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Zyro encyclopedia

Learn about online business

Zyro Glossary eCommerce

eCommerce

What is eCommerce?

You probably have a broad idea about eCommerce, since the word is always being thrown around online. But what is eCommerce exactly?

The buying and selling of products and services over the internet is generally referred to as ‘electronic commerce’ or ‘eCommerce’ for short. 

eCommerce differs from a traditional brick-and-mortar store in many ways: 

  • Open 24/7. Unlike a physical store, eCommerce stores are open around the clock. 
  • Fewer costs. No need to worry about rent, or electricity or water bills, or having to pay a property or city tax for operating a business on the high street. 
  • Wider reach. Thanks to the internet, your store is not tied to a physical location. This means that you can serve customers on the other side of the country, or even across the globe. 
  • Niche markets. Chances are that running a very niche brick-and-mortar business, like a comic book store, isn’t going to be easy, or profitable. Even if there’s a devoted comic book community in town, having a wider audience online helps to make a small niche a true success story. 

eCommerce platforms, stores, and business models have undergone major changes over time. 

The first time anyone bought anything online was in 1994 (it’s a story of a guy, a Mastercard, and a CD), signaling that the internet was a safe place to make credit card purchases. 

By the late-90s, big players like Amazon and Alibaba had already started to change the way eCommerce was viewed. 

Fast forward to today, and you’ve most likely also bought something online at one time or another. 

There are three most common eCommerce business models: 

  • Business to business (B2B). In this model, businesses sell to other businesses. This could mean wholesaler selling stock to a retailer (an online shoe store), or a marketing company selling their services to other businesses. 
  • Business to consumer (B2C). Being the most traditional form of business, in B2C a business sells products and services to the consumer. A supermarket operates on a B2C model, as do clothing stores, for example. 
  • Consumer to consumer (C2C). C2C is a newer and smaller-scale business model where consumers sell and buy among themselves. A crafty person could sell the hats they make online on platforms like Craigslist and Etsy.

How important is eCommerce?

Electronic commerce is growing at an unprecedented speed. 

Since eCommerce is forecasted to account for up 95% of all shopping, it would be unwise not to consider it a legitimate and important field of business. 

With over 224 million online shoppers in the US alone, eCommerce sales are estimated to reach over $4 trillion by 2020. eCommerce is a huge and growing sector and not making use of it can eliminate important customer segments from your business. 

Regardless of what market you’re in, most millennials are spending around $2000 online annually. This means that if you want to sell anything to those under 35, you should have an eCommerce business.

Also, research shows that men are more likely to buy via mobile devices than women. Men also state that they would be more likely to shift all their shopping online. Women, however, shop online more frequently. 

So, while having an online presence is important, it’s even more important to make sure that your eCommerce store works well on smaller screens and devices. 

What is the difference between eCommerce and eBusiness?

Simply put, eCommerce is part of an eBusiness, or an electronic business. 

eCommerce is used to refer to the selling and buying activities online. An eBusiness, on the other hand, covers a business’ needs more thoroughly. 

Let’s take an online car part company as an example. The company’s eCommerce activities would include its online store, the warehouse used to store stock and prepare orders, and the related marketing efforts. 

Since some of the car parts are heavy, the company has a couple of employees taking care of the shipping and order preparation. To manage the payroll and holidays, the company uses dedicated softwares to manage its human resources. 

Similarly, the company makes use of a customer relationship management (CRM) system as most of their customers return with a new order within 6 months. This makes it easy to have all information about the customer’s previous orders and communication in one place. 

In short, the more a company makes use of different softwares and runs its operations digitally, the more it can be referred to as an eBusiness. 

How do eCommerce businesses and online stores work?

Many of us don’t really think about what actually happens when you order a new dress or swimsuit for your holiday online. 

You just go to your online store of choice, add the item to your basket, pay and wait for your parcel to reach you.

In reality, eCommerce businesses and online retailers run their stores on a specialized eCommerce platform that helps them automate many processes. 

When a customer places an order for a scented candle, the store’s web servers notify the order manager software that an order has been made. 

The order manager software checks that there is indeed enough stock with the stock database. If the stock database can confirm that there are enough scented candles in stock, the query gets passed on for a bank check.

The merchant’s payment system now checks with the customer’s bank that the card used is valid and has enough credit on it. Once the bank has given the transaction the go-ahead, it’s time to send the order to the warehouse. 

After the warehouse has received the order, the order will be packed and shipped to the customer.  

The order process remains generally the same regardless of what you’re selling. And there are many ways you can sell online: 

  • Selling physical goods. Ever shopped in an online fashion store? Selling physical products is popular, and you can either buy your own stock or use dropshipping platforms to take care of the order fulfillment.
  • Selling digital goods. An eCommerce store is in its element selling digital products like eBooks, webinars, and templates. Templates could include things like CVs or wedding invitations, or even fonts or icon sets.
  • Selling services. Whether it’s online hobby courses for individuals or virtual assistant services for other businesses, eCommerce platforms can be used for selling services as well. 
  • Marketplaces. If you want to sell on a smaller scale, you can sign up on a C2C marketplace and get rid of old furniture or sell homemade pottery.
  • Online Auctions. Similar to marketplaces, you can auction your old stuff to the highest bidder. Particularly handy if you have some vintage treasures gathering dust in the attic. 
  • Crowdfunding platforms. Whether you decide to support a cool new product on Kickstarter or want to help your favorite content creator out on Patreon, you can take a crowdfunding approach to make money online.

eCommerce business model examples

It might not be easy to grasp how the different types of eCommerce businesses work in practice. 

Since eCommerce is used to refer to transactions that occur online, or the selling and buying activities between individuals and businesses, it can take many forms. 

Online retail

One easy way to run an online business is to sell physical goods in an online store. It could be an extension of your physical store, or exist solely online. 

Online retail business is quite a self-explanatory business model for making money online. Thankfully, setting up your own eCommerce store isn’t as difficult as you might think. 

You need a good idea, a solid platform, and a business model that works for you. Sprinkle some marketing magic on top and you can curate your own online store in no time. 

Wholesale

Wholesale is a great example of a B2B eCommerce business model. You act as the middleman between a retail store and a manufacturing plant. 

Buy large quantities of products directly from the factory and sell them in smaller batches to retailers. 

You need to show all the available products on your eCommerce store and market your services towards small businesses. 

Running a wholesale business means that you do also need to think about where you will store your stock. 

Marketplaces

Maybe you have a gift for putting together IKEA furniture with ease? You could offer your help for hire on online marketplaces like TaskRabbit. 

If you want to get a few bucks selling your old furniture, try the likes of Craigslist. Online marketplaces are a great example of C2C eCommerce. 

Consulting 

If you have a lot of professional experience and knowledge others might find useful, offer your expertise for sale. 

You can either give your services a price tag by the hour or create digital materials like webinars for anyone interested. 

Educational platforms

You can also run an eCommerce business on an educational platform. 

Whether you’re teaching people how to look after their houseplants or how to bake sourdough bread, you can sell digital goods like eBooks to your visitors. 

Cooking blogs 

For anyone running a successful cooking blog, you could combine your blog with an online business. 

You can sell physical recipe books, eBook collections, or your favorite cooking equipment in a different section of your website. 

Social media influencers

Being successful on social media can be a tricky and lengthy process. 

There are a few ways to monetize your social media presence: you could set up a dropshipping online store and sell merchandise with your designs. 

Alternatively, you could set up a Patreon and have your loyal supporters show their love through monthly donations. 

Auctions 

Sites like eBay let others bid for the list products and items you’ve listed for sale. 

Depending on the popularity and rarity of the item, you could end up making quite a bit of cash by running an auctioning business online. 

4 types of eCommerce business models

Depending on the types of products or services you’re selling, you might find that one eCommerce business model suits you better than others. Generally, the four different models are based on your customer base.  

Business to Consumer (B2C):

Most people have taken part in a B2C sales transaction. When did you last buy clothes or a book online? 

When a business sells its products and services online primarily to consumers, it is classified as a business to consumer online business. 

Running a business specializing in B2C retail sales means that you need to know your customers and understand how B2C digital marketing works. 

Most eCommerce platforms are made with B2C small businesses in mind.  

Business to Business (B2B):

B2B eCommerce businesses might not be as familiar to many consumers compared to B2C businesses. 

When a business primarily sells its products and services to other businesses, they are operating on a B2B model. 

B2B can cover a wide variety of different types of eCommerce businesses: almost anything consulting services to wholesale buying and selling. 

Some B2B businesses, particularly those selling physical goods, even run their own online store for other companies. 

Consumer to Consumer (C2C):

When individuals sell and buy products or services from one another, we can talk about C2C business. With C2C, you don’t necessarily have to run an online store to sell online. 

You can either list yourself available to help someone with their grocery shopping or house move on Craigslist, or auction off items on eBay. 

The main difference between C2C and B2B and B2C businesses is that both the seller and buyer are consumers, rather than business entities.

Consumer to Business (C2B):

In C2B eCommerce it’s the consumers who sell their products or services to a business or another corporate entity. 

Social media influencers are a great example of C2B in action: promoting or endorsing a product to their audience in exchange for a fee would fall under this category. 

Similarly, selling your photos for a stock photo company like Adobe is also an example of C2B eCommerce.

Pros and cons of eCommerce businesses

eCommerce has made types of business activities accessible to people who wouldn’t be able to run a traditional brick-and-mortar business. 

Indeed, almost anyone can sell online, as long as they have a good niche and a clear idea of how the world of eCommerce works.

Pros 

There are some big pros to running an eCommerce business: 

  • Global reach. With an online store, you’re not tied to your physical location. As long as you can ship the orders across the globe, you can sell across the globe. 
  • Open around the clock. Since an eCommerce store doesn’t have opening or closing times, you can have your shop open 24/7. And relating to our previous point about global reach, this means that while the West Coast sleeps, East Coast can do business. 
  • Fewer costs. You only have to pay for your web hosting (think of it as your online rent) compared to city taxes, electricity, water, and phone bills that come with a physical shop. 
  • Personalization. With some clever templates and accurate data, you can offer your visitors a personalized shopping experience, no matter how busy your store might get. 
  • Curate collections and best-sellers. Space or the lack of it is not an issue online: you can curate as many collections and show your visitors the current best-sellers, based on their location. 
  • Retargeting made easy. In the world of eCommerce, data is king. And the better you can retarget and remarket your online store to your customers, the better your retail sales. 
  • Accurate data. No need to rely on a gut feeling ‒ you can collect, organize, and analyze mountains of data quickly and fast online. Most eCommerce platforms make it easy to integrate different systems and automate tasks, meaning that you don’t waste time doing manual work. 

Cons

Compared to your traditional brick-and-mortar stores, an eCommerce business has its drawbacks, too: 

  • Customers can’t see or try the products before purchasing. While you can combat this problem with good product photography, you have to work twice as hard as a physical shop to make your sales. 
  • Site crashes. If your web hosting provider or eCommerce platform is unreliable and your site crashes, nobody can visit your store or buy anything.
  • Competition. You’re not just against the city’s other five shoe shops: you’re competing with hundreds and thousands of others. You must make sure you can stand out from the crowd.
  • Shipping. Until the product reaches your customer, anything that can go wrong is on you. In a traditional store, on the other hand, the product is the customer’s responsibility after purchasing.

The good news is that eCommerce and technology are moving forward at the speed of light, meaning that problems of yesterday tend to be solved quickly.

Written by

Author avatar

Matleena

Matleena is a seasoned eCommerce writer, with a particular interest in emerging digital marketing trends, dropshipping, and growth hacking. She’s addicted to coming up with new eCommerce business ideas and making them a reality; she deserves her nickname of ‘print on demand business mogul.' In her free time, she enjoys cups of good coffee, tends to her balcony garden, and studies Japanese.

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