A Complete Guide to E-Commerce Basics

Before delving into the finer details, it is essential to understand the meaning of e-commerce. At its core, it refers to the act of buying or selling goods and services over the internet. This is done through electronic devices, such as smartphones, laptops, and tablets. Customers can place orders and make payments online, while enjoying the comforts of their homes or offices. There is no need for any physical interaction between the buyer and the seller.

The most common examples of e-commerce are online shopping platforms, such as Flipkart, Amazon, Shopify, etc. Besides, e-commerce also includes other online activities, such as online auctions, ticket-booking platforms, and even subscription-based digital content (OTT) services.

One of the top reasons behind the increasing popularity of e-commerce is that it benefits both businesses and customers. For businesses, it provides a wider reach than a physical location. It allows them to sell their products to anyone around the country (or even the world) who has access to the internet. For customers, e-commerce allows them to shop for their favourite clothes, electronic items, and daily necessities at any time and from anywhere. They won’t even need to step out of their home.

What is M-Commerce?

While traditional e-commerce primarily relied on desktop access, an increasing penetration of smartphones and mobile internet has led to the rise of m-commerce in India. An abbreviation for mobile commerce, m-commerce refers to transactions made from mobile devices such as smartphones and tablets, including app-based shopping, in-app purchases, and mobile wallet payments.

Today, a majority of online shoppers in India use mobile devices for browsing and purchasing. This trend has encouraged businesses to develop mobile-first storefronts and apps, improve mobile payment integration, and optimise user journeys for a fast and secure checkout experience.

To truly understand the scale and impact of modern e-commerce, it is important to look at how it has evolved over the decades. While many associate e-commerce with online shopping websites, its origins go back much further than the internet era.

The foundations of e-commerce were laid in the 1960s with the introduction of Electronic Data Interchange (EDI). This technology allowed businesses to exchange documents such as purchase orders and invoices electronically. The EDI replaced the existing manual document-sharing practices.

However, the first true e-commerce transaction took place in 1994, when entrepreneur Dan Kohn sold a music CD through his website, NetMarket, using an encrypted credit card. A year later, Amazon came up with an online bookstore to sell books through digital transactions. AuctionWeb (now eBay) also entered the e-commerce market, bringing digital auctions to the mainstream.

Four years later, in 1998, the launch of PayPal revolutionised online payments. It enabled secure cross-border money transfers and accelerated global e-commerce adoption. With the rising popularity of on-demand delivery, the mid-2000s saw the launch of several dedicated e-commerce platforms such as Shopify, Magento, and BigCommerce.

However, the real catalyst came into force in 2020 in the form of the COVID-19 pandemic. It forced businesses worldwide to shift online, and the trend quickly became a norm. This period also triggered advancements in AI-driven personalisation, social commerce, and cybersecurity. These technologies continue to shape the modern e-commerce ecosystem.

E-commerce isn’t a one-size-fits-all operation. Different business models cater to different participants in the value chain, depending on whether the transaction is taking place between businesses and businesses, businesses and consumers, or even businesses and governments. Here are the different types of e-commerce business models:

Business-To-Consumer (B2C)

Business-to-consumer, or B2C, is perhaps the most prevalent e-commerce business model. In this model, businesses sell their products and/or services directly to customers through online channels. It focuses on delivering a smooth and user-friendly customer experience, with online stores built around intuitive navigation and simplified checkout processes.

The B2C business model is widely used for retail operations because it is convenient and relatively easy to launch and manage. However, its popularity also means intense competition, especially in highly saturated niches.

Common examples of B2C e-commerce platforms include Flipkart and Amazon, which sell a wide range of products online, ranging from clothing to books to smartphones and laptops to heavy electrical appliances.

Business-To-Business (B2B)

Business-to-business, or B2B, is another popular e-commerce business model where businesses sell their products and/or services to other businesses. The buyer can be the end-user or a reseller. In the B2B model, the transactions often involve bulk orders and higher values. In some cases, sales cycles are also longer.

The B2B business model is typically more complicated than the B2C model. The businesses may have to deal with large orders and repeat customers. Alibaba is one of the largest B2B e-commerce platforms in the world. Companies like B2B Delhivery support B2B online businesses with customised logistics and delivery services.

Consumer-To-Consumer (C2C)

The rise of e-commerce platforms has flipped the traditional concept of businesses selling their products to consumers. Now, even consumers can directly sell goods to other consumers, resulting in a modern business model known as the consumer-to-consumer model or C2C.

The examples of C2C e-commerce platforms include peer-to-peer marketplaces like eBay, OLX, and local community selling groups. This business model drives user-generated commerce and often serves re-commerce or secondhand market demand. C2C platforms may help consumers find unique items and deals, but they can involve risks related to payment, security, and product quality.

Consumer-To-Business (C2B)

The consumer-to-business, or C2B, is a relatively newer but growing model. It allows individuals to sell their products or services directly to businesses. This can result in innovative and cost-effective solutions for businesses, though the quality and terms of such deals may vary.

The examples of the C2B model are freelance platforms that allow individuals to list services that companies can purchase. Content creators or influencers who monetise their content also fall under this category.

Business-To-Government (B2G)

Business-to-government, or B2G, refers to a business model where individual entrepreneurs or companies supply goods or services to government agencies. This is usually done through a dedicated portal authorised by the government itself.

The B2G model typically involves strict regulations and formal procurement procedures. While businesses often benefit from steady demand, they must be well-versed in compliance requirements and capable of navigating complex bidding and tendering processes.

An example of the B2G platform is the Government’s e-Marketplace (GeM) portal. It is India’s national public procurement platform that allows government agencies to buy common goods and services directly from registered sellers

Government-To-Consumer (G2C)

Government-to-consumer, or G2C, covers services offered by government bodies directly to citizens. For example, online tax payments, registration, and license renewals.

G2C eCommerce improves accessibility by allowing citizens to use government services online and complete tasks more efficiently. However, despite the added convenience, limited internet access and concerns about data privacy can still be concerning for some users.

E-commerce offers significant advantages to both businesses and consumers by removing traditional barriers associated with physical retail stores. For businesses, it enables scalable growth, operational efficiency, and wider market access. For consumers, it delivers convenience, choice, and seamless shopping experiences. Let’s look at the benefits of e-commerce one by one:

Eliminates Geographical Restrictions

E-commerce allows businesses to reach customers beyond city, state, or national boundaries without setting up physical stores. A seller operating from one location can serve customers across India or globally.

No Fixed Hours for Business

Physical retail stores can operate for only fixed hours during the day. However, e-commerce stores remain operational 24/7. Customers can browse, compare, and place orders at any time, while businesses continue to generate sales even outside traditional working hours.

Reduced Overhead Costs

Operating an online store reduces expenses related to rent, utilities, in-store staff, and physical infrastructure. These cost savings enable businesses to offer competitive pricing while maintaining healthier profit margins.

Enhanced Customer Experience

E-commerce platforms offer personalised recommendations, easy product comparisons, secure payments, and real-time order tracking. This is done through blockchain technology in supply chain management.

No Need for Inventory Storage

With dropshipping models, sellers can operate without holding inventory. Products are shipped directly from suppliers to customers, with e-commerce platforms acting as the middlemen.

Easy Access and Convenience

For consumers, e-commerce provides instant access to a wide range of products from multiple sellers. They can buy or order anything they want at any time and from anywhere. All they need is a stable internet connection and a working smartphone.

Despite the benefits and popularity, e-commerce has certain limitations or drawbacks. Understanding them can help businesses prepare accordingly and ensure customer satisfaction. Here are the disadvantages of e-commerce:

Delayed Customer Connection

One of the key challenges is the delayed customer connection, as online interactions lack the personal, face-to-face engagement found in physical stores. This can make it harder for companies to build trust, address queries instantly, or offer smooth customer experiences.

Delivery Waiting Time

Another common drawback is the waiting time for delivery. Unlike in-store purchases, customers must wait for products to be shipped and delivered. Even after the availability of advanced e-commerce shipping solutions in India, delays can occur due to distance, weather conditions, or supply chain disruptions.

Additional Shipping Costs

E-commerce transactions may involve additional shipping costs, which can increase the final price of a product. For cross-border deliveries, import ship expenses, customs duties, logistics charges, and compliance charges further add to the product cost.

Data Privacy and Cybersecurity Threats

Online platforms store sensitive customer information such as payment details and addresses. This makes them attractive targets for cybercriminals. Businesses must invest in technologies such as HTTPS/SSL and PCI-DSS-compliant payment gateways to tackle these threats.

Returns and Exchanges

Returns and exchanges associated with e-commerce can be complex and costly for businesses. Managing reverse logistics through courier return services requires additional coordination, increases operational expenses, and may result in product damage or resale losses.

Launching an e-commerce website or business requires appropriate planning and diligence. Here are the steps involved:

Step 1 - Define your business niche

Before starting an e-commerce business, it’s crucial to identify your niche. Clearly define the products you are going to sell through your website and the target audience you want to cater to.

Step 2 - Choose an e-commerce platform

Select an e-commerce platform that aligns with your business needs and preferences. Options range from hosted solutions like Shopify and BigCommerce.

Step 3 - Set up an online store

Design and set up your e-commerce platform. Use high-quality images and detailed descriptions for products. The site must be responsive, intuitive, and secure, with easy navigation and fast load times.

Step 4 - Implement payment integration

Integrate payment gateway services into your website to allow your customers to pay online. Offer multiple payment methods, including debit/credit cards, UPI, and mobile wallets.

Step 5 - Monitor, analyse, and optimise

Monitor and optimise your website regularly. Organic visibility comes from structured URLs, keyword optimisation, and performance improvements.

E-commerce continues to transform how businesses are conducted globally. Whether you are a first-time seller or a seasoned business looking to scale, mastering the basics of e-commerce can ensure your long-term stability and success. Additionally, embracing the latest innovations and recent trends in SCM can help you stay agile and competitive.

To cover operational, logistical, and financial risks related to your e-commerce business, you can procure a commercial insurance policy. From inventory loss to transit damage to asset damage, commercial insurance covers a range of financial perils.

TATA AIG offers a gamut of insurance for small businesses, including Office Insurance, which helps you ensure all-around protection for your office space and operations.