Apple Pay.

2015

Google launched Android Pay which is similar to Apple Pay but for Android devices.

2015

In the same year, Facebook launched its “Buy Button” and Pinterest launched its
Buyable Pins which allow users to sell products and services directly on social media.

Shopify quickly adopted the idea and shortly after integrated with Facebook
and Pinterest so that Shopify store owners can sell their products directly on Facebook
and Pinterest.
2015

The first Hema store was launched and it was part of Alibaba’s “New Retail” strategy to
integrate online shopping with brick-and-mortar retail. As of September 2018, the Hema
stores are numbering 65. A Hema store is essentially a blend of online and offline retail.
Customers can scan the products in the store using the Hema app and get detailed
information related to contents, manufacturing, certificates, recipe ideas, etc. The stores
also function as a distribution center and every customer within 3 kilometers can order
online and receive their goods within 30 minutes. Some of the Hema stores feature the
so-called Robot.He restaurant where customers can order food using the Hema app
and the food is delivered by robotic devices.

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These high tech stores seem poised for all kinds of innovation and knowing Alibaba, we
can assume that there is big data, machine learning, tracking, facial recognition and all
manner of cutting-edge technology working behind the scene and laying the foundation
for the best shopping experience to be seen yet.

2016
Alibaba launched Buy+ AR, VR. Using a Google Cardboard VR headset customers can
walk through a virtual mall, browse items and look at them in a 360 view in great detail.
This relatively new service is part of Alibaba’s effort to blend online shopping with
entertainment. It also allows brands that do not have physical shops to reach a wider
audience.

Advantages and disadvantages of e-

commerce

According to Statista, 1.7 billion people around the world have purchased goods online
in 2017. This is nearly half of the total 3.6 billion Internet users.

If you’re one of those people or if you are hesitant whether to try it out, here are the pros
and cons of e-commerce.

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 Statista: Source 1, Source 2

Advantages of e-commerce

 International reach. E-commerce is undoubtedly the easiest way to reach other

markets and grow your business without an enormous investment. Let’s take UGG, for
example, a company based in Australia, which sells winter boots. Having an online
shop, Ugg are able to reach international markets and also sell their boots through the

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 summer because the Australian summer coincides with the European and North
American winter.
 24/7 availability. Another perk, which is closely related to the first one, is that
online stores are always open. Customers from every point on the planet can access an
online shop and complete an order at any point of the day. This is, naturally, much more
convenient and preferable. As for the retailers, the constant availability results in
increased sales.
 Tailored shopping experience. The digital nature of e-commerce allows it to
make use of various technologies and innovations to provide convenient, personalized
and enjoyable shopping experience. Online shops now have the ability to track
customer behavior and based on that data, for example, adjust the site navigation,
change product prices or offer various promotions, recommend products, send timely
and engaging messages. Needless to say, the result is a win-win for the store owner
and the customer.
 Cost reduction. An online-based only business requires fewer employees (at
least at the beginning), and thus, fewer business expenses. Cost is also reduced when
there is no need to pay rent, store equipment or even inventory.

Alibaba, for example, is one of the biggest e-commerce sites in the world. They take
pride in the fact that they don’t have a single warehouse.

Smaller operational costs allow retailers to offer more competitive prices, making e-
commerce even more appealing to consumers.
 Low inflation, cheaper goods for consumers. At the time of this writing, the
American economy is booming, unemployment is sinking and businesses are
expanding their operation, producing more and more goods and services.

The laws of economics stipulate that an accelerating economy is accompanied by rising

prices and higher inflation. Yet even with the economy going full throttle, prices and
wages are rising much more slowly than expected.

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 The American Federal Reserve has an inflation target of 2%, which is optimal for
keeping the economy buzzing without overheating. But inflation is routinely falling short
of this target.

So far, the economists have identified one main culprit for this: E-commerce. Decreased
operational costs and increased competition online are some of the attributes of e-
commerce which logically are keeping prices in check even with the economy in full
swing.
 Niche markets development. Niche products target a specific segment of
customers. They are unique, one-of-a-kind and in many cases handmade. Think of
organic milk-free coconut yogurt or phone cases made from compost material. When it
comes to selling niche products, e-commerce proves to be a lot more efficient and
merciful than normal offline retail. Because of the reduced expenses and the opportunity
to sell to a worldwide-range of customers, niche markets have a greater chance of
succeeding if they’re online-based. 

Disadvantages of e-commerce

 Inability to test the products. Even though an increasing number of people

shop online, many still prefer to try out the products before buying them. VR and AR
technologies aim to alleviate this problem and therefore are recently seeing an
increased investment.
 Lack of human interaction. While for some people avoiding the queue and the
shopping malls is a benefit, those who prefer face-to-face interaction may still go to a
brick-and-mortar store. But given that prices are more competitive online, it is often the
case that customers will still buy the product online after trying it out in an offline store.
 Shipping time. Let’s face it. All of us prefer to have the products we’ve bought
immediately. Unfortunately, with e-commerce, this is not the case and customers have

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 to wait for their goods to arrive sometimes for weeks. However, with e-commerce
becoming more competitive it is almost a norm now for online retailers to offer a one or
two-day delivery.
 Privacy issues and safety concerns. Sometimes, especially when the online
shop is not of a well-known retailer, customers may feel that their personal or credit card
information may be exploited. Therefore it is important for online retailers to build trust
by showing that they are PCI and GDPR compliant, that they use reputable payment
providers and that customers have already trusted them and are satisfied with their
experience.
 Dependence on IT knowledge. For most customers, a site that crashes or loads
too slowly would be a deal breaker. It is therefore paramount that the store owner
chooses a rock-solid system and a reliable technology partner.
 Causes job losses. According to Business Insider, e-commerce is one of the
reasons why retailers are rapidly closing stores. In 2017, an estimated number of 89,
000 merchandise workers have lost their jobs. While e-commerce does not give new job
opportunities to retail workers, it usually opens positions for e-commerce assistants and
professionals as well as technically skilled personnel. Therefore although it is often cited
in publications, this disadvantage is highly debatable.

Steps to setting up and managing your own e-

commerce platform

Maybe you are a student considering starting a dropshipping business, or a maker of a

niche product trying to expand your sales or an established offline retailer planning to
explore the opportunities e-commerce. In any case, if you are wondering where to start
and how it all works here are a few simple steps that you can follow to start an online
store.

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 Choose a product. If you still do not have a product, this is, naturally, the first
and most important step for anyone who wishes to dive into the world of e-commerce.
Whatever the chosen product is, there are four main methods of sourcing it: making,
manufacturing, wholesale, and dropshipping.
 Set up a platform. You have done your product research and designed your
business model carefully. Now is the time to choose an e-commerce platform. You have
two general choices: a free and an open source platform like nopCommerce and
Magento or a cloud platform like Shopify and BigCommerce. The former is cheaper, you
have complete ownership and control of your system but will need a hosting space and
a little bit of IT knowledge. The latter is a bit more expensive, you do not own the
system, but do not have to deal with hosting providers and do not need IT knowledge.
 Promote your website. Promoting your website comes down to one very
comprehensive and trendy skill - digital marketing. This includes content creation, social
media, email marketing, Google and Facebook Ads, affiliate marketing, various
strategies for customer retention, etc. Unless you are a digital marketer or are keen to
learn the field, your best bet will be to delegate this to a professional.
 Measure the success of your marketing efforts. Regardless of who takes care
of your marketing operation, you should be in control and measure its success. For this
purpose, you will need your website to integrate with Google Analytics. Once you have
GA setup you should routinely check the number of your monthly visitors, the sources
and campaigns that brought them to your website, the bounce rate and time on site, the
pages that they visit most and the pages that they bounce most often from, the sources
and the landing pages that convert most. In this way, you will know what part of your
marketing strategy is working and what can be improved.

Successful businesses that started with little

to no venture capital

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You're probably thinking that no matter how great your idea and business plan is you
have to invest a lot of money to make it work. Not necessarily. There are thousands of
companies who have started out with little to no money and have subsequently become
successful. Dive in to see how they’ve made it.

Tuft and Needle have been selling and manufacturing mattresses since 2012. In the
beginning, the company did not have a brick and mortar store and was only selling
online.
The idea of the company was born when co-creator JT Marino and his wife overpaid for
a poor-quality mattress. Marino and his colleague Daehee Park quit their engineering
jobs and invested $3,000 each for the creation of an e-commerce mattress company.

By its first year, their product was the No.1 mattress on Amazon. Later, they took a
$500,000 loan and opened a physical store in San Francisco. In 2016 the revenue of
the company was over $100 million.

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The creators of the Cards Against Humanity game used Kickstarter to fund its launch.
Originally, the game could only be bought online - first on Kickstarter and then on
Amazon and on the Cards Against Humanity website.

With a venture budget of $15,570, it became the No.1 game on Amazon a month after it
was released in 2011 and has generated an estimated $12 million in revenue. 

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RXBAR, the protein bar company, was created with no outside funding. Creators Peter
Rahal and Jared Smith set up a webshop because it was easier to sell the product
online than to find a physical venue for it.

Rahal and Smith invested $5,000 each and started selling the bars in 2013. Their idea
was to popularize the product one bar at a time - at the beginning, the two of them
would make the bars by hand. Sometimes they would even give the bars for free to
coffee shops and CrossFit centers.

In 2017, Kellogg’s bought the company for $600 million.

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Ipsy, an e-commerce company that sends subscribers a monthly sample of beauty
products, was started with no outside capital.

Michelle Phan, the creator of Ipsy, is a beauty vlogger on YouTube and this is how she
attracted most of Ipsy’s customers. With over 8 million YouTube subscribers, Phan has
managed to convert many of them to members of Ipsy and create a company with an
annual revenue of $120 million.

Here’s how it works: members receive a “Glam Bag” with five sample products for $10
each month. However, Ipsy does not pay anything for the products. Rather, makeup
brands are happy to provide the products for free in exchange for the marketing
exposure and the feedback they receive.

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Conclusion

If you have read this far, you should already have a firm understanding of e-commerce,
what types there are, the channels and platforms that it runs on, its history, pros and
cons. I hope I have also provided you with a bit of inspiration should you decide to
venture into the intricacies of online retail. And if you do please let us know in the
comment section below.

Of course, there is more to e-commerce than this guide. If you wish to know more, dig
deeper by exploring other articles on our blog.

In case you feel like we’ve missed something, or there was a question we did not
answer, feel free to tell us, again in the comments or through our contact form here.

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http://wiki.rademade.com/marketplace-c2c-b2c-b2b

GALYNA PRYHODKO
\

Marketplaces by types of participants:

C2C, B2C and B2B
GALYNA PRYHODKO
Head of Product Marketing at Rademade.com

Here we will discuss the three business models of online marketplaces.

What is the difference between C2C, B2C, and B2B marketplaces? What is
their specifics? What interaction is set among the participants? We can find
out and compare the models in the summary table.
To easily remember the business models, it's enough to know what the letters stand for:

 C = customer = users, clients

 B = business = vendors, suppliers
Three combinations of letters define a business model:

 C2C — customer to customer

 B2C  — business to customer
 B2B — business to business
Keeping in mind the interactions, it's easier to organize the process for both sides.

Read also: Typology of marketplaces with 4 examples listed to help your understanding

C2C marketplace: equal communication

C2C online platforms presume that all participants are equal. That's why this model is
also called P2P: peer-to-peer, people-to-people or person-to-person.

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People who visit the e-marketplace are not entrepreneurs. They have similar interests,
income, are about the same age, and go to the web platform to share something with
others.

Customers:

 agree on beneficial conditions — save money,

 have similar interests — they gather into communities,
 change their roles — today they buy, tomorrow they sell.
These three characteristics are applicable for all C2C marketplaces. To make it clearer,
let's consider each characteristic in the examples.

Saving money: BlaBlaCar

Online marketplaces C2C emerge in social spheres because everybody is desperate to
save money. A good example of this is ridesharing platforms like the BlaBlaCar service.
It helps drivers find companions and vice versa. One has a free seat in the car, the other
has some money he is ready to pay for fuel.
Both of them save money:

 a driver without a passenger would travel alone and earn nothing;

 a passenger would pay more for the services of traditional transport operators.
The website informs about the opportunity to save money on the main page.

In other words, it is called a sharing economy meaning expenses are shared

equally. Lyft, the parallel service of finding companions, promises that one can save up
to 60% of the travel cost.

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Besides the thrifty travel, participants of the C2C exchange get other benefits ranging
from meeting new people to increased mobility (time, route, and stops can always be
discussed with the driver).

Community of like-minded people: Couchsurfing

Money is not the main argument for clients of the C2C marketplace. Here is an
example: Couchsurfing, a web platform for travelers. Registered users can stay in any
city for free whilst receiving a shelter for the night and also a hot dinner will be offered
by the hosts.
In spite of the colossal saving of money, this advantage takes second place. What is more
important is to meet and talk to the local people and share their travel experience. That's
why the main page of the Internet platform does not mention saving money, it declares
another UVP: Stay with Locals and Meet Travelers.

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All the C2C online marketplaces build hobby communities. For Couchsurfing, the
common feature is travelling, for Etsy —  handmade stuff, for DogVacay — love to pets.
Users go to these web platforms because it is related to their hobbies, so they remain
loyal to the service.

Roles exchange: SkillShare

Due to the fact that in the C2C business model everybody is equal, there is no strict
divide between suggesting and making use of a service. Participants can be easily
replaced, and it's important to learn how to use these specifics.

Here is an example: SkillShare, an e-marketplace that suggests studying online.

Customers watch video lessons choosing a topic at their discretion. If one is an expert in
some field, he can upload a video lesson to the website.
On the main page of the platform, there are two slogans:

 Learn a new skill each day

 Earn money by teaching

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A website that takes a similar approach is Preply, a marketplace where you can search
for tutors. This service allows people to learn a foreign language and to teach a native
language via Skype.
This is the block from the BlaBlaCar website mentioned above: find a ride or offer one.

What is important to remember about C2C online marketplaces? Their audience is

rather “monotonic” — there is no strict distribution of roles, interests are common, for
both participants of the deal the terms are beneficial.

B2C marketplace: entrepreneurs and customers

The B2C marketing model differs by involving business. Entrepreneurs and their
customers interact with each other. Users stay not with hospitable home owners like on
“couchsurfers”, but at hostels and hotels from BedandBreakfast or Booking.com.
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The advantage of such a platform is that there is a wide variety of commercial offers on
one website. This is a “one stop shop”, a place to find everything you need.

AliExpress, a huge online marketplace with many vendors offering their goods, work
with the B2C model. The platform is being visited by more than 525 M users per month.
They find offers from companies-producers: from clothes and household appliances to
cars and bikes.
On the website, each product is sold with its brand — the vendors’ side is obviously
represented by its business.

Sometimes the B2C business model becomes the secondary after the C2C. This happens
due to two reasons:

1. A lot of people come to the C2C Internet platform, and businessmen see that their
target audience is on this market. Salesmen negotiate positioning of the goods on
the marketplace, and the platform partly or completely turns to B2C.
2. Private individuals (ordinary clients) earn a minimal revenue out of the deals and
decide to keep developing their business. They become entrepreneurs.
That's why on Airbnb, the website where you search for accommodations, one can see
not only advertisements from private owners, but also from companies. The Etsy
platform that was launched as an absolute C2C e-marketplace, contains goods also from
companies-manufacturers.

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B2B: business-marketplaces
In the B2B segment, the business sells something to another business on beneficial
terms.

A good example of this segment is marketplace Alibaba, which allows entrepreneurs to

buy in bulk. On the online marketplace, there are more than 40 categories of goods
presented (electronics, equipment, etc.) Any entrepreneur can order wholesale.

The B2B model proved the UVP of Made-in-China marketplace: Connecting Buyers with
Chinese Suppliers. With the website, entrepreneurs are able to find a supplier in China.

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Depending on the platform content, B2B models can be of two types:

 vertical — refer to only one segment of the industry;

 horizontal — suggest a service in different industries.
And again, here is a parallel: a marketplace can stick to the B2C business model, but
additionally create business proposals.

Compare the two models:

 Booking.com (B2C)
The Booking.com e-marketplace lets users book rooms in hotels or hostels around the
world. One side represents landlords (owners of hotels and apartments), and the other
is people who travel or arrive to another city or country for some reason.

 Booking (B2B)
And now take a look at BookingB2B, a sister project. The online technology of booking is
optimised for those who work in tourism (tour operators, agents, transport agencies,
etc.). All customers of the platform are small and big business owners.

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From one side, hotel and hostel owners are represented, from the other side  — there are
tour operators who want to save on booking accommodation and get wholesale
discounts.

Comparative table of the C2C, B2C, and B2B business

models

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Besides the variants mentioned above, there are also C2B models (customer to
business). It can be a freelance exchange house where private specialists offer their
services to different companies.

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