What is ecommerce

What is ecommerce

Whether you’re an experienced entrepreneur or a beginner, learning about e-commerce is vital for success in the modern technological world.

This guide explains everything you need to build a successful e-commerce business. We’ll discuss different ecommerce industry trends and share instructions on setting up an online business with a list of the best ecommerce platforms.
Let’s dive in to answer what is ecommerce?

What Is an Ecommerce business?

Ecommerce business, also known as electronic commerce or internet commerce, is a business model of trading goods and services online. It involves marketing, transaction execution, customer service, shipping, and other essential commerce elements facilitated using the internet. In other words, e-commerce is any business running online.

The concept of e-commerce isn’t as new as it may seem. The first online sale was made in 1994 through a website called NetMarket. This was a marketplace similar to modern-day Facebook Marketplace, Amazon, and Etsy. Since the ‘90s, e-commerce has evolved into a multi-billion dollar industry.

Ecommerce Examples

Online businesses can take many forms, selling various goods and services, and utilizing different marketing strategies. Some of the most common e-commerce examples are:

  • Retail – selling goods directly to the consumer via an online store.
  • Dropshipping – an online store reselling products stored and shipped by a third party.
  • Software subscription – an automatic recurring payment for a digital product.
  • Professional services – individuals or agencies offering online services to other individuals and businesses.
  • Crowdfunding – platform facilitating donations toward a specific cause from interested individuals.

Types of eCommerce

Not all e-commerce is the same. It’s a broad term including so much more than online stores. Generally, all e-commerce companies can be divided into six categories by business models:

  1. Business to Business (B2B)

The B2B e-commerce model refers to commercial relationships between two companies facilitated via online platforms. For instance, B2B e-commerce companies may sell products in bulk online to distributors without ever contacting the end customer. In addition, selling goods and services to organizations, such as educational institutions, nonprofits, or other businesses, is also considered B2B e-commerce.

  1. Business to Consumer (B2C)

The B2C model currently takes the largest share of the global e-commerce market. In this model, a company sells goods or services directly to the end customer, avoiding the middlemen, such as distributors and retailers. Some examples of B2C e-commerce include online stores of a specific brand, design agencies offering online services to individuals, or a software subscription for a personal computer.

  1. Consumer to Consumer (C2C)

The C2C business model implies that independent consumers sell their goods or services to other consumers online. So, for example, if you want to sell your old couch, you’ll likely head to Amazon, eBay, or an alternative online marketplace. In this case, you’re avoiding third parties and doing business directly with other individuals.

However, individuals aren’t the only participants in the C2C e-commerce model. The business facilitating the goods or services posting the transactions, such as eBay, Amazon, or Etsy, typically receives a share of your transactions or a fixed advertising fee. As a result, the C2C business model is often underestimated, though Jeff Bezos managed to make billions on it.

  1. Consumer to Business (C2B)

The C2B model is the youngest in the e-commerce world, though it’s rapidly developing. The term refers to an individual selling goods or services to a business. An example of a C2B business model is when an influencer offers to advertise a makeup brand or a designer licensing their logo for an enterprise to use.

  1. Business to Government (B2G)

In the B2G e-commerce model, companies provide goods and services to governmental institutions and structures. Examples include marketing agencies creating social cause advertising and pen manufacturers providing an annual supply of stationery and pens to local police stations.

  1. Consumer to Government (C2G)

Although e-commerce guides often leave out the C2G model, it’s also a form of online business. In this case, individuals pay directly to the government for services, such as education. Taxes paid online are another example.

Benefits of Ecommerce

Entrepreneurs considering engaging in e-commerce must first learn about the benefits and drawbacks of this online business model. Thankfully, the former tends to outweigh the latter. Continue reading to understand the benefits of why every business owner should consider turning to e-commerce.

Global Reach

Perhaps, the most significant e-commerce advantage is its global reach. Your audience reach may be limited to your area or distribution channels with an offline business.

Meanwhile, the internet provides you with unlimited lead generation opportunities. People from all over the world can find your business in a few clicks. However, to make it work, you should follow the best practices of search engine optimization (SEO) and online advertising.

Cost Reduction

Offline businesses are associated with a range of burdensome yet essential expenses, such as rent, repairs, utilities, inventory management, and sales assistant labor.

With e-commerce, you can avoid a significant part of the costs typically involved in running a business. Of course, this doesn’t mean that e-commerce business doesn’t require any investments. However, the cost of starting, maintaining, and developing an online business is incomparably low with that of an offline business.

More Customer Data

Data collection and analysis are vital for successful business development. In the offline world, gathering customer feedback and data isn’t simple. With e-commerce, you get a wide range of data analytics tools to help you better understand your customers.

You can gather information about your customers as a group or individuals, such as their interests, gender, locations, and preferred payment methods. Additionally, you can easily determine which website design draws more attention or how easy it is to navigate.

Trackable Marketing

You can collect and analyze your marketing efforts, apart from gathering customer data. Whenever you launch a campaign on social media or via email, you can instantly get insights into its reach and results.

Most importantly, you can customize your campaigns at any time, such as adjusting the target audience or changing the call to action.

Flexibility

With e-commerce, you can offer your customers flexible payment and shipping options. Furthermore, the customer can access your product or service from any location and at any time.

They can order the desired item on Saturday night without the need to wait for the store to open on Monday morning and have it delivered right to their door. Many modern customers prefer e-commerce to offline businesses for this very reason.

Drawbacks of Ecommerce

Like every business model, e-commerce has its drawbacks. Below are a few things to keep in mind when launching an online business.

Competition

The e-commerce market is constantly expanding. A broader reach and the relative ease of setting up an online business attract many beginning entrepreneurs, but this complicates the lead generation process.

Imagine an endless street full of stores. This is the image of the internet. Customers are more likely to purchase from one of the first stores they enter, not one at the end of the street. To get on the first pages of search results, you should learn how to use SEO to your advantage and how to stand out against your competition.

Security

The internet has never been a safe place. Online businesses and individual consumers are constantly facing cyber threats.

Your business may be hacked someday, and you should place great importance on protecting it by implementing the latest safety measures. Furthermore, e-commerce is highly dependent on internet connection. If your site crashes, your business will stop operating.

Can’t Try and Touch

Although e-commerce attracts many customers worldwide, some people are still hesitant to try online shopping, preferring tangible products. The inability to touch a product before buying it is a valid concern.

Thankfully, artificial intelligence (AI) and virtual reality (VR) solve many related issues. They allow people to see how the apparel or accessories will look on them without leaving their homes. While you can’t find out how comfortable VR shoes are, you can at least make sure they match your outfit.

Privacy Concerns

Another common concern among people hesitant to try e-commerce is the lack of privacy. People need to share their private data before making a purchase. Many are worried that their phone number, address, and name will be stored by the service provider or accessed by third parties. Thankfully, this issue is solvable with advanced encryption technology.

Technological Challenges

Running an online business requires being tech-savvy and following the latest e-commerce trends to survive the competition. It also involves numerous technological challenges, such as optimizing your website’s back-end to improve its performance or utilizing A/B testing.
Of course, you don’t have to do all of this yourself, but hiring IT and SEO professionals can become costly.

How to Build an Ecommerce Business

Starting an e-commerce business is different from creating a bricks-and-mortar store, though some similarities exist. The following is a brief look at the typical process of setting up an online business.

  1. Market Research

Like any business, the success of an e-commerce business to a large degree depends on the competition and a correctly chosen niche. Therefore, conducting market research is necessary to assess the risks and opportunities. Remember, competition within the e-commerce industry is even higher than offline.

  1. Target Audience Research

Every product or service has its target audience. However, defining your potential customer’s age, gender, location, and interests is not enough. You should also learn which social platforms they prefer and what their typical shopping behavior entails to market your offers and broadcast your advertisement effectively.

  1. Business Registration and Licensing

Any e-commerce business must be registered and licensed to avoid legal liability issues. In addition, you should select and register your business name and legal structure, obtain an employer identification number, and secure all necessary permits. The permits and other documentation you need will depend on your business type.

  1. Branding and Marketing Strategy Creation

Once the paperwork is done, you can start developing your marketing strategy. Without marketing, you won’t reach your audience and sell your product or service.

However, the tools you use will vary depending on your target audience and other business specifics. Apart from marketing strategy, consistent and memorable branding helps success rates. Branding is a vital element of marketing, essential for business success. It can boost audience recognition and trust and make your business stand out among competitors.

  1. Choosing an E-commerce Platform

The first four steps of setting up an e-commerce business aren’t any different from starting a company offline. But now it gets interesting. First, you should choose a suitable e-commerce platform. Your choice defines your monthly expenses, the flexibility of payment and shipping options, your website design and speed, and much more.

  1. Website Development

Once you’ve picked the right e-commerce platform, you can move on to bringing your business to life. Some e-commerce platforms, such as Shopify and Wix, feature simple drag-and-drop website builders perfect for inexperienced users.

Others, such as WordPress, require some understanding of website development. Either way, hiring a professional is always a good idea to ensure your website runs impeccably and has all the necessary safety measures.

  1. Marketing Strategy Implementation

Now that everything is set up, you can start implementing your marketing strategy to reach your target audience and generate conversion. The internet offers entrepreneurs a variety of marketing tools, including social media ads, email marketing, SEO content, and influencer marketing.

Regardless of your chosen strategy, you should constantly track your campaign results and adjust your strategy accordingly.

Best Ecommerce Platforms

Beginning entrepreneurs are often confused about which ecommerce website builder to choose. They may all appear similar to inexperienced users, but slight differences can significantly impact your business’ success.
Here are some of the most popular ecommerce platforms for businesses of any type and scale:

Shopify

Shopify is a simple all-in-one solution for online stores, with the ability to manage and create a website with their drag-and-drop editor. The platform’s catalog features a great selection of pre-designed themes and templates.

Furthermore, Shopify does all the dirty work for you, such as hosting and back-end optimization. The main drawbacks are a relatively high price and limited customization options.

Webflow

Webflow is an e-commerce platform combining ease of use and customization freedom. It’s suitable for small businesses and enterprises, beginners, and experienced developers.
If you aren’t fond of boring, overused site templates and wish to customize your design, this platform is your go-to.

You can even design a custom mobile website version, not available on many other platforms. Last but not least, the pricing is highly appealing. However, the multilingual support could be improved.

Magento

If you don’t mind hiring a coder, Magento is worth your consideration. The platform is trusted by enterprises such as Nike and Cisco for its flexibility, scalability, and freedom of customization.

It’s an excellent choice for large-scale businesses wishing to implement complex technology on their website. However, all this hassle may be unnecessary for small businesses.

BigCommerce

BigCommerce offers endless tools for design and customization for functionality, making it suitable for businesses of any scale. Although the interface is user-friendly, BigCommerce mainly targets tech-savvy people with intermediate development skills.

A great benefit of BigCommerce is its highly customizable pricing. Instead of paying a fixed monthly fee, you can look for specific themes and the extensions you want to use on your website.

Ecommerce Trends That Are Here to Stay

Knowing the latest industry trends is crucial for keeping up with the competition. If you’re planning to set up an online business, consider implementing the following solutions:

Augmented Reality (AR)

Inability to try on a product is one of the most significant disadvantages of e-commerce, so it’s no wonder leading businesses implement AR technology to offer customers a better shopping experience. This technology is especially relevant for the beauty, fashion, and home décor industries.

Personalization

Today, customers expect to get a highly personalized experience. You should provide them with offers and recommendations tailored to their unique interests and shopping behavior. Data collection and artificial intelligence are vital elements of personalization.

Chatbots

Customer service plays a vital role in customer retention. According to Microsoft, 90% of customers expect a business to have an online customer service portal, and 30% prefer to resolve their issues using chatbots.

Engaging Content

Today, content is king. Even if you’re an online store owner rather than an influencer, creating valuable, engaging content is the key to success.

Great content will help to draw an audience’s attention and boost trust. Consider posting interesting blog posts on your website, sharing pictures of your customers wearing your brand’s clothes on Instagram, or creating fun polls on Twitter.

Omnichannel Optimization

Omnichannel commerce is an approach to marketing and sales that allows the customer to seamlessly navigate between your business channels.

Modern consumers expect to encounter zero obstacles in navigating from your landing page to social media and from social media to your customer service portal.

Keep Up With the Times

Hopefully, our guide has answered all the questions you had about e-commerce. It’s a rapidly developing and constantly expanding industry, so it is vital to keep up with online business trends. So make sure to get on that train in time to keep one step ahead of your competitors!