What is ecommerce? Launch and grow an online sales channel

What is ecommerce?

Ecommerce” or “electronic commerce” refers to the exchange of goods and services through the internet. Essentially, it is the virtual version of a bustling city center or brick-and-mortar shop. Currently, an estimated 2.14 billion people worldwide engage in online shopping, with over 200 million Prime members buying goods and services from Amazon stores globally.

Ecommerce is a popular retail method utilized by businesses. Some companies exclusively sell products online, while others incorporate ecommerce as part of a broader strategy that includes physical stores and various distribution channels. Regardless, ecommerce enables startups, small businesses, and large companies to sell products at scale and reach customers worldwide.

What is an ecommerce website?

An ecommerce website serves as a digital storefront on the internet, providing a platform for buyers and sellers to conduct transactions. It is the online space where businesses display their products, and customers make their selections. In essence, the website acts as a salesperson, product display, and cash register for the online business.

Depending on their business needs, companies may choose to create a branded store experience on marketplaces like Amazon, build their own dedicated ecommerce site on a separate domain, or adopt a multi-channel approach encompassing both options.

What is an ecommerce business?

An ecommerce enterprise is a business that earns its revenue by selling products or services online. This type of company can offer a wide range of products, from software and apparel to housewares and web design services. The ecommerce business can operate on a single website or through multiple online channels, such as social media and email marketing.

How does ecommerce work?

The process of ecommerce involves linking buyers and sellers through different electronic channels. To start with, you require a platform like a website or social media where customers can locate and buy your products or services. Once a purchase is made, a payment processor comes into action, allowing for the exchange of goods or services. After a successful transaction, customers receive confirmation through email or SMS, along with a printable receipt.

For physical goods, sellers ship the products and send customers a tracking number for their order via email or SMS. On the other hand, for services, the provider may reach out to the customer to arrange and deliver the service as per the agreed terms.

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Steps to starting an ecommerce business

Starting an ecommerce business involves several steps that can vary depending on what you plan to sell. If you are selling services, there is no need to manage inventory or fulfillment. However, if you want to sell products, inventory and fulfillment will likely play a critical part in your operations. Below are some general steps you can follow to get started:

  • Identify your product or service niche and target audience
  • Research the market and competition
  • Determine your business model and legal structure
  • Choose a business name and register your domain
  • Obtain any necessary licenses and permits
  • Set up your ecommerce website or storefront
  • Establish your payment and shipping methods
  • Create a marketing plan to promote your business
  • Launch and start selling!

What are the types of ecommerce?

“The world of ecommerce is shaped by various business models, reflecting the different ways of shopping online. Here are a few common models:”

  • B2C – Businesses sell to individual consumers (end-users). The most common model with many variations.
  • B2B – Businesses sell to other businesses. Often the buyer resells products to the consumer.
  • C2B – Consumers sell to businesses. C2B businesses allow customers to sell to other companies.
  • C2C – Consumers sell to other consumers. Businesses create online marketplaces that connect consumers.
  • B2G – Businesses sell to governments or government agencies.
  • C2G – Consumers sell to governments or government agencies.
  • G2B – Governments or government agencies sell to businesses.
  • G2C – Governments or government agencies sell to consumers.

Where and how does ecommerce take place?

Online shopping is constantly evolving and changing, as people use a variety of devices to make purchases, including computers, phones, tablets, and other devices. They browse websites, social media pages, and participate in various virtual channels. Here is an overview of three different methods of conducting ecommerce today:”

M-commerce

Mobile commerce, also known as “m-commerce,” refers to online transactions that occur on mobile devices such as smartphones or tablets. As these portable devices become ubiquitous among consumers worldwide, it’s no surprise that m-commerce is expected to account for over 43% of total retail ecommerce sales in 2023, representing an increase of almost two percent from the previous year.

In today’s world, many people conduct product research and make purchases through their mobile devices, and this trend is only expected to grow. Therefore, it’s crucial to ensure that your online store is optimized for mobile users to provide a seamless shopping experience.

Enterprise ecommerce

Enterprise ecommerce refers to the process of selling products online to large organizations or companies. When a large business with various product lines or brands begins selling online, it is engaging in enterprise ecommerce

Social media ecommerce

Marketing and promoting ecommerce stores to a broad audience is made possible with the help of social media. By leveraging social media platforms, businesses can connect with potential customers and promote their brand. When done well, social media marketing can engage customers in an informal setting and build strong relationships with them.

Social media can help you:

  • Attract new customers
  • Build brand awareness
  • Generate online sales

What are the advantages and disadvantages of ecommerce?

As with any sales approach, ecommerce has its advantages and disadvantages. Whether ecommerce is suitable for you depends on various factors, such as your business objectives, target market, and more. Here are some factors to consider.

Benefits of ecommerce

Conducting sales online has some significant advantages. Among the top benefits, ecommerce:

  • Is growing rapidly
  • Offers global marketing reach
  • Provides the ease of ordering products online
  • Generally involves lower operating costs
  • Gives direct-to-consumer access

All of these points offer strong incentives to participate in ecommerce. Let’s explore each in detail.

Rapid growth

In 2021, U.S. small- and medium-sized businesses selling in the Amazon store exported over 225 million products and international sales reached a whopping $2 billion. Amazon shoppers purchased 3.9 billion products, roughly 7,500 items per minute. (source)

Global marketing reach

Previously, the number of customers a business could attract was limited by the number of individuals who could physically visit its store. Nowadays, ecommerce has made it possible to reach customers worldwide. The increase in internet usage and the expansion of social media have made it easier for ecommerce businesses to connect with a diverse range of customers.

Ease of ordering products

There are various types of ecommerce available today that make it possible for customers to browse and purchase products from anywhere in the world with just a few clicks. Online retail giants like Amazon provide easy-to-use interfaces that allow customers to sort and compare products by price, features, and other criteria. Furthermore, payment innovations like Amazon Pay make the checkout process more streamlined and convenient.

Lower operating costs

Creating and maintaining an ecommerce website is generally less expensive than running a traditional brick-and-mortar store. By starting an ecommerce business, you can bypass the need to lease retail space, hire a team of employees, or maintain a large warehouse.

These advantages translate to lower overhead costs. There’s no need to pay rent or worry about building maintenance. Your online store can stay open 24/7 without the need for monitoring or staffing, unlike a physical store.

You can use website building tools and services to quickly establish your own ecommerce store, or you can opt to launch your brand on social media or a marketplace like Amazon. Many businesses choose to sell on multiple online channels to increase their reach and revenue.

Direct-to-consumer access

Because of the internet, ecommerce brands can directly build relationships with their audiences. You don’t need to pay for a giant billboard or TV ad campaign to capture your audience’s attention. You can tailor your brand and marketing to fit customer wants and needs down to special offers and personalized product recommendations.

Challenges of ecommerce

Some businesses may try to avoid ecommerce due to challenges like:

  • Limited face-to-face interaction
  • Technical difficulties
  • Data security
  • Challenges of shipping and fulfilling orders at scale

Let’s walk through each of these potential pitfalls.

Limited face-to-face interaction

For some businesses and transactions, face-to-face interaction is essential. Depending on your product, service, or sales approach, it can be difficult to convey your personality fully in an online space.

There is no one-size-fits-all solution to this, but one way to maintain authenticity online is to keep your brand story at the forefront of everything you do. Alternatively, if you prefer communicating with customers via email or phone, the lack of face-to-face interaction may be an advantage for you.

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Technical difficulties

“Technical challenges can potentially hinder ecommerce sales. Similar to how supply chain disruptions can cause delays in product delivery, problems with internet connectivity or hardware failure can result in losses in time and revenue.

However, it’s important to note that for every technical issue that may arise, there are solutions and preventive measures available. Regularly backing up your data and having a reliable technical infrastructure in place can help mitigate these risks. Opting for established ecommerce platforms like Amazon can also provide added assurance and stability.”

Data security concerns

It’s essential to prioritize the privacy and security of customer data when operating an ecommerce business. Sharing how you store and handle customer information can build trust with customers and demonstrate transparency.

Amazon has established a strong reputation for secure shopping, which is beneficial for businesses that sell on the platform. However, if you host an ecommerce store on your own domain, you should invest in a secure payment processing service and take reasonable precautions to protect customer data. Creating a clear privacy policy and ensuring that all customer information is kept confidential and secure can help establish trust with your customers.

Shipping and fulfillment at scale

Starting an ecommerce business from your home may allow for easy packing and shipping of orders initially, but as your business expands, order fulfillment can become a more challenging and time-consuming process. A sudden surge in orders may leave you struggling to meet demand, potentially harming your business reputation. However, you can address this challenge by utilizing an ecommerce fulfillment service, such as Fulfillment by Amazon, which can help reduce the workload and ensure customer satisfaction.

To ensure that you select the best ecommerce fulfillment service for your needs and help your business grow, it is essential to research and compare different options available.

What makes an ecommerce store successful?

Every successful ecommerce business has a few critical components that need to be considered. First and foremost, it is crucial to focus on the product and your target audience. Additionally, your brand messaging and your store’s user experience play a significant role in your success. You should also optimize your fulfillment process to ensure the timely delivery of products, which can lead to maximum customer satisfaction. Let’s take a closer look at each of these essential components.

Great products

Successful online brands are built on high-quality and dependable products, as well as ecommerce services. Your product should address an unmet need or challenge for your customers and be priced competitively.

The quality of your product and its pricing can make or break your ecommerce business. It’s essential to conduct market research to understand the types of products your competitors are offering and the market value of similar items. This will help you set a compelling price point for your products and ensure their quality meets or exceeds customer expectations.

A compelling brand story

While unique products can help your business stand out, a great brand requires more than just a great product. To capture customers’ attention, you must communicate your business’s purpose and vision.

Start by asking yourself why your business needs to exist and how your products can improve your customers’ lives. Your branding should reflect the answers to these questions.

Take the time to consider the appearance and overall vibe of your brand. Delve deep to find a clear, compelling way to convey your business’s origin and mission.

A focus on the customer

To attract loyal and enthusiastic customers, it’s essential to define your ideal audience. Determine who you want to serve with your products and direct your marketing efforts accordingly.

As your business gains momentum, keep the momentum going by considering who will be moved by your brand story. Instead of targeting buyers who don’t need what you’re selling, focus your efforts on an audience that will appreciate and resonate with your brand.

A smooth online experience

Creating a user-friendly online store is crucial for a successful ecommerce business. A well-designed online experience ensures that customers can easily make purchases without any hassle. However, if customers have to go through too many steps to complete a transaction, they may abandon their carts, leading to a decrease in sales.

To avoid this, focus on streamlining the checkout process and removing any unnecessary steps. Make your website’s user interface intuitive and straightforward, placing the spotlight on your products. This will result in a seamless shopping experience for your customers, which will encourage repeat purchases and customer loyalty.

Timely order fulfillment

When shopping online, customers demand speed and efficiency. They expect their purchases to be delivered quickly and in good condition, no matter what product they’re buying.

Fulfillment is the critical process of delivering products to customers. It includes various aspects, such as sourcing products, storing and packaging orders, handling returns, and keeping customers informed. Top-performing ecommerce businesses focus on optimizing their fulfillment process and ensuring they have sufficient stock to meet customer demand, even during peak seasons.

How New Republic grew their ecommerce business with Amazon

Dee Murphy, one of the co-founders of New Republic, saw significant growth by expanding his fashion brand to the Amazon store.

Initially, Dee expected Amazon to make up only a small portion of their business. However, within six months of launching on Amazon, it accounted for half of their total sales. This rapid growth changed Dee’s perspective on the future of their business.

New Republic’s success was also aided by Amazon’s account managers. Dee acknowledges that their Amazon team played a crucial role in achieving this level of growth so quickly.

Ecommerce growth

The third quarter of 2022 saw over $265 billion in U.S. retail ecommerce sales—three percent growth from the second quarter of 2022.

In 2022, Amazon had its biggest holiday shopping weekend ever. Between Thanksgiving and Cyber Monday, shoppers worldwide spent over $1 billion buying from U.S. small businesses that have chosen Amazon as an ecommerce solution.

Amazon statistics

In 2021, existing brands selling on Amazon saw over 25% growth in sales. More than 100,000 new brands joined Amazon in the U.S. during the same timeframe.

Prime Day

The Prime Day event of 2021 recorded the highest sales ever for Amazon sellers, spanning across two days. In the two weeks leading up to Prime Day, customers purchased over 70 million items, amounting to a total of $1.9 billion in sales. These figures indicate a more than 100% increase in sales compared to the Prime Day promotion in 2020.

Launch in ecommerce and grow your online business

Are you considering starting an ecommerce business? Discover how you can turn your online store idea into a reality by launching on Amazon. With access to over 300 million customers worldwide, including 200 million Amazon Prime members who love to shop, you can reach a vast audience with ease.

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