Online sales of goods and services are now a common feature of contemporary business. This change is permanent and offers chances for small business owners to succeed online. However, you must comprehend how everything operates before you open your online store.
E-commerce: what is it?
Online sales of products and services are known as e-commerce. Consumers use electronic payments to make purchases from the website or online marketplace. The merchant ships the goods or renders the service after receiving payment.
Since Amazon only offered books for sale in the early 1990s, e-commerce has existed. Currently, the industry is worth billions of dollars. The U.S. e-commerce market is predicted by Statista to reach a valuation of over $1 trillion by 2024, cementing its position as a significant economic pillar of the country’s economy.
How is e-commerce carried out?
The same concepts that govern physical stores also apply to e-commerce. Consumers visit your online store, peruse the offerings, and then make a purchase. The main distinction is that they can do so without getting off of their sofa, and your clientele isn’t constrained to a particular area.
Running an online store requires you to go through the same steps whether you’re selling home goods or running shoes:
Take the order. The client uses your website or e-commerce platform to place an order. You’ll receive notification when an order is placed.
Complete the order. The order is then marked as completed, the payment is handled, and the sale is recorded. A payment gateway, which can be thought of as the internet version of your cash register, is typically used to handle payments. [See companion article: Does Your Business Really Need a Merchant Account?]
Deliver the order. Shipment completes the e-commerce procedure. If you desire recurring business, you must guarantee timely delivery. Customers are accustomed to receiving their orders in two days because of Amazon.
Here’s a look at the process of buying a goods online to demonstrate how it functions in real life:
1.] A consumer browses your merchandise on your website. She chooses a shirt at last. She adds it to the shopping cart after selecting the color and size.
2.] Order management software or an order manager verifies if the product is in stock.
3.] When a consumer is ready to check out and the goods is available, she fills out your payment form or page with her shipping and credit card information.
4.] The payment processor, which is usually a bank, verifies that the client has sufficient funds in her account or credit available on her card to execute the transaction.
5.] The website notifies the customer that the purchase was successful. All of this takes place in a matter of seconds.
6.] The order is despatched after being released from the warehouse. An email informing the customer that the product is ready for delivery will be sent.
7.] The transaction is finished after the order is delivered.
What characteristics ought to an online store have?
You need to have a thorough inventory of the goods and services you offer on your website or marketplace page in order to succeed at electronic commerce. The online store should be visually appealing, intuitive to use, and simple to explore. Additionally, it needs to be mobile device optimized.
An additional critical component of e-commerce functioning is the checkout process. It is the procedure a consumer goes through in order to purchase a good or service from you. You risk losing the sale if your checkout procedure is complicated, laborious, or involves too many stages. There is such a thing as shopping cart abandonment; according to the Baymard Institute, the average rate is close to 70%.
What are the benefits and drawbacks of running an online store?
Benefits of owning an online store
Before the epidemic, there were many reasons to launch an online retail firm, and those reasons have only grown. These are the seven important ones.
Compared to a physical store, its overhead expenses are lower. A retail business’s physical storefront is a major expense. That is the amount of money used for necessities like rent and utilities. That all disappears when you run an online store. There isn’t any rent due. You also don’t have to pay to have the walks shoveled or the lawn mowed; neither do you need to worry about leaving the lights on.
Without employees, you can run your business around the clock. There are no store hours on the website. It is always up, just like your online store. Your website may take orders whenever your clients are ready to buy, which can increase sales, unlike a physical store with set hours. You can avoid hiring an ordering manager for the night shift if you use software to automate the majority of the procedure.
Your company is adaptable and scalable. Operating a brick and mortar store has physical limitations on the number of things it can stock because shelf space is limited. With e-commerce, there are no restrictions of any kind; you can add and delete things as you see fit.
You can connect with more clients. Even though your company is located in New York, if you have an internet store, you can reach Californian consumers. “The game is changed for small businesses by e-commerce,” Xero’s U.S. national manager Ben Richmond stated. “You can live wherever you want and sell into many markets with e-commerce, regardless of whether you’re in a big city or a small rural town.”
Monitoring your shipments and sales is simple. For e-commerce enterprises, logistics are critical to success. E-commerce is digital, which makes tracking shipments and sales simple. Real-time access to this information has the advantage of enabling you to promptly detect and fix any errors.
It gathers client information. Online retailers gather a lot of information about their customers, including emails and addresses. Additionally, you can learn more about their preferences for purchases. These insights can be used to target devoted clients with special offers and discounts.
Pandemic-proof, that is. Online businesses were able to continue operating during the epidemic, but physical firms were compelled to close. Because of this, customers’ purchasing patterns have changed, necessitating the operation of an online store for all retailers. Businesses “need to shift as more consumers shift their spending from visiting brick-and-mortar stores to online shopping,” according to Richmond.
Drawbacks of managing an online store
E-commerce has numerous advantages, but it also has drawbacks. Before you choose whether starting an online store is the appropriate move for you, take into account these six points.
Not everyone can be reached. Some customers still choose to shop in person rather than online because they want to see and touch things before making a purchase and are wary of online fraud, even in the midst of the pandemic. Oberlo projects that 2.77 billion people will purchase online by 2025, but that number only includes those who live in the 7.8 billion-person global population.
There is a lot of data and credit card fraud. The possibility of fraud is among e-commerce’s main issues. Identity theft and credit card fraud are widespread issues that impact thousands of customers every year. Your network could be compromised by hackers, who could take critical consumer data and do irreversible harm.
Consumers give up on their shopping baskets. Customers can more easily windowshop with little intention of making a purchase thanks to e-commerce. Online sales are significantly impacted by shopping cart abandonment.
Operating an online business has expenses. Even while you might not have the same overhead as physical stores, you still need to budget for things like website hosting, e-commerce platform fees, internet service charges, social media marketing, inventory control, storage, and shipping. You have to think about related taxes, business licenses, and regulations just like any other business owner.
The world of e-commerce is competitive. Depending on your sector, there may be numerous competitors selling same or very comparable things to you, therefore you are not the first person to offer goods or services online. It’s possible to find yourself in a race to the bottom because many customers base their purchases on price and assume they can get fantastic discounts online.
Consumers desire free, quick shipment. Physical shops are relieved of the burden of product packaging and shipment. An internet merchant does. Customers now anticipate free shipping from Amazon, even if you may not be able to provide it, in addition to two-day shipping.
E-commerce business model types
A variety of e-commerce business models exist, depending on the product and customer base being served. These three kinds are the most prevalent ones.
Business to consumer (B2C): Businesses in this sector sell goods or services to customers directly. The most prevalent kind of online business is business-to-consumer (B2C), which includes anything from apparel to entertainment. B2C e-commerce sites include Overstock, Netflix, and Amazon. These kinds of e-commerce sites are run by the majority of well-known retailers, such as Tommy Bahama and Nike.
Business to business (B2B): Online sales of goods or services by an enterprise to another enterprise are referred to as B2B e-commerce. These companies may sell furniture, equipment, and office supplies. Additionally, they offer cloud-based services and online business solutions including document signing software.
Marketplaces: e-commerce marketplaces, which were first introduced by eBay but are now surpassed by Amazon, are online stores where independent retailers can provide goods and services to customers. Additional examples of internet marketplaces are Etsy and Walmart.com. You can post your products on these platforms and reach their consumer bases in exchange for a percentage of the sale. For a cost, a lot of online marketplaces will take care of your social media promotion, logistics, and payment processing.
E-commerce Business examples
Online retail: Although Amazon is the clear leader in this field of e-commerce, you don’t need to be the next big thing to be successful in this market. To launch an online business, you can make use of tools like agreements with eBay and Amazon.
Wholesale: Alibaba is among the most well-known online retailers for wholesale goods. Alibaba has made a name for itself as a global powerhouse in the B2B market, even though it also engages in B2C sales. Alibaba is the source of merchandise for businesses globally.
Dropshipping: This is the process of having a third party handle your product on your behalf. While you design the online storefront where buyers may peruse and place purchases, the dropshipping provider handles the logistics of getting the products to the buyer. Although Amazon does make inroads into this market, Shopify is currently the leading dropshipping provider. In a few hours, you can have a functional Shopify storefront.
Subscription: There are many different types and sizes of subscription businesses. A subscription service such as Dollar Shave Club may be used for automatic product restocking. They may serve as curation, like in the case of a monthly wine club. Access to a service may also be provided by the subscription. The greatest illustration of this kind of subscription strategy is Netflix.
Digital products: Stores selling digital things don’t sell real, tangible objects. They provide digital goods, which are not the same as services. Software is the most widely used digital product. Among the most successful manufacturers of digital products is Microsoft. Art, online courses, and other “objects” that exist just on a computer but may be purchased are examples of digital items.
Physical goods: Makers create tangible items on Etsy, which they subsequently market and dispatch themselves. It is evident how this differs from dropshipping or retail. An online retailer of tangible goods will produce the goods it offers.
Services: One of the easiest products to sell online is a service. E-commerce services cover almost everything, including accounting and taxation, legal services, and healthcare.
Starting an e-commerce firm might be inexpensive.
At a comparatively minimal cost, you can grow your consumer base by offering products and services online. You can start selling immediately for the cost of developing a website with an e-commerce store, a marketing and advertising budget, and minimal inventory. E-commerce might be the sales channel your company needs to add, regardless of whether you’re starting from scratch or trying to grow an already-existing organization.
This article was aided by Tejas Vemparala. An earlier draft of this piece involved several source interviews.