Got a great online business idea, but not sure what eCommerce is or exactly how eCommerce works? We’re here to help.
With eCommerce sales predicted to reach 5.4 trillion dollars by 2022, it’s a great time for you to get started with everything you need to know about eCommerce to help you elevate your eCommerce business to success.
Here, we’ll take you through:
- What is eCommerce?
- What an eCommerce website is
- How eCommerce makes money
- What you need to start an eCommerce business
- The advantages and disadvantages of eCommerce
What Is eCommerce?
eCommerce refers to the buying and selling of goods and services via the internet, including the use of money transfers and data. eCommerce also includes any online commercial transaction such as internet banking and the use of payment gateways.
In fact, there are various eCommerce business models, including:
- Retail: Products are sold by retail businesses directly to the customer.
- Digital products: These include music, movies, software, online courses, webinars, etc.
- Subscription services: These are recurring purchases made by the customer and are automated until the customer cancels their subscription. Examples include beauty boxes, food delivery services, and clothing services.
- Dropshipping: Physical products are sold by an eCommerce retailer without purchasing them first. The products are then “dropshipped” to the customer by a third party that handles all aspects of order fulfillment and inventory management.
What Is an eCommerce Website?
eCommerce websites are businesss’ virtual storefronts and are built to connect consumers to products or services. If you’ve ever used Amazon to purchase goods, then you’re already well-versed in eCommerce websites.
However, not every eCommerce website looks or functions the same way as Amazon. Each business’s eCommerce website looks different depending on its size, its niche, and its branding. However, one thing that they all have in common is that they’re created using eCommerce website builders.
eCommerce website builders, or eCommerce platforms, are software tools allowing eCommerce business owners to build their online stores. Features like professionally created website templates, SSL certifications, domain hosting, and shopping cart tools help even newcomers to eCommerce manage their online business and day-to-day operations via their eCommerce websites.
How Does eCommerce Make Money?
In the simplest of ways, eCommerce businesses make money just like physical businesses do: They sell goods to customers and hopefully turn a profit.
However, nine times out of ten, eCommerce ventures don’t hold up to the old mantra, “If you build it, they will come.” Like all businesses, there are no guarantees that eCommerce businesses are viable and successful.
Once you’ve researched eCommerce trends and created your business plan, a few more steps are involved in making money through an eCommerce venture. Let’s explore what you need to start a successful eCommerce business below:
Choose the Right eCommerce Platform
The eCommerce platform you choose is the backbone of your business. You’ll need to research the best eCommerce platform for your business, keeping in mind your budget, product, and customer base.
Each eCommerce platform offers a different combination of features, pricing tiers, and level of complexity to use. Luckily, we’ve already helped you take the guesswork out of choosing an eCommerce platform—our experts have spent 40 hours reviewing 60+ of the best eCommerce platforms to help you decide which is the right one for you.
Select a Payment Processor
Just like choosing your eCommerce platform, you’ll need to be selective when it comes to choosing a payment processor to find one that meets your needs and those of your customers.
Firstly, make sure the payment processor you choose helps you stay PCI-compliant should be top of your list.
Second of all, consider the costs involved. Since all payment processors have their own payment terms, such as setup fees, monthly fees, and transaction fees, you’ll need to factor these costs into your monthly outgoings.
Thirdly, think about your target customer base. If you intend to sell products internationally, your payment processor needs to support multiple currencies. If you’re opting to sell subscription services or products on a recurring basis, you’ll need a payment processor supporting recurring billing.
Invest in Marketing and SEO
As mentioned, starting an eCommerce business and creating an eCommerce website does not mean that you’ll attract hordes of customer traffic. Unless you invest in marketing channels and Search Engine Optimization (SEO) to help promote your business, how will customers know you exist?
There are several marketing tactics you can use to drive customers to your eCommerce website:
If you’re new to the world of SEO, there are plenty of SEO tools that can help you find target keywords that will drive the right customers to your site and help your site rank on Google.
Advantages and Disadvantages of eCommerce
Convinced about opening an eCommerce store? Great. But before you dive headfirst into the eCommerce world, make sure you’re fully informed about both the benefits and drawbacks of eCommerce so that you’re prepared for any eventuality.
Advantages of eCommerce:
- Larger target market: An eCommerce business allows you to easily sell to customers worldwide, rather than just your local area. Customers can buy your products or services from anywhere, at any time.
- Lower overhead costs: Setting up an eCommerce business involves far fewer startup costs than physical stores. Not only will you save money on rent, utilities, and employee salaries (although if your eCommerce business is a success, you’ll likely need to hire extra personnel over time), you can also save money on buying large amounts of inventory at one time.
- Scaling your business is easier: The growth of eCommerce businesses doesn’t depend on the amount of physical space in a store. In fact, it’s easier to scale both up and down depending on market fluctuations since eCommerce stores can rely on third-party logistics companies to shoulder the responsibility.
- Capturing customer information is easier: Personalization is a key success differentiator in the retail and eCommerce world. Since you’ll be able to capture customer email addresses, you can send them automated and customized emails when you’re running a sale or promotion or want to offer them a discount.
Disadvantages of eCommerce:
- Customers have easy access to competitors: No matter how niche your eCommerce niche is, you’ll always be competing with other eCommerce businesses on the internet—and customers can access them in a few clicks.
- Customers feel a lack of personal touch: Some customers still prefer to interact with salespeople and even make long-lasting relationships with staff at physical stores. Some also still prefer to consult salespeople before they make a purchase.
- Lengthy shipping times can discourage customers: One of the main drawbacks of eCommerce is that customers often have to wait to receive their products. For some, they’d still prefer to make the journey to a physical store so that they can have the product in hand immediately.
- Physical retail stores still have an advantage: Despite the vast availability and massive amount of choice available online, customers are still flocking to physical stores more than eCommerce websites. In 2020, online sales only accounted for 18% of global retail sales.
Get Started With eCommerce
Every new business venture has its advantages and disadvantages. However, starting an eCommerce business is a low-risk, inexpensive way to take advantage of the growth in the online retail industry.
Rather than launching full-speed ahead, get to know how eCommerce works, which tools you’ll need to set you up for success, and most importantly, research the right product or service to sell. Putting in the work at the beginning of your journey helps your eCommerce business not only survive but thrive.