Digital commerce explained: Benefits and key challenges

What is digital commerce in the era of CX?

Defining digital commerce today looks very different than it did even a few years ago – there are many more steps and considerations that must be factored into the definition, and you cannot properly explain it without all of them.

That being said, let’s define digital commerce.

What is digital commerce: Definition

In its simplest definition, digital commerce provides the ability for consumers to purchase products and services online without the need for direct human interaction. It represents an end-to-end process that extends beyond mere transactions, encompassing the entire customer journey from discovery to delivery and post-sale service. It involves a comprehensive integration of technology and digital channels to facilitate business operations.

And as we know from our personal experiences, that with a few clicks of the mouse, nearly anything you want can be delivered to your doorstep.

Digital commerce is often referred to as e-commerce, however, the term “digital commerce” extends beyond mere transactions and involves a comprehensive integration of technology and digital channels to facilitate business operations. Accordingly it is important to understand digital commerce in the context of its various facets.

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Some of the facets of the modern definition of digital commerce include:

B2B (Business-to-Business) digital commerce

B2B digital commerce involves transactions between businesses. It includes wholesale purchasing, supply chain management, and the exchange of services between companies. Unlike B2C, B2B transactions often involve bulk orders, longer sales cycles, and customized pricing. Key features include:

• Bulk orders: businesses often buy products in large quantities.
• Negotiated pricing: pricing can vary based on contract terms and order volume.
• Complex decision-making: purchases often involve multiple stakeholders.

B2C (Business-to-Consumer) digital commerce

B2C digital commerce refers to transactions where businesses sell products or services directly to consumers. This is the most common form of digital commerce and includes online retailers, subscription services, and digital products. Key characteristics include:

• Direct sales: businesses sell directly to end consumers.
• Wide product range: consumers have access to a vast array of products.
• Personalized experiences: companies leverage data to offer personalized recommendations and experiences.

C2C (Consumer-to-Consumer) digital commerce

C2C digital commerce involves transactions between consumers, typically facilitated by third-party platforms. Examples include online marketplaces like eBay and peer-to-peer services like Airbnb. Characteristics include:

• User-generated listings: consumers create and manage their listings.
• Diverse offerings: a wide range of products and services, often including second-hand goods.
• Trust and safety: platforms provide mechanisms for payments and dispute resolution to ensure trust among users.

Key differences between digital commerce and traditional e-commerce

While digital commerce and traditional e-commerce are often referred to interchangeably, there are a few key differences:

• Scope and integration: traditional e-commerce primarily focuses on online transactions, whereas digital commerce encompasses a broader scope, including digital marketing, customer relationship management (CRM), analytics, and digital payment solutions. Digital commerce integrates multiple touchpoints and technologies to create a seamless customer experience.
• Technology use: digital commerce often involves advanced technologies like artificial intelligence, machine learning, and big data analytics to enhance user experiences and streamline operations. In contrast, traditional e-commerce may rely more heavily on basic website functionality and manual processes.
• Omnichannel presence: digital commerce emphasizes an omnichannel approach, integrating online and offline channels to provide a cohesive customer journey. Traditional e-commerce may focus more narrowly on online transactions.
• Customer interaction: digital commerce platforms prioritize personalized interactions and engagement, utilizing data to tailor experiences. Traditional e-commerce may offer more generalized experiences.

By now, it should be clear that digital commerce differs from traditional e-commerce, offering a modern approach that’s more than just a new way to shop. But what makes it so beneficial?

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Benefits of digital commerce

Digital commerce offers a range of advantages for both businesses and consumers, transforming the way products and services are bought and sold. Let’s explore these benefits in detail:

Business benefits

• Increased market reach: digital commerce enables businesses to break down geographical barriers that traditional brick-and-mortar stores face, by establishing an online presence, companies can tap into new markets, access a broader customer base, and operate 24/7, reaching customers across different time zones.
• Cost reduction: businesses with digital commerce operations often enjoy lower overhead costs when compared to maintaining physical stores (i.e. added costs from rent, utilities, in-store staff, etc.). Additionally, digital commerce platforms often offer more efficient inventory management systems, reducing the need for excess stock and minimizing storage costs.
• Enhanced customer engagement: digital commerce platforms provide various tools and features to engage customers, such as personalized recommendations, targeted marketing, and interactive content. Businesses can leverage data analytics to understand customer preferences and behavior, enabling them to tailor their offerings and marketing strategies accordingly.
• Scalability and flexibility: digital commerce platforms are scalable, allowing businesses to expand their operations without significant infrastructure changes. Companies can easily add new products, update content, and implement new features. This flexibility makes it easier to adapt to market trends and customer demands, ensuring that the business remains competitive.

Consumer benefits

• Convenience: one of the most significant advantages of digital commerce for consumers is convenience. Shoppers can browse, compare, and purchase products from the comfort of their homes or on the go – 24/7, without the need to visit a physical store.
• Personalization: digital commerce platforms often utilize data analytics and machine learning to offer personalized shopping experiences. Consumers receive tailored product recommendations based on their browsing history, preferences, and past purchases. This level of personalization enhances the shopping experience, making it more relevant and enjoyable.
• Improved customer experiences: digital commerce can offer a seamless and integrated shopping experience, with features like easy navigation, detailed product descriptions, and customer reviews. Many platforms also provide various payment options, including digital wallets and installment plans, making transactions smoother. Additionally, digital commerce can offer efficient post-sale services, such as easy returns and customer support, enhancing overall customer satisfaction.
• Access to a wide range of products: consumers can access a vast array of products and services online, often at competitive prices. Digital commerce platforms allow for easy comparison shopping, enabling customers to find the best deals and products that suit their needs.

Digital commerce, no doubt offers a range of advantages and benefits, but it also brings with it a host of challenges that businesses must navigate in order to succeed.

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Digital commerce: Key challenges

Businesses looking to adopt a digital commerce business model must tackle challenges ranging from security concerns to technological complexities, as well as regulatory and compliance related issues. Let’s dive into each of these challenges:

1. Security concerns and data privacy: Digital commerce success is heavily dependent on data, including sensitive customer data. Protecting sensitive customer information against data breaches and cyberattacks, while also ensuring compliance with evolving data privacy regulations like GDPR and CCPA. Building trust through transparent data handling practices and robust security measures is essential for maintaining customer confidence.
2. Omnichannel integration: Providing a seamless experience across multiple channels—whether online, mobile, or in-store—is a significant challenge. Ensuring consistent branding, messaging, and pricing, along with integrating inventory, order management, and customer service, requires sophisticated systems and coordination. The goal is to offer a unified and smooth experience regardless of the platform the customer uses.
3. Personalization and customer experience management: In the present age of customer experience, customers now expect personalized experiences tailored to their preferences. However, delivering these personalized experiences at scale across all digital touchpoints without becoming overly intrusive is crucial for retaining customer loyalty.
4. Emerging technologies and innovation: The rapid pace of technological advancements, from augmented reality (AR) and virtual reality (VR) to voice commerce and blockchain, presents both opportunities and challenges. Businesses must decide which technologies to adopt and how to integrate them into their existing digital commerce ecosystems, all while staying ahead of competitors.
5. Payment fraud and financial security: As digital payment methods diversify, from cryptocurrencies to buy-now-pay-later options, ensuring secure and efficient transactions becomes increasingly complex. Preventing payment fraud and managing chargebacks are ongoing concerns that require constant vigilance and advanced security protocols.
6. Supply chain and logistics: A robust digital commerce landscape demands a resilient supply chain. Managing inventory levels, ensuring timely delivery, and handling cross-border logistics are complex tasks that require digital solutions and real-time visibility. Disruptions, whether from global events or local issues, can significantly impact operations and customer satisfaction.
7. Regulatory compliance: Navigating the complex web of regulations across different jurisdictions is a major challenge. From tax laws to consumer protection regulations, businesses must stay compliant to avoid penalties and legal issues. This is especially challenging for companies operating in multiple regions with varying legal requirements.
8. Sustainability and environmental impact: With increasing awareness of environmental issues, businesses face pressure to adopt sustainable practices. This includes addressing the environmental impact of data centers, packaging, and last-mile delivery. Incorporating sustainability into digital operations is not only ethical but also a growing expectation from consumers.

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Innovate or go home: To meet CX expectations, digital commerce requires constant revamping

In a recent report from Gartner, some interesting predictions for the world of digital commerce by 2023 emerged. Among them:

1. 15% of large digital commerce companies will have rolled out their own marketplaces
2. 80% of organizations that use AI as part of their digital commerce strategies will see 25% or higher improvement in key performance indicators such as customer satisfaction, revenue, or cost reduction
3. Three digital commerce vendors will dominate the market by offering extensive application platform-as-a-service (aPaaS) innovations, extensive ecosystems, and rapid feature releases

This last point seems particularly relevant, both to nascent vendors and more venerable large players alike. The message? Innovate or go home.

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All roads to digital commerce begin – and end – with CX

While the frameworks of all digital commerce platforms have many things in common, the key element that defines a leader is the ability to continuously offer new and ground-breaking features that will help clients consistently construct the process around the customer experience.

The landscape of commerce has shifted radically in the past couple of years, both in reaction to and as a result of game-changing new technologies being employed to automate previously manual processes, or to enable brand new abilities.

First, there’s the move to cloud-based, headless-first digital commerce platforms. They have enabled the front-end online storefront or in-app customer interface to be decoupled from the back-end commerce core, opening up a world of flexibility for a business’ partner ecosystem.

Headless commerce can also be extended into physical stores in the form of “endless aisle” capabilities, where in-store stock can be offset with quick-turnaround warehouse inventory on-the-spot, minimizing lost sales from stock shortages.

Or, consider the effect of AI and machine learning on product visualization, storefront configuration, customer service chat functions, and more.

AI can, for instance, drive personalization on a more granular level by allowing a single customer’s behaviors and intents to inform the actual content and layout of the digital store they interact with, in real time.

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Make every moment matter

While nobody can predict the future of business and the wonders it will bring with complete accuracy, we can confidently lean into the trend towards fully connected cloud technology platforms as the primary means of getting there.

But, of course, technology isn’t all there is to success – it’s about remembering what matters most.

In the race to the top in digital commerce, the winners will undoubtably be the ones that constantly look ahead, reimagine the possibilities, and keep their focus firmly on the true benefactors of their offerings: the end customer.