If you’ve ever made an online purchase, you’re now part of the millions worldwide who have turned e-commerce into an indispensable sales channel for any business. But do you know what e-commerce is and how it works? Are you familiar with its advantages and the types of companies in this virtual sphere?
We invite you to read this guide if you’re considering developing your own e-commerce business. We won’t just explain what e-commerce is; we’ll also cover some essential matters related to the dynamic universe of electronic commerce.
What is E-commerce?
In simple terms, e-commerce is buying and selling goods and services through electronic means such as the Internet and mobile applications. It encompasses the online purchase and sale of products and services and the entire set of electronic transactions that facilitate them.
Thanks to rapid and constant digital evolution, e-commerce has grown exponentially recently, often replacing physical stores in terms of sales volume. However, for many companies, e-commerce is just one sales channel that is part of a larger business strategy, which may also include a physical commercial presence.
Beyond this, e-commerce allows startups and small businesses to sell their products globally 24/7 without incurring the high costs associated with a physical store. The advantages of e-commerce are numerous, but before delving into them, let’s briefly describe how e-commerce works.
How Does E-commerce Work?
From a transaction perspective, e-commerce operates exactly like physical stores. In other words, people visit your website, explore your product offerings, browse your catalog, and make a purchase, just as they would in a brick-and-mortar store.
The significant difference is that in e-commerce, customers don’t need to interact with you to buy products. Furthermore, your potential customer base is more comprehensive than a specific geographic area.
In general terms, the following are the seven steps that define transactions within e-commerce:
- A customer arrives at your website, explores your products, and selects one, adding it to the shopping cart.
- An order processing software confirms the product’s availability.
- Customers purchase by entering their personal details, payment method, and shipping address.
- The payment processor verifies the validity and availability of the user-supplied payment method.
- The system confirms to the user that the purchase has been successful.
- The product is dispatched from the warehouse and shipped to the customer.
- The customer receives the product, and the transaction is completed.
Advantages of E-commerce
Let’s begin by reviewing the strengths that make e-commerce appealing.
Cost Benefits
The primary advantage of e-commerce lies in cost savings. With e-commerce, you eliminate the substantial fixed expenses and overhead costs associated with physical stores.
24/7 Availability
Unlike physical stores, e-commerce operates 24/7. This means users can make purchases even when asleep, potentially translating into increased business volume.
Global Customer Reach
One magical aspect of e-commerce is its ability to erase geographical barriers. You choose the markets you want to sell with an online store, significantly expanding your target market.
Enhanced Marketing Strategies
Selling products online helps gather a wealth of customer data, enabling you to optimize your marketing strategies. Analyzing purchasing patterns allows you to attract loyal customers through promotions and discounts effectively.
Dropshipping
The dropshipping model embodies the benefits of e-commerce. It allows you to sell products globally and avoids the complexities and high costs associated with inventory and shipping logistics.
In addition to these advantages, e-commerce provides excellent scalability and operational flexibility during critical situations, such as the COVID-19-induced lockdown.
Disadvantages of E-commerce
Now that you’ve seen the advantages of e-commerce, it’s essential to understand that only some things are rosy. E-commerce also presents some significant challenges.
Not Everyone Shops Online
While e-commerce helps you reach more users, only some make online purchases. Some people need internet access or trust these transactions. This is a market segment you won’t be able to access.
Security Issues
Security is a serious concern in the virtual world, with data theft and customer payment information being significant problems in e-commerce. However, it’s crucial to note that Shopify’s payment gateway systems ensure maximum security in all transactions, providing customers with reliable payment options.
Fierce Competition
With millions of online stores, the e-commerce market is saturated. However, you can still make money and gain a competitive edge if done right.
High Shipping Expectations
Customers expect to receive their products quickly, posing a challenge for many e-commerce stores. Failure to streamline shipping processes may lead customers to seek products elsewhere.
Types of E-commerce
-
2C (Business to Consumer)
E-commerce B2C involves a virtual business selling products to the end consumer. For example, an online clothing store catering directly to consumers falls under this model. -
B2B (Business to Business)
B2B e-commerce sells products to other businesses. For instance, a provider of employee time-tracking software is an example of B2B e-commerce. -
C2C (Consumer to Consumer)
In C2C e-commerce, consumers sell products to other consumers. Typically, these involve second-hand products, and users leverage large platforms for transactions, with eBay being a classic example. -
C2B (Consumer to Business)
C2B e-commerce involves consumers selling products or services to businesses. An example is an influencer charging a company to promote its product.
How to Create an Ecommerce in 4 Steps
Now that you know what e-commerce is and how it works, you’re likely eager to see how to create one. While our article on creating an online store provides many keys, we’ll give you the strategic steps in this final section.
- Design a Business Plan
Analyze your e-commerce idea to determine its viability. Use a business plan template to coherently and structurally study whether your online store has a future. Writing a business plan will help you organize your ideas and make various financial, logistical, marketing, personnel, and strategic decisions.
- Create the Online Store
The simplest option to shape your e-commerce is to use Shopify. Shopify is an intuitive and user-friendly platform that allows you to set up your e-commerce without programming or implementing custom solutions. The Shopify repository offers numerous plugins and apps to configure your payment gateway, shipping system, subscriber acquisition strategies, and marketing campaigns.
- Decide on Online Advertising and Digital Marketing
One of the critical decisions when starting an e-commerce business is how to attract potential customers for initial sales. Consider which marketing channels to explore and if you’ll have a presence on many social media platforms. A social media marketing plan is essential. Still, more marketing strategies exist to explore to start selling as soon as possible. Among them, we recommend paying particular attention to online advertising.
- Establish a Measurement and Analysis System
Since you are still determining if the marketing campaigns you implement will work, create a system that allows you to measure the success or failure of each strategy. The study of which channel generates the most conversions or products sold. From there, make the right decisions to achieve maximum efficiency and profitability.
With this quick guide to creating e-commerce in four steps, we’ve reached the end of this article. We hope it has helped you better understand what e-commerce is, how it works, and its main advantages.
