Ecommerce is a term that’s used often in sales discussions these days. This concept offers a simple way for product sellers and service providers to increase sales through online commerce and boost revenue with ease.
Selling online is a popular sales method, not just regionally but around the globe in a wide array of commerce settings. In fact, it’s estimated that ecommerce retail sales could reach $3.914 trillion worldwide for 2020. The bottom line is people are doing a lot of online shopping and this online marketplace commerce option is a sales method you need to use.
If you’re a company owner that sells products or services and have yet to dive into ecommerce, this article is for you. The following content highlights the basics on what ecommerce is and how it works. By the end of the article, you’ll know why this commerce method is a slam dunk option for you and be ready to become an ecommerce entrepreneur.
Ecommerce, or electronic commerce, is defined as transactions conducted by way of the internet. When individuals buy and sell goods and services online, they are conducting ecommerce business. This type of commerce transaction is used by many sellers.
In the ecommerce industry, sellers can focus entirely on ecommerce transactions for their business as ecommerce retailers or offer a mixture of ecommerce online retail and brick-and-mortar retail sales.
Ecommerce is a beneficial sales option for many reasons including:
- Wide consumer reach
- Ease of access for customers
- Expansive commerce options
- Easy to operate commerce opportunity
- Low startup costs
- Low operating costs
- Operate your commerce site from anywhere you like
- Selling products online can take place 24/7/365
- Use social media to market your site and sell your products online
When you use ecommerce for the selling of goods and offering services, you are expanding your selling capabilities. You don’t have to sell to the consumer in person or have them come to your physical store location. You can reach people you never would have had access to in the past. And, as a result, more people to sell to through electronic commerce means more money in your pocket.
How Ecommerce Works
The ecommerce process is an easy one to follow once you get the hang of it. This differs from brick and mortar sales. There are different steps along the way that take the initial contact between you and the consumer and push it all the way through to the money in your bank account after the final commerce transaction.
The following will show you how the process works for ecommerce businesses from start to finish and the different types of ecommerce business models you can use if you want to start an ecommerce business.
The first connection point between online consumer and seller in this commerce transaction is the ecommerce platform or ecommerce website that the buyer visits. This is the place where you offer your products or services and the consumer connects with you to buy those items.
The ecommerce website, or online shop, is where the content and technology come together in one set location. Individuals are drawn to your website by ecommerce SEO, content marketing, and other ecommerce marketing methods. And there’s plenty of ecommerce software available to help you every step of the way.
Once your website visitor reaches your website, the SSL certificate comes into play. This is the technology tool that encrypts personal data that exists between your website server and the visitor’s browser.
The SSL certificate enables secure transmission of credit card numbers via the internet. It’s the method used that helps the consumer feel safe purchasing items online and sellers feel confident knowing their customer transactions are secure.
The next step in the ecommerce process is the shopping cart. The shopping cart is where site visitors can submit their credit card information and complete their purchase on your website.
When a consumer finds items they like on your web pages, they click on them to purchase and the products are added to their individual shopping cart. Once the customer is ready to check out, the shopping cart gives them a space to add their credit card information and complete the commerce transaction.
The shopping cart function adds convenience to the buying process. Without the shopping cart, you would have to take down the consumer information by phone, which can be timely and burdensome. The shopping cart computes taxes and shipping costs plus captures the customer’s billing and delivery addresses.
Payment Gateway Processor
After the information is put into the shopping cart, it goes to the payment gateway processor. This service approves or declines the online credit card payments. This credit card information is sent securely via the SSL to the gateway. The funds are then extracted from the customer’s credit card account every time a sale is completed.
This is the function that ensures the credit card payment is an acceptable one. If the credit card payment is not successful for one reason or another, this will be stated so in the next step.
After the credit card information is processed by the gateway processor in the electronic commerce process, the sale is either confirmed or denied. The shopping cart then sends out an email to the customer stating the acceptance or denial of the commerce transaction and includes fulfillment information.
You can fulfill the order yourself and send commerce confirmation to the customer or send the information to your fulfillment center and have them handle this portion of the commerce transaction.
This part of the process lets your customer know the transaction has gone through and their order is currently being processed.
After the online payment is approved, the commerce money will go to a merchant account. This can be separate from the gateway or it can be set up together through one company. The next stop after the merchant account is your bank account.
Business Bank Account
Once the money has gone through the gateway and merchant account it winds up in your hands through your business bank account. For ease of transactions and also to keep track of your sales, it’s best to have a separate business bank account for all the transactions from your website.
The electronic commerce process contains many steps from the point the customer buys from your website to when the money winds up in your hands. On the bright side, the ecommerce process is a quick transaction option to use. This online sales method provides an easy way to reach customers around the globe, sell your goods and services, and get paid for the commerce transaction.
Ecommerce Business Models
The ecommerce sales method follows the steps above and this process can be used in many different ecommerce business models, including b2c and b2b sales. Ecommerce business models offer a variety of selling methods for online retailers to use which differ from brick and mortar techniques.
Some of the ecommerce business models for products and services deal with two parties, the consumer to business commerce relationship, while others add in an additional party to complete the sales transaction. This selling of products and services will occur in b2c and b2b business transactions.
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.
Retail business models are often the first ones pursued by new ecommerce sellers. There are less people involved than some other business models and the setup can be more basic and easy to understand for new ecommerce sellers.
Wholesale is the sale of products in bulk. This type of commerce business often occurs between retailers and is a b2b situation. The purchasing retailer then sells the wholesale items to its consumers.
The seller buys products wholesale from another seller with this type of b2b ecommerce and then offers them to the consumers on their website. The wholesale products can be purchased at a lower price and then later sold for a greater price in the following retail commerce sale to make a profit.
Dropshipping is the sale of a product by a business to a customer but the product is manufactured and shipped to customers by a third party.
The dropshipping commerce model is one that often consists of less work for the seller. They’ll be responsible for the contact between themselves and the customer for the initial purchase communications and then a third party will handle the rest. This third party may even handle returns and any communications that occur after payment has been made and before delivery has taken place.
White labeling is a business where you take a successful product offered by another company that offers white label options where you can design your own package and label. You then take the finished product and sell it to consumers through your website.
This is often a popular yet generic product that many people want and you can sell it with your name attached. Examples of white labeling products can 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 product is ordered with the custom details requested by the customer via your online store, the item is printed.
Print on demand products are popular with businesses ordering company logo products and party hosts ordering party favors for special occasions.
Private labeling consists of a product that’s manufactured by a third party and sold with the original seller’s brand name.
Many ecommerce sellers like to put their brand name on products and private labeling in electronic commerce makes this possible.
Affiliate marketing is the practice where you use other brands, bloggers, or businesses to promote your products on their websites and encourage their site visitors to do some shopping online. It introduces the consumer to business offerings of your company. The affiliate marketers will receive some type of compensation for doing this and it enables your website to reach additional potential customers through this marketing strategy.
Each of these business models consists of a different supply chain, so you want to research what’s best for your online store. Also, you don’t have to choose just one business model. Some online sellers choose retail but also use affiliate marketing in selling their products.
Product Business Models
Ecommerce business also includes specific product business models that classify your overall category of product and types of ecommerce in your store, whether it’s a digital product or physical product. Some ecommerce businesses focus on one type of product alone while others offer a wide array of products to their consumers and their online shopping needs. You’ll need to know what business mode you want to pursue through your online store in order 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 and this type of b2c ecommerce store is easy to manage. On the downside, 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 sell capabilities.
The multiple category option features retailers that offer many different product categories. Examples of these businesses include Best Buy or Macy’s. This type of business model is ideal for existing brands and physical store locations.
The benefits of this type of business for your online store include its wide appeal to individuals shopping online and upselling potential. Some cons include that 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, such as The 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.
Maybe you know the electronic commerce business model you want to pursue or are still unsure. Knowing more about each business model can help you start (and complete) the decision making process.
Types of Products
Product types, like business models, are wide and varied. Focusing your online store on a specific type of product will help you narrow down the 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. The consumer is more likely to do research before buying a shopping product from your store and compare with other similar products, such as backpacks and apparel.
A specialty product is an item where the customer accepts no substitute. With this product, consumers are interested in the quality of the product and are often concerned with brand image, for example, a luxury watch or high-end handbag.
Consider the product options for your online store and choose the type that fits your website best.
Main Features of an Ecommerce Website
As you start to learn about ecommerce, you don’t want to get bogged down with too many details on buying and selling. However, once you’re more familiar with ecommerce and are ready to set up your ecommerce site, there are a few features your ecommerce website should include for ecommerce functionality. Tailor your website builder to include:
You want store site visitors to turn into customers. The best way to make this happen is to offer a user-friendly website.
The website design should be simplistic and offer shopping categories and filters to help customers find what they want on your store website. Social media buttons are also good features to include. Overall, you want the buying and selling to be as easy as possible for all involved.
Not everyone who shops on your ecommerce store website will be doing so from a PC or laptop. Many customers will be checking out your site and placing their order on their mobile device, so make sure your website is mobile-friendly.
A picture is worth a thousand words and you want your ecommerce website to echo this sentiment. Be sure to use high-resolution photos and videos on your website, especially when they pertain to your products.
User-generated reviews are read and appreciated by online shoppers. When you provide a setup for user reviews to be submitted and displayed to website visitors, you’ll be providing helpful information for other customers. And they’ll thank you for it.
Upselling and Crossselling
Customers adore special offers. If you want your website to be a frequently visited one, include a special offer section. This encourages your potential customer to turn into an actual consumer and keep them returning. It’s also a way to pursue upselling and cross selling opportunities. If a customer likes your products, they may want to explore more options from your company and special offers will entice them to do so.
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. This is one sales method you don’t want to miss out on!