Speaking with someone today, I came to the realization that, at the moment, many could be confused on the core difference between having an online (yes, digital) store and running an ecommerce company. The industry definition of ecommerce may not help, because they use the term “ecommerce” when transactions take place, only, on the internet.
Electronic commerce or ecommerce is a term for any type of business, or commercial transaction, that involves the transfer of information across the Internet. It covers a range of different types of businesses, from consumer based retail sites, through auction or music sites, to business exchanges trading goods and services between corporations. It is currently one of the most important aspects of the Internet to emerge.
Ecommerce allows consumers to electronically exchange goods and services with no barriers of time or distance. Electronic commerce has expanded rapidly over the past five years and is predicted to continue at this rate, or even accelerate. In the near future the boundaries between “conventional” and “electronic” commerce will become increasingly blurred as more and more businesses move sections of their operations onto the Internet.
Technically, “ecommerce” needs to have been transactions that take place on any electronic medium. This means those POS-, ATM-, and Internet-based transactions could be included, as they are all “electronic” representing the “e” in “ecommerce”. However, the term has evolved that ecommerce is simply associated with Internet-executed transactions. When you pay with your credit card in a store, you do not think of ecommerce even though the card itself is an electronic system which has facilitated that transaction. When you transfer money via ATM, ecommerce does not come to mind. Those other types of transactions are now loosely referred to as digital commerce. The internet has taken ownership of the “electronic” commerce.
That is all fine. Today, we will simply note that ecommerce occurs when transactions are done online.
However, ecommerce is different from digital or online store in terms of business strategy or formation. That you have an online store does not mean that you run an ecommerce business.
When I say ecommerce business, for those that read my writing, I have in mind companies that do nothing but sell online as a business model. The essence of the business is facilitating trade and commerce online by bringing buyers and sellers together. It could be the seller or it could enable other sellers to participate in its ecosystem to reach buyers. Amazon.com, Alibaba (a marketplace ecommerce), Konga and Jumia are all ecommerce companies. Largely, except Alibaba, most of these noted examples are hybrid ecommerce firms: they combine the pure ecommerce business with the marketplace ecommerce business. In the pure ecommerce, the company keeps inventory and sells directly to buyers. In the marketplace version, the company does not own any inventory, it merely links sellers and buyers in its portal, acting as an intermediary.
When you have a website and have a small online store on the website, I do not consider that an ecommerce business. I see that as a digital store to help you expand your distribution channels. What I write does not apply to you. Your business is not ecommerce. Rather, you are using the Internet as a tool to grow your business. An ecommerce business is living on the web and that is all it does. If Internet stops working, the business will collapse.
Let me make it clearer with an example. A soap company with a website where people can buy soap is not an ecommerce company. You simply have an online store. The fundamental challenges of ecommerce do not apply wholly to you.
Distrust: Rich Africans have yet to embrace online shopping, due to online fraud.
Cost of broadband
African open market: In Africa, there are “markets” everywhere, starting with the security guards who run stores in front of their masters’ mansions.
Fragmented markets: For all the efforts to make Africa appear as one market, it is not.
Literacy rates: Even if all the infrastructure and integration issues are fixed, illiterate citizens may be unable to participate directly on e-commerce sites that require reading and writing skills.
The Core Difference
A company online store has largely few products, mainly owned or marketed by the company, while an ecommerce company has expansive list of products, in hundreds, and usually not produced by it. Sure, like Amazon, the company can produce some of the products under its labels. However, the key difference is clear. In company digital store, you have few products made/marketed largely by one firm or few while in an ecommerce firm, you have multiple brands available. If government bans internet in that country, the ecommerce company will fold, while the company in this example can still operate, except that its online store will be gone.
Please go and add digital stores in your companies. Online stores will help grow your business. That website you are paying for domain hosting and renewal can bring more revenue if there is a store there. Everything you read about ecommerce does not apply to you. I want to make it very clear. You need a digital store – no argument on that. Your online company store is not the same as ecommerce. While you sell your products online, you business is not selling things online as the sole living mechanism. A lawyer that asks people to pay for consultancy fees online is not running an ecommerce company, and all the challenges affecting ecommerce should not concern that person.
Join Tekedia Capital and build Next Africa with min of $10,000 in startups.