Online Retail vs E-Commerce: What’s the Difference?
According to Digital Commerce 360 estimates, consumers spent $871 billion with online merchants in the US in 2021, up 14.2% from the previous year. With the industry slated to continue growing at 13.7% YoY until 2025, now is the perfect time for your small business to boost its digital presence.
As you start to explore this further, you’ll come across a few words, such as online retail, D2C, and e-commerce. While these words are often used interchangeably, they are not the same. This article will tell you the difference between them.
What are online retail and e-commerce?
Online retail involves businesses that primarily focus on the B2C (business to consumer) sector. These businesses are trying to sell products to the end consumer.
D2C, or direct-to-consumer, is the most popular form of online retail today. It involves businesses that market and ship their products directly to the consumers. D2C lets brands control their brand image, access their customer data, and eliminate distributor costs.
In the D2C model, the consumer buys straight from the business, and the intermediary parties between the brand and consumer are bypassed. Firms that offer online retail aspire to provide the same customer experience to users as they are likely to experience in physical shops.
E-commerce, on the other hand, involves the buying of products and services from a seller online, not the brand itself. For example, Amazon is the largest online retailer that provides its customers with products from various companies. This means that you can explore and compare products by features and price online.
E-commerce platforms allow for participation from entities like small businesses, individuals, non-profit organizations, government bodies, and from retailers, manufacturers, wholesalers, and distributors. Choosing to do e-commerce can mean participating in the best online ecosystem for your business and gaining access to the most relevant insights for your company.
What are the various E-commerce models?
Before setting up your online store, you should know the difference between the six types of e-commerce models.
1) Business to Business
In this model, a business is providing a service to another business. For example, a logistics company utilizing a consulting firm’s services. Here the consumer of the product or service is a business, not an individual user.
Any type of wholesale commerce is also considered a B2B model. This is because a business is selling products in bulk to another business, which then sells the products to consumers.
2) Business to Consumer
Here, the end-user of the product is the customer of the company. An example of this type of model is a clothing store like H&M, or companies like Spotify and Netflix that provide subscription services to paying users.
3) Consumer to Consumer
C2C involves consumers on both ends, connected through a platform. For example, Poshmark is a site where one individual can sell something in their closet to another consumer. So, here, neither the buyer nor the seller is a business. An item is sold from one consumer to another consumer, made possible by the C2C platform.
Another example of this type of e-commerce model is eBay. eBay connects individuals who wish to sell used products to people willing to buy them second-hand.
C2C is synonymous with C2B2C because the business acts as an intermediary between two consumers.
4) Consumer to Business
In this model, businesses can capitalize on their customer base by paying their customers to market on their behalf. For instance, a business whose customer segment overlaps with a social media influencer’s reach can pay the individual to post content about its products or services.
So, essentially, a consumer is selling their influencer marketing service to a business.
5) Business to Administration
A B2A model could be a government subscribing to an agrotech startup’s services and then implementing them across their territory. So, essentially, a business provides a product or service to an administrative body. Another example of this is when a government body outsources the designing of its websites to a third-party organization.
6) Consumer to Administration
A C2A e-commerce business model is one where consumers/users can interact with government bodies on an online medium, like a portal or app. For example, if a person wants to book an appointment at a passport-renewal facility, they would make use of such a service. Another example of this type of business model is filing for tax returns.
What’s better for your business?
So, when setting up an online space for your business, which one would serve you better; an online retail store, or an e-commerce model? Let’s look at the pros and cons of each.
Online retail is great for helping you keep a check on your customer experience, but it makes it expensive to attract new customers because of the low brand visibility.
On the other hand, one downside to online retail is the absence of an e-commerce safety net, so your business exists somewhat in isolation. Whereas, on an e-commerce platform, potential customers would see your products listed on the platform even if they had never heard of your brand before.
One other drawback of online retail is the considerable difficulty in achieving operational efficiency. For example, a company that conducts its business via e-commerce can cut costs at various parameters. One such parameter is employee salaries since the company no longer requires large teams to maintain an online retail site.
Advantages of e-commerce
Ultimately, e-commerce is usually the preferred choice for new businesses and consumers alike. Marketing your brand via platforms like Amazon and Facebook Marketplace allows you to start selling your products in a relatively short time because of the plug-and-play solution.
Moreover, with e-commerce, the barriers to entry are lower than for setting up online retail stores—since you need not pay for designing and maintaining the website, building payment integrations, and various other such costs.
Using known and secure providers also helps customers ensure that their payment details are safe. This leads to them favoring e-commerce solutions over standalone sites that use a relatively unknown payment gateway.If this sounds interesting, we encourage you to check out our various solutions. We have helped numerous companies with e-commerce payment processing integrations and engagement software.