What Does Ecommerce Really Mean and How Does It Work

Ecommerce or electronic commerce has enabled financial transactions on the internet

that provide a variety of services which include sales, insurance, marketing, online

advertisements and the like. With the current estimated value of ecommerce being $591

billion, there are various large-scale and small-scale companies that want a share of

these financial transactions to promote their business. However, there have been

innovations in the area of electronic commerce as home-based businesses have greatly

profited form online marketing. Ecommerce continues to grow as a major economic

sector.

What is Ecommerce?
In general terms ecommerce is the market place of the Internet where buying, selling

and distributing of goods and services takes place through an electronic medium. It is

a virtual environment where the buyers and the sellers decide upon financial services.

Therefore, any economic transaction that is enabled over an electronic medium i.e.

Internet it is termed as Ecommerce.

Since the advent of the Internet, Ecommerce has grown steadily enabling optimization

of businesses. The following figures elaborate the growth of Ecommerce:-
• Online population in the U.S. has increased by 50% from 141.5 million in 2001 to

210.8 million in 2006.
• Online U.S. retail sales have grown from $47.8 billion which was estimated in 2001

to $130.8 billion in 2006.
• The total number of small companies in the U.S. is 2.3million out of which only 60%

of them are based on the Internet. 16% of these companies specialize in retail trade.
• The annual expenditure of the buyers has increased from $457 which was in 2001 to

$784 in 2006.

However, there are various large and small companies that offer products and services

in order to meet the overall customer requirements. Companies such as Ebay, Amazon,

and CoinStar Inc are just some of the top 50 online retailing sites. These companies

are able to sell their goods and services to consumers through credit card

transactions online. This enables a real time commercial transaction as these

transactions are done with a click of a mouse. At these speeds of conducting business,

online retail companies have managed to optimize their commercial transactions. By

selling online these companies have profited greatly which has offered tremendous

growth potential.

What is the scope of small companies in Ecommerce?
Ecommerce has provided small companies especially self-employed businesses to gain the

advantage of marketing which they can carry out from their offices in order to spread

the awareness of the products and services.

Unlike large companies, small companies cannot afford expensive advertisements. In

order to increase the awareness of the products and services, online marketing

provides them a solution to enable potential consumers’ access to their goods and

services. In fact there are only 2.3 million small companies in U.S. out of which 60%

are providing retail services on the Internet. These small scale companies have

enabled to expand their base by having virtual customers on the internet that increase

their profits.

The advantages that small-scale companies can gain from Ecommerce can be seen as

follows:
• Larger pool of customers: Small companies are able to gain greater access to

customers through emails and advertisements.
• Increased marketing: Through web commerce small companies are able to market their

products and services through online advertisements and able to target the potential

customers through their profiles.
• Optimization of business: Small businesses don’t have the expertise to research and

conduct market analysis. By linking their websites with other similar websites in

their category they can find potential customers. Internet technology enables small

businesses to keep a track of the customers that are visiting their website.
• Increase in profits: Internet commerce has increased market access and optimized

businesses, small companies can earn better profits thus allowing them a better growth

potential.

With over 3 billion customers having Internet access it becomes convenient for the

companies to reach them through the Internet and provide information about their

products and services in an interactive way. In fact, with the introduction of

shopping cart users can select various books, furniture, clothing and technology

gizmos. As an audience the virtual customer has the best benefit of knowledge as

information flows to them in terms of the latest news regarding plane fares, cinema

tickets, holiday tours and other news that will enable them to exercise their choice

as a customer.

Therefore Ecommerce continues to grow as a lucrative option for many businesses as it

bridges the gap between the seller and the buyer and provides an opportunity to gain

the advantages of globalization.

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