What you need to know

E-commerce is a route to market for consumer to consumer (C2C), business to consumer (B2C) and business to business (B2B) activity including many products and services. Most media attention concentrates on the B2C activity and its disruptive impact on traditional high street retailing. However, the B2B market is far larger than that of the B2C sector, and is equally challenging to traditional distribution routes. Moreover, in both the B2C and B2B market the catalogue form of distribution has been challenged by online e-commerce, and the development appears compatible not only with consumer convenience but also environmental issues, which are gaining in importance with increasing attention to climate change.

The B2B e-commerce sector is more than twice the size of the B2C sector at £551.2 billion in 2019, equivalent to 69% of the total e-commerce market excluding C2C activity. In the B2C sector, the market is entirely accounted for by website sales, whereas in the B2B sector website sales are smaller than the electronic data interchange (EDI) form of e-commerce. All EDI activity is accounted for by the B2B sector. In addition, B2B activity is estimated to account for 43% of website sales. The role of B2B e-commerce activity as a proportion of total websites sales has continued to fall, along with the very buoyant B2C activity. However, growth in website sales in the B2B sector in 2019 remained strong at almost 15% while the dynamic B2C sector recorded growth of 25%.

E-commerce is of growing importance in a wide range of industrial and commercial sectors. It is estimated that almost 39% of the turnover of the transport and storage sector is now accounted for by e-commerce, and it further accounts for more than 32% of the manufacturing turnover. These are far higher proportions than is evident in the wholesale (20.2%) and retail (14.3%) sectors. Other sectors with high penetration levels include the information and communication sector (19.5%) and accommodation & food services (14.5%) where large parts of the food trade are booked online before being paid for at site. Areas with low penetration include construction (4.1%) where there is growth in material supplies through e-commerce.

Covered in this Report

E-commerce covers the buying and selling of goods and services, or the transmitting of funds or data, over an electronic network, primarily the internet. Statistics in this Report cover business-to-business (B2B) e-commerce and business-to-consumer (B2C) activity, but exclude consumer to consumer (C2C) sales.

Electronic data interchange (EDI) is a document standard which, when implemented, acts as a common interface between two or more computer applications in terms of understanding the document transmitted. It is commonly used by large companies for e-commerce purposes, such as sending orders to warehouses or tracking their order. It is more than mere email; for instance, organisations might replace bills of lading and even cheques with appropriate EDI messages. It also refers specifically to a family of standards.

In 1996, the National Institute of Standards and Technology defined electronic data interchange as "the computer-to-computer interchange of strictly formatted messages that represent documents other than monetary instruments. EDI implies a sequence of messages between two parties, either of whom may serve as originator or recipient. The formatted data representing the documents may be transmitted from originator to recipient via telecommunications or physically transported on electronic storage media." It distinguishes mere electronic communication or data exchange, specifying that "in EDI, the usual processing of received messages is by computer only. Human intervention in the processing of a received message is typically intended only for error conditions, for quality review, and for special situations. For example, the transmission of binary or textual data is not EDI as defined here unless the data is treated as one or more data elements of an EDI message and not normally intended for human interpretation as part of online data processing."

Before using EDI, trading partners must set up a trade agreement to define the parameters of EDI. Each partner in an EDI trade agreement must independently determine a method to translate internal data to and from EDI formatted messages. Each must agree on the communications media and arrange the method for transmitting information. This may involve several methods, such as a dedicated communications link, a virtual area network (VAN) or the internet. Each must provide for system recovery in case of failure or error, security and timely response.

There are several advantages to using EDI:

  • EDI speeds the process and improves the accuracy of getting information into the user's computer system. The traditional connections between businesses are telephone and mail. Both can be slow and require human intervention. EDI uses direct links to the computer system to minimize the transmission delay.

  • Direct links also eliminate the need for transcribing data into the computer. This reduces errors and saves time.

  • EDI solves business problems, offers cost savings and strategic benefits and provides a competitive edge.

  • EDI helps organisations improve communications and increase competitiveness, efficiency and customer service by cutting costs and maximizing productivity and profitability.

  • EDI can lower costs by reducing inventory investments by timelier ordering. EDI can enable better business practices, such as "just in time" stocking. If point-of-sale data is sent directly to vendors, inventories can be monitored and orders automatically generated to minimize overstocking.

Omni-channel marketing is a multi-channel approach to sales which seeks to provide the customer with a seamless shopping experience, whether the customer is shopping online from a desktop or mobile device, by telephone, or in person at a store.

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