Ecommerce, or electronic commerce, is a term that’s used often in sales discussions these days. Product sellers and service providers can increase sales through online commerce and boost revenue with ease. Selling online is a popular sales method, worldwide.
In fact, statistics show global ecommerce sales could reach $6.542 trillion by 2023, representing 22% of the total retail market. The bottom line is people are doing a lot of online shopping, and if your products aren’t there, you’re missing out. Ecommerce growth has gotten a boost as more people avoid visiting a physical store due to the pandemic. As life gets back to normal, many brick and mortar stores have adjusted their site functionality so that it’s easier to shop online.
If you sell products or services but don’t sell online yet, this article is for you. Here, I highlight the basics of what ecommerce is and how it works. By the end, you’ll know why this commerce method is a slam dunk option for you. And, you’ll be ready to become an ecommerce entrepreneur.
What is Electronic Commerce? Ecommerce Defined
The simplest ecommerce definition is “commercial transactions conducted over the internet” or internet commerce. Basically, it’s nothing more than buying something online, or online shopping. If you’re one of the millions of people who shop on Amazon, you’re already familiar with ecommerce from the consumer’s point of view.
It’s a two-party transaction – usually either business-to-business (B2B) or business-to-consumer (B2C). The seller lists products or services for sale online. The customer (either another business or a direct consumer) finds the product and buys it online. Digital products are delivered to the buyer right away. Physical products are shipped to the buyer’s chosen address.
Though not as common as B2B and B2C, there are a couple of other ecommerce business models:
Consumer-to-Consumer (C2C): With this approach, consumers sell directly to one another. This is made possible with ecommerce platforms like eBay, LetGo, Poshmark, and Mercari. Some platforms let customers create online stores they can use to sell items they already own, or to sell items they find elsewhere.
Consumer-to-Business (C2B): With this method, a consumer is selling something to a business. For instance, some artists sell their work for display in other businesses. It’s also C2B when photographers sell photos to stock photo companies for use online.
What is Ecommerce Business?
Lets take a closer look at the different ecommerce business models.
Retail sales in an online store are the sale of a product directly from the seller to the buyer. There is no middle party in the transaction. This is a B2C relationship. New ecommerce sellers often use the retail approach. There are fewer people involved than some other methods. The setup is more basic and easy to understand for new ecommerce sellers.
Wholesale is the sale of products in bulk. The seller purchases wholesale bulk products from another seller, in a B2B transaction. Then, they turn around and sell the products to another business. The final purchasing party then sells the wholesale items to its consumers via their ecommerce site, at a higher price point, to generate profit.
Dropshipping is a three-party system. The buyer purchases a product from the seller. The seller doesn’t send the product directly. A third party (usually the supplier) sends the product directly to the buyer. The buyer never knows it was shipped this way. Drop shippers generally use branding to make it look like the order came from the seller. Sellers don’t have to deal with packaging, shipping, or even sending order status emails. That’s why it’s great for small businesses that don’t have the room to store inventory.
With white labeling, you take another company’s successful product and selling it with your own package and label. However, you have to find a product that allows for white labeling. You don’t manufacture the product, but sell it in your online store as if it were your own.
This is an easy way to sell products online. Typically, white label products are popular yet generic enough to warrant creating your own brand. Examples of white labeling products include tote bags, stainless steel water bottles, and phone cases, to name a few.
Print On Demand
Print-on-demand, or on-demand printing, is an ecommerce model featuring ecommerce personalization. After the customer orders the product via your online store, the item is printed. Print on demand products are popular for company swag and party favors.
Private labeling uses a third-party manufacturer but sells the product with the seller’s brand name. Like white labeling, this only works with certain products where it is allowed. One of the most common types of ecommerce businesses is private label rights content. From articles to videos, ebooks, and even full courses, creators sell their product with private label rights, to others. Buyers rebrand and price the product for sale directly to their customers.
Affiliate marketing uses other brands, bloggers, or businesses to promote your products for you. It’s essentially a sales team out there working to sell your product – and you only pay them when they send you leads or sales. That’s what makes it one of the most popular ecommerce methods.
Affiliate marketers build their own websites and social media assets. They show up in a Google search for terms related to your product or service. They use a special link to your site that tracks the traffic they send your way.
Affiliate marketers may promote multiple products to build additional revenue streams. You can find a variety of affiliate programs to work with. It’s a great way to expand the reach of their products and services.
Each of these ecommerce models consists of a different supply chain. You need to research what’s best for your online store. Also, you don’t have to choose just one type of ecommerce business. Some online sellers choose retail but also use affiliate marketing. This helps to reach more customers.
Product Business Models
In the ecommerce business, there are specific product business models. These classify your overall product category and types of ecommerce in your store. You may use digital or physical products.
Some ecommerce businesses focus on one type of product. Others offer a wide array of products to their consumers and their online shopping needs. You’ll need to know what business model you want to use with your online store to choose the right marketing channel.
A single product is a product that has one focus and use, such as Spanx or Crocs. It is a unique product available in different sizes and colors. This product often sees high margins. This type of B2C ecommerce store is easy to manage. The downside is that it may have limited appeal and won’t work for affiliate marketing.
A boutique product in your ecommerce store covers a single category, such as Flowers.com or White T-Shirt Company. This type of business-to-consumer model is good for newbies as it’s easy to manage. Negatively, with this b2c business model you have limited cross-selling capabilities.
The multiple category option features retailers that offer many different product categories. Examples of these businesses include Wayfair, Best Buy, or Macy’s. This business model is ideal for existing brands with physical store locations. This approach has wide appeal to people shopping online and upselling potential. It’s hard to get traction and can be difficult to manage through your store.
Subscription business models are businesses that customers subscribe to and receive goods and services. Examples include Dollar Shave Club and Blue Apron. This is an ideal business-to-consumer model for specialty and convenience items. It’s good for recurring revenue, but it requires a lot of trust.
Understanding your options for your ecommerce website makes the decision-making process that much easier.
As tempting as it may be to jump in and get your business online right away, it’s critical to research your approach. You’ll also need to research the products or services you’ll sell. This is true whether you create them yourself, or rely on existing solutions.
Types of Products
Product types, like business models, are wide and varied. Focusing your online store on a specific type of product helps you narrow down types of ecommerce options and fine-tune your business plan. Here are some product categories to consider when deciding what to sell online with this sales method:
A convenience product is an item that’s purchased with little thought as it’s a routine purchase. This store product appeals to a large target audience and is purchased often, such as shampoo or razors.
A shopping product is an item that requires more thought. Consumers are more likely to do research before buying a shopping product from your store. They’re more likely to compare it with other similar products, such as backpacks and apparel.
A specialty product is an item where the customer accepts no substitute. With this type of product, consumers are interested in the quality. They are often concerned with brand image, for example, a luxury watch or high-end handbag.
In some situations, you can take a convenience product like body wash, and make it into a specialty product. Lush Cosmetics is a perfect example. They’ve created specialty products by using vegan or cruelty-free ingredients, purchased from organic farms. The products are all handmade in batches. The brand takes massive action to protect the environment. They use naked packaging, have a charity pot lotion, and a pot recycling program.
Though the international company has brick-and-mortar stores, many customers prefer the online shop. Many customers aren’t close to a physical store. The brand has kept up with trends by adding a buy online and pick up in-store option.
Consider the product options for your online store and choose the type that fits your website best. One of the biggest benefits of ecommerce is the flexibility it offers. It’s possible to combine multiple types of ecommerce. You can reach more customers and expand your revenue potential.
Ecommerce Examples: What a Successful Online Store Looks Like
I’m skipping obvious examples like the biggest online marketplace (Amazon), and others like it.
You can be a successful online retailer without having the kind of market share that these marketplaces do. You can even leverage them to help reach more of your target customers.
Zenni Optical is a highly successful ecommerce store that shows nearly everything works as an online purchase. At the dawn of ecommerce stores, buying your eyeglasses over the internet wasn’t on anyone’s radar.
Zenni Optical was founded in 2003, making it one of the older brands out there. In September 2020, this ecommerce website reported they were on track to hit $325 million in online sales. That’s rapid growth from $75 million in 2019. While the pandemic played a role in the increase, Zenni is popular because they put customers first. They make it easy to test what a pair of glasses would look like on your face. If the glasses don’t look or fit as expected, you can return them for store credit. Zenni provides a quality product at a fraction of what you’d pay at your local optometrist’s office.
Like eyeglasses, mattresses were once something people would never dream of buying online. Purple Mattress is one of many startups that have proven you don’t have to go try a bunch of mattresses in-store to find something that works for you. And they started a trend – CBNC reported in 2019 there are an estimated 175 online “bed in a box” companies that sell online, exclusively. Purple is one of the brands leading the pack but is the only public bed-in-a-box company.
In 2020 Q4, Purple reported a 39.9% net revenue increase to $173.9 million, compared to 2019 Q4. The company also reported direct-to-consumer revenue increased 57%, with wholesale revenue increasing 9%.
Lume Deodorant officially launched on October 1, 2017, and has become a wild success. The product generates an estimated $6.86 million in online sales as of 2020. Exclusively sold online, at their official website, and on Amazon, products range from $12.99 to $24.99. Popular because it’s an aluminum-free, cruelty-free product safe for use anywhere on the body (for both men and women), this brand shows all you need is a good product, an ecommerce website, and an online advertising and marketing plan. The brand is known for its catchy social media ads, such as the one shown here.
Harry’s is an online razor subscription club, similar to Dollar Shave Club. In 2019, the company reported 35% year-over-year growth. At this volume, it’s only growing faster than Dollar Shave Club, it’s growing 3x faster than the industry average. As the third-largest brand in online blades and razor sales, it goes to show that you really can find nearly anything you want online. It’s worth noting, though, that like Dollar Shave Club, Harry’s has made its way into retail partnerships with brands like Target and Walmart.
What You Need for a Profitable Ecommerce Website
Today’s internet users are savvier than ever, so that means you need more than the necessary site functionality to make the most of your online efforts. Whether you’re selling products or services online, you need a few things to support you in your journey.
Solid Ecommerce Platform
There are many ecommerce solutions out there to choose from. You can create an online store from scratch with a platform like WordPress and use plugins to add the features you need to sell online. Or, you can an ecommerce platform like Shopify or BigCommerce, which is built solely for ecommerce websites. No matter what you choose, the technical structure that supports your commerce transactions is crucial. Without a sturdy foundation, none of the other work that goes into it matters.
The best ecommerce platforms are those that give you the flexibility to add support for features as you need them. You want something that lets you start small, but can scale with you as you grow.
Support for Mobile Commerce
On today’s World Wide Web, online shoppers expect to be able to make purchases from their smartphones and tablets. If online consumers can’t shop from their mobile devices, then you’re basically sending them to other businesses that make online purchases easy.
In the ecommerce industry, managing inventory is a crucial part of the business, unless you’re selling digital products. Without it, you could easily oversell a product – especially if you have to share inventory across a traditional store and an online store, too, or sell the same inventory across more than one online market. There are many businesses online that use inventory software that integrates with their store, to make it easy to keep track of stock. It automatically takes an item out of stock so that you don’t end up with unhappy customers.
Business and Marketing Plan
No matter what niche you decide to go into within the ecommerce industry, you’ll have some competition. To make the most of the ecommerce traffic that heads your way, you’ll need a good plan.
That means, taking the time to do your research. Look at what the competition is doing and build a plan that puts you right alongside them. You may not have the capital that some of these brands do, but to build ecommerce sales, you need a plan.
- What you’ll sell and how you will sell it.
- How your brand or products are different from what’s already out there.
- The types of social media and online advertising you’ll use.
- Short-term and long-term goals
Ecommerce Business Opens Up a World of Sales Opportunities
You now have an overview regarding what is ecommerce pertaining to the selling of goods and how this online business scenario works with customers. Now’s the time to brainstorm ideas on how to get these types of ecommerce products out to the consumer. Ecommerce business enables online retailers to reach consumers across the globe through an ecommerce store and improve sales numbers while attracting customers.
The most successful ecommerce retailers have done their homework – and they go into business with a value proposition that makes them stand out from the competition. This is one sales method you don’t want to miss out on!