Investing in eCommerce

January 7, 2020

More than Just Online Shopping

There are certain ecommerce enterprises that have taught consumers and investors, alike, quite a bit…good and bad. Stories of unreasonable working conditions in distribution warehouses are notorious. Perceived declines in quality customer service have consumers annoyed. However, we have also learned that online shopping, or, ecommerce, is not going anywhere anytime soon. As such, investing in ecommerce can be a wise choice, whether you are looking to see a quick ROI and cash out, or you plan on hanging onto that stock for the long term.

What Exactly is Ecommerce

A lot has changed since the early to mid-1990’s, when the internet and online shopping were both in their infancy. For years, the internet served as a meaningful tool for communication with email and instant messenger, as well as a means of doing research. But, shopping? No one was thinking about selling stuff online, nor was anyone considering sending their credit card information out onto the Information Superhighway. It may have been slow-starting, but now online shopping is expected to account for nearly 13% of retail sales by next year. A trend that is only expected to grow as essentially every retailer not only has ecommerce capabilities, but mobile capabilities; shopping from one’s smartphone currently accounts for over 90% of online purchases.

So, what exactly is ecommerce? Yes, it is electronic commerce, meaning that goods and services are being bought and sold over the internet. Chances are, when we think of ecommerce, we immediately think of a few big names like Amazon and eBay. And, with good reason: love them or hate them, these are two of the ecommerce giants who have changed the name of the game. Fortunately, there is a lot more to the art of ecommerce, and as pretty much any consumer knows, there is a lot more out there.

Types of Ecommerce

There are essentially two primary types of ecommerce: B2B, which is business to business, and B2C, which is business to consumer. Additionally, C2B, which is consumer to business and C2C, which is consumer to consumer, are existing business models, as well.

While the definitions are probably quite self-explanatory, what are some significant examples of each?

Business to Business

B2B is actually more common than most people realize and there are several disruptors out there, as well. For example, there are the obvious B2B companies like Xerox, a business that is selling or leasing photocopy equipment to other businesses. But, how many people immediately recognize a company like WeWork as a B2B endeavor? While the other businesses to whom the coworking space is leasing, may be sole proprietorships, they are still seen as fellow businesses.

Business to Consumer

The second primary ecommerce model is B2C. Obviously enough, this is a business providing a good or service directly to a consumer. While this includes businesses that have strictly an online presence such as Overstock.com, it also includes those old-fashioned brick and mortar stores that have expanded their sales reach to include online shopping. (Which, is pretty much all of them, at this point. Even some staunch, independently owned businesses like the famous New York City bookstore The Strand, provides the ability to shop online.)

Consumer to Business

C2B is also more common than most people realize, although sometimes trickier to understand. Essentially, the C2B model is defined as a consumer (or, individual) is providing goods or services that are being bought by a business. One example of this is a company paying an individual to try out a new product and then write a review for it. The C2B model also includes a business obtaining an individual’s services through an intermediary. For example, a company utilizing the services of a temp or employment agency to hire an employee would follow this model, as the temp agency is serving as the intermediary between the individual and the business.

Consumer to Consumer

C2C exists when two individuals are buying and selling goods or services between each other, without an established business being a part of the equation. One of the older examples of this business model would be the hiring of the kid down the street to mow your lawn or babysit your kids; a business relationship that existed long before the internet. This business model continues to grow, thanks to the internet and the increasing each by which people can build websites that provide ecommerce capabilities, along with online payment options like PayPal and Venmo. Esty, meanwhile, serves as an example of a C2C ecommerce model, as does Poshmark.

It is worth noting that several C2C ecommerce shops may also meet the definitions of other types, as well. For example, eBay. There is certainly no shortage of individuals selling goods and services to other individuals on the famed website, but there are just as many small businesses that have been established on eBay, utilizing the ecommerce platform to facilitate their sales.

The expansive nature of ecommerce and the ease by which different businesses or platforms can wear different hats, is one of the appealing factors for investors.

Why to Consider Ecommerce when Investing

While the internet was initially written off as being a fad, something that was never going to really take off, the continued growth of ecommerce in recent years (not only have more or less all brick and mortar stores established an online presence, but even businesses that had initially been online only are now providing their consumers with an in-store experience. So, not only is ecommerce changing the way we shop, online, it is changing the way we shop, period.

Additionally, with the rapid changing technology that is constantly happening, ecommerce will only continue to boom as driverless cars may eventually lower shipping and receiving costs, due to not drivers not having to be paid. Some online retailers have already been trying to experiment with drone technology as a means of delivering packages. Meanwhile, technologies such as artificial intelligence and cloud computing are streamlining warehouse operations and data collection procedures, both of which lower costs and speed up processes.

Ultimately, the reason ecommerce should be an attractive investment opportunity, lies in just how robust the opportunities are. While there is the obvious choice of investing directly in what is positioned to be the next big online bookseller or DVD-by-mail rental service, investors have the ability to be a part of the continued growth of ecommerce by also investing in the technologies that is fueling the backends of these endeavors.

From the rapid growth possibilities to the low cost, compared to more traditional shopping experiences, investing in ecommerce will prove to be more than simply investing in a brand or a store, as the ability to shop online manages to connect communities, even on a global scale. Investing in ecommerce today will be more than simply investing in a brand or store, it will serve as an investment into the future.