Of all things, Pizza Hut gave birth to the e-commerce industry as we know it today. Back in 1994, Pizza was the first thing that was purchased on the internet. It ushered in the e-commerce era, a $1.917 trillion industry today.
E-commerce websites today have changed how we buy and sell things. 20 years ago, buying used to be simple. All a seller had to do was keep the stock, and a buyer just had to visit the shop.
Like everything, commerce has evolved with technology, consumer demands, and buyer behaviours. The consumer of today can buy anything they want anywhere in the world.
E-commerce websites of today are powered by a massive ecosystem of technologies, digital services (website builders, hosting providers, payment gateways), sales channels, and much more.
The impact of e-commerce is so massive that by 2026, e-commerce sales willaccount for 23.6%of all retail activity.
With e-commerce touching the lives of almost every person on the planet, have you ever wondered how it all works?
In this guide, we’ll explore how e-commerce works, types of e-commerce businesses, e-commerce shopping trends, how to start an e-commerce business and more.
What is e-commerce?
E-commerce, or online commerce, is the buying and selling of goods using an online medium. Any commercial transactions that happen through websites, online marketplaces, apps, emails, or any other online source fall under the umbrella of e-commerce.
E-commerce allows businesses to connect with a global audience instead of staying domesticated.
Some of the biggest eCommerce websites in the world today include:
- Amazon.com
- Alibaba
- EBay.com
- Rakuten.co.jp
- Etsy.com
- Walmart.com
How Does E-Commerce Work?
E-Commerce has multiple steps. The process starts working when a buyer clicks on the “Buy Now” button. The online retailer fulfils the order via shipping, store pickup, or local delivery for physical products.
When it's about digital products (e-books, PDFs, online courses, digital services), the product is sent straight to the buyer’s email or any other online account.
There’s no single E-Commerce channel; these transactions happen on several devices and platforms. Apart from eCommerce websites, other businesses, such as online ad companies (Google Ads), logistics companies (ShipRocket, UPS, FedEx), and more, support this ecosystem.
Without multiple channels working simultaneously, the e-commerce ecosystem would crash and burn instantly.
Types of E-Commerce Platforms
Businesses still selling offline can rely on multiple platforms to sell to consumers online. They can build an e-commerce website for themselves or use third-party service providers. Each e-commerce platform has its pros and cons, so sellers have the best option to use all available channels to sell online.
Let’s go over the types of e-commerce platforms:
#1. E-Commerce websites
For sellers looking to take their business online, the best approach is to go with a personal e-commerce website. Fastor is a company that individuals to create, set up, and sell online.
Pros of E-Commerce Websites
- Low financial cost.
- 24/7 potential income.
- Possibility to sell globally.
- Can offer a personalized online experience.
- Easier to encourage impulse buying.
- Customers can shop from the comfort of their homes.
Cons of E-Commerce Websites
- Can be challenging to maintain site without help.
- Customers can’t try before purchase.
- E-Commerce space is competitive.
- Need a 24/7 customer support.
- Shipping times can take a lot of time.
- You have to compete with physical retail.
The biggest challenge of running e-commerce websites is that it requires active marketing efforts to generate traffic and make sales.
#2. Online Marketplaces
Online marketplaces are third-party e-commerce channels businesses can use to sell their products/services. Marketplaces like Amazon and Etsy have also taken the role of search engines, meaning customers often use these platforms to search for products.
Pros of Online Marketplaces
- Allows sellers to reach wider audiences.
- No technical hassles.
- Customers trust big e-commerce marketplaces.
- Customer service is excellent.
- Management of shipping and delivery is fairly easy.
Cons of Online Marketplaces
- High competition.
- Payment delays are not uncommon.
- Platforms take huge commissions.
- More focus on product selling instead of brand building.
- Marketing costs can add up over time.
The challenge with online marketplaces is that it is almost impossible to build a unique brand identity. You can’t customize the look and feel of your store and you don’t own your customer lists.
#3. Social Selling
Almost all social media platforms allow businesses to sell their products and services. Small businesses with limited budgets and technological capabilities can use social media selling channels.
Facebook and Instagram, two of the largest social media platforms, offer in-built shopping features.
Pros of Selling on Social Media
- Direct contact between buyers and sellers.
- Legit and trustworthy reviews.
- Ideal in brand building.
- Perfect for targeting mobile shoppers.
- Sell globally without limitations.
Cons of Selling on Social Media
- Social commerce is built for shoppers, not sellers.
- Can be time-consuming to sell.
- Limited organic reach.
- Negative feedback can accumulate quickly.
- Can target only social media audience.
The challenge with selling on social media is that you can quickly lose the audience you build. You can lose your entire customer base if your account shuts down. Moreover, building a respectable brand identity can take months.
Types of E-Commerce Businesses
Now that you know the platforms you can use to sell, let’s break down the type of e-commerce businesses. Each e-commerce business type has a different audience, marketing methods, and more.
1. Business to Consumer (B2C)
The most common type of e-commerce business model is B2C. Any business sells goods and services straight to a customer is a B2C business. Clothing e-commerce websites that sell to customers individually is a B2C business.
2. Business to Business (B2B)
Like B2C, any business that sells goods or services to businesses is a B2B business. In the e-commerce space, the best examples of B2B business are payment gateways.
3. Consumer to Consumer (C2C)
A person that sells goods or services to another individual is an example of C2C e-commerce.
Most of these types of sales include the sale and purchase of pre-owned items, collector pieces, and vintage products.
4. Consumer to Business (C2B)
Any individual that sells goods and services to a business can fall under the C2B e-commerce business category.
The C2B channel has been on the rise in recent times. A business pays the influencer to promote or sell their products/services via social media, website, or any other way.
Revenue Models of E-Commerce Businesses
Deciding the type of e-commerce business you want to run isn’t enough; you must also understand all potential earning options. Here are all the revenue options that most online selling businesses use:
- Sales
Sales are the most apparent earning model for e-commerce websites and online brands. Businesses sell goods and services for money.
- Subscription model
The subscription model is increasing among consumers and Direct-to-Customer brands. Businesses look to earn recurring revenue from subscriptions to products and services.
- Advertising
The advertising revenue model is most popular among online creators and influencers. Those who have amassed a substantial online following and built a unique personal brand earn revenue with advertising deals with other brands.
- Affiliate marketing
Affiliate programs are also famous among online creators, bloggers, and website owners. Any platform with a respectable customer base can leverage it to promote products and services from other brands.
The website owner earns money whenever a customer buys a product or signs up for a service using the website’s link.
- Transaction fee model
This model is for specific e-commerce companies (payment gateways) that facilitate online financial transactions. These companies earn revenue by charging a fee on each sale.
Benefits of Starting an E-Commerce Businesses
If you’re already selling goods or services offline, you can potentially double your revenue with e-commerce. Selling online means accessing global audiences and a vast pool of customers looking to buy your products.
1. Convenience for consumers
E-commerce is highly convenient for consumers as they can shop anywhere, anytime, and on any device. No need to drive to the store and buy an item. Moreover, e-commerce websites have allowed customers to discover brands globally.
2. Better reach and new markets
An e-commerce business can reach wider audiences online compared to a physical store. Chances are that a customer from another city, let alone a country, wouldn’t visit your physical store.
E-commerce websites, fortunately have changed how that works. Businesses don’t need a physical presence everywhere they need to sell.
3. Personalization and data
You can’t exactly beat the one-on-one retail experience when it comes to online commerce. But, online stores can be personalized for each customer. Customer data (cookies) can be used to personalize e-commerce stores.
Personalization includes product recommendations, targeted marketing campaigns, loyalty programs, and more.
Online stores do have one advantage over physical stores. Users can see a variety of colours and customized products. Some online stores have even started integrating AR capabilities. This allows customers to try on clothes, shoes, and accessories in a virtual space to see how they would look.
4. Lower startup and operational costs
Online stores often have lower operational costs compared to brick-and-mortar stores. To run an e-commerce store, you don’t need to have a physical office. You can work from your home.
On the other hand, physical businesses need funds to set up an office and inventory.
Common Challenges Faced in E-Commerce Businesses
You can’t start an e-commerce website without knowing about the everyday challenges. Planning for these challenges before they come up can help in succeeding in future.
1. Security is a big concern in e-commerce
One of the biggest challenges in e-commerce is maintaining security. Customers need to know that their information is kept safe when they make online purchases.
E-commerce websites must invest in trusted payment gateways, SSL certificates, and other security measures.
Ensure your customers know that keeping their data safe is your utmost priority. Building brand trust is a great way to succeed in online commerce.
2. Increased competition
Compared to a decade ago, e-commerce has become a highly competitive space. Online businesses must find their target audience and differentiate themselves from competitors.
3. Logistics can be a hassle
Providing the right customer experience during product shipping is crucial. Seamless and efficient shipping is the way to earn a customer’s loyalty.
To make this possible, businesses must find the most reliable shipping partner or build their own logistical system to ensure quality assurance.
4. Returns can be a problem
To be competitive, e-commerce websites need to offer incredible return policies that work in favour of the customer. Not only that, there needs to be an effective customer support system in place to handle customer queries.
Growing E-Commerce Trends
To ensure success in the e-commerce space, you must stay on top of e-commerce shopping trends.
Customer trends are constantly evolving, but here are some trends that are here to stay:
1. Social E-Commerce Will Keep on Growing
Social e-commerce sales in the US will likely exceed $56 billion in 2023. To sell products or services on social media, sellers must engage in meaningful conversations with potential customers.
When you build trust and online relationships, you can earn more revenue from social e-commerce.
2. Social media platforms are becoming search engines
Social media platforms are becoming the first place users search for a product. Alongside Google, social media channels help customers make buying decisions.
The younger generation usessocial media to research brands more than Google and YouTube.
3. Mobile shopping is the future
In the US, 43% of all e-commerce sales in 2023 happened on mobile. As things stand, this number of mobile shopping users will keep rising. Upcoming and established e-commerce websites should focus more on providing a quality user experience to mobile users.
Focusing more on delivering a custom experience to mobile users can increase sales.
Starting your E-Commerce Journey - 6 Steps To Launch Your Online Store
Now you know all you need to know about e-commerce websites, the pros and cons of the e-commerce industry, and more. If you’ve decided to jump aboard the e-commerce train, congratulations!
Now that you know you want to sell online, it’s time to choose an e-commerce platform like Fastor to help you make your vision come true. Here are the steps to get started:
- Finalize a niche:Choose the goods or services you want to sell. Look for untapped markets, new products, or, if possible, create a demand in the market for what you’re offering.
- Conduct market research:Research competitors in the niche you’ve finalized. Understand market caps, customer habits, standard practices used, and more to get started.
- Map a business plan:If you need funding, having a business plan is crucial.
- Build a brand:Choose a domain name that fits your niche and your vision, develop a brand vision, mission statement, and values, and set a tone for your brand.
- Set up an online store:Fastor can help you set up and maintain your e-commerce platform to achieve your vision. There are many moving parts to remember, so having a professional by your side will be handy.
- Build a marketing plan:You can’t sell anything if you’re not visible to anyone. It takes continuous efforts to successfully market an e-commerce store and generate organic traffic and revenue.
Summing Up - Start Your E-Commerce Journey Today
E-Commerce websites help local businesses to get online and sell their goods and services to customers all over the globe. The e-commerce industry has room for newcomers with innovative ideas and incredible products/services.
Whenever you feel stuck, revisit this guide for help with your e-commerce journey. Or, choose an e-commerce platform like Fastor to take care of all the challenges.
