What Is Ecommerce? Everything You Need to Know

Ecommerce has been around since 1994, when a man named Phil Brandenberger purchased the first product online: the Sting CD Ten Summoner’s Tales. Fast forward to 2023, and retail ecommerce sales are expected to make up 20.8% of total retail sales worldwide.

Stats like these show that in three decades, ecommerce has become an integral part of everyday life.

In this article, we’ll look deeper into what ecommerce is. We’ll run through the history of ecommerce and share some key stats on online sales. We’ll also delve into ecommerce development, platforms, and business models to show the impact ecommerce has had on the world.

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What is ecommerce?

Ecommerce, also known as electronic commerce or internet commerce, is the buying and selling of goods over the internet. Sites that sell their products online are known as ecommerce stores or businesses.

For example, Amazon.com is one of the most popular online stores in the ecommerce industry.

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Ecommerce should not be confused with e-business. Although sometimes used interchangeably, the terms are not synonymous. Ecommerce specifically indicates the transaction of goods and services, whereas e-business refers to all aspects of operating an internet business.

How does ecommerce work?

Ecommerce works by connecting retailers and consumers using various platforms. For instance, you can set up a Shopify store to help your target market find your products easily. Connecting a payment processor is the next step—it facilitates the exchange of goods between the buyer and seller.

Ecommerce transactions use a number of payment methods, ranging from cash on delivery to BNPL (buy now, pay later) payments. After a successful transaction, the online retailer delivers a customer’s purchase via shipping or local delivery. In the case of digital products like virtual courses and NFTs, the retailer delivers the item online.

What is an ecommerce business?

An ecommerce business is an organization or individual entity that seeks profits by offering goods or services over the internet. It allows consumers to buy quickly and choose from a range of payment methods to execute the ecommerce transaction. There are many different types of ecommerce businesses, based on the model you choose.

Popular ecommerce business models

The beauty of ecommerce is that there are various business models for you to choose from, whereas in traditional commerce the business models are more restrictive. There are four widely known ecommerce business models, but there are other niche models as well.

B2B (business to business) ecommerce

B2B ecommerce is the trading of goods or services between businesses. No consumers are involved in the trade, and the price of the products is often higher than what a retailer sells to an end customer. Alibaba is an example of a B2B business, as its suppliers sell to other businesses.

B2C (business to consumer) ecommerce

B2C ecommerce involves businesses selling goods or services to consumers. If you decide to open your own online retail store, you’ll likely be selling to customers instead of businesses. Amazon, Walmart, and Apple are examples of B2C businesses.

C2C (consumer to consumer) ecommerce

C2C ecommerce is where consumers sell goods or services to other consumers. Consumers typically do this through online marketplaces like Swappa and Facebook Marketplace, or shopping sites like eBay, Craigslist, and Etsy. Many of the sellers on those sites aren’t businesses, but average consumers selling products they own, whether second-hand or new.

C2B (consumer to business) ecommerce

C2B ecommerce is where a consumer sells their own product or service to a business or organization. This could be a photographer selling their photography to a business, or a sticker collector selling one of their rare finds to an online sticker store.

What is an ecommerce website?

An ecommerce website is any website that sells a good or service. This type of website can adhere to any of the above ecommerce business models. To show just how broad ecommerce online stores can be, below we outline the common types of ecommerce websites you may find.

Common types of ecommerce websites

Physical goods ecommerce site: Retailers with brick-and-mortar stores may also host an online store to reach a broader audience. This option is ideal for those looking to increase sales without expanding their physical locations.
Service-based ecommerce site: Freelancing and pure online services have recently become a significant trend. In this model, websites serve as intermediaries between service providers and potential clients.
Digital products ecommerce site: Companies that sell digital products, such as software or video games, don’t require physical stores. Sales occur online, with customers simply downloading the purchased product.
Dropshipping ecommerce site: Unlike typical physical goods stores, dropshipping involves merchants who don’t hold any inventory. They display products on their online store and, when a customer makes a purchase, a supplier fulfills the order.

Advantages of ecommerce businesses

Starting an ecommerce business comes with a lot of perks. Not only does this business model help you build an online presence, it also offers a convenient way for customers to engage with your brand. Here are a few of the things an ecommerce business lets you do:

Reach far and wide

With an ecommerce platform, your products travel farther than they would in a physical store. Shipping partners and logistics ensure your products reach even the farthest corners of the world. In short, your online business suddenly has access to new markets you might never have considered.

Use data to your advantage

Physical stores may offer a personal touch, but online stores counter with smart, data-driven personalization. These insights enable targeted marketing campaigns and tailored services, building customer loyalty and increasing the likelihood of repeat purchases.

Customize your business

Your ecommerce company can offer a range of options that could overwhelm a physical store. Whether it’s different colors or custom engravings, your customers get more choices, which means they’re more likely to find exactly what they want.

Lower your startup costs

Perhaps one of the biggest advantages of selling online is cost savings. Without the overhead of physical space, your operating costs plummet, allowing you to invest in other aspects of your business.

Challenges of ecommerce businesses

Like all other online businesses, ecommerce also has its challenges. The key ones are:

Security concerns

Security tops the list of ecommerce challenges. Customers must feel their personal and financial information are in safe hands. Secure your online store with features like SSL certificates and trustworthy payment gateways. Shopify, for example, offers built-in security features. Make these security protocols clear to customers at checkout and in your terms of service.

Shipping and logistics

Shipping isn’t just about moving boxes; it shapes your brand’s reputation. Efficient, reliable delivery systems are crucial for getting products into customers’ hands on time and intact.

High competition

The ecommerce arena is a battlefield, crowded with businesses fighting for the same customers. Stand out by offering unique products, unbeatable prices, and a customer experience that wins hearts.

Returns and customer service expectations

A top-notch return policy and responsive customer service are not optional—they’re essential. These become even more crucial for stores selling complex or technical items. If you’re a small operation without a dedicated staff, this aspect can pose a significant challenge, but it’s one you can’t afford to neglect.

What makes an ecommerce store successful?

Running an ecommerce business is not easy. Just having a store and some stock to sell doesn’t mean people will flock to buy your products. There are things you can do to try to ensure your store is a success.

Focus on the user

With ecommerce, you can sell anything to anyone, but you must know what you need to do to make website visitors trust you enough to buy your products. Pick the right website theme, choose the right branding and tone of voice for your copy, and keep your focus on only one or two target audiences so you don’t get overwhelmed.

Test with friends

Use your friends as your test subjects and have them run through the purchase steps to make sure everything flows perfectly. You don’t want the checkout process to be so long that people leave before they’ve placed an order.

Optimize for mobile

Make sure that users can purchase on mobile and tablet devices. With mobile commerce on the rise, optimizing your store for the small screen is paramount to being successful in your business.

Invest in SEO and PPC

SEO and PPC drive traffic to your store, so missing out on them will slow down your success. Find a good consultant or agency if you have the budget, or get started by learning about ecommerce SEO and applying relevant strategies on your store.

Research and develop

Never be content with what you do; research new products and ways to sell them. You don’t need to restock your ecommerce store every month. Try to attract attention through innovative ways to grow your store.

Popular of ecommerce sales channels

When it comes to selling online, you’ve got options. You can use your own website, go through big sites like Amazon, or even use social media. Here’s a quick rundown:

Ecommerce platforms

Your own online store gives you control. Sites like Shopify help you set up a shop where you can sell whatever you want. It’s a direct line between you and the customer, but you’ll have to work to get people to visit.

Online marketplaces

Amazon and Etsy come with built-in customers. People go there to make online purchases, so half your marketing is already done. The downside? You’re one of many sellers, and Amazon holds all the cards, including customer data.

Facebook and Instagram let you sell right where your audience is. No need for them to even leave the app. But remember, it’s Meta’s playground. It makes the rules, and those rules can change.

Mobile commerce (m-commerce)

More and more people shop right from their phones. It’s so popular that nearly half of all online shopping could happen on mobile devices this year. If your online store isn’t easy to use on a phone, you’re missing out on a lot of business.

Each channel has its own ups and downs. Often, the smart move is to use a mix of them to fit your online business needs. That way, you make the most of online shopping opportunities.

Choosing your ecommerce revenue model

Picking your ecommerce platform is just the first step. Next, determine how you’ll make money. Here are five revenue streams commonly used in online commerce:

Sales model

The sales model dominates both the online and brick-and-mortar markets. You sell products or services for a profit, plain and simple.

Advertising model

If you’re an online creator or influencer, consider the advertising model. Partner with businesses to feature promoted content and cash in on your personal brand.

Subscription model

A rising star among consumers and direct-to-consumer brands, the subscription model generates steady income from product or service subscriptions.

Affiliate model

Creators with a large following also excel in the affiliate model. You get a commission every time someone makes a purchase through your affiliate link.

Transaction free model

If your ecommerce business processes payments, you could make money via the transaction fee model. Collect a small fee for each sale, and it all adds up.

Stay ahead with top ecommerce trends and stats

Understanding ecommerce trends can make or break your online store. These trends shape site design, product offerings, and customer interactions. Keep your finger on the pulse to stay competitive and adapt to changing customer needs. While trends evolve, some are marking permanent shifts in consumer behavior.

Expect social commerce sales in the US to soar past $56 billion in 2023. Real conversations with potential customers online build trust and nurture relationships. Guide them down the marketing funnel to close the sale. Want to get better at this? Check out guides on selling on platforms like Facebook, Instagram, TikTok, Pinterest, and other top social selling venues.

M-commerce takes center stage

Expect mobile commerce to make up 43% of total US ecommerce sales in 2023. With a steady growth trajectory, brands must perfect their mobile UI, focusing especially on mobile payment systems.

AI powers personal shopping experiences

A 2022 study revealed that 62% of consumers would turn their backs on brands that failed to personalize their experience, a whopping 45% increase from the prior year. AI tech, like ChatGPT and Midjourney, lets ecommerce brands tailor customer experiences to a T. Apps in the Shopify store help automate tasks from customer chat to inventory management.

Product discovery is no longer Google’s exclusive domain. Consumers are also turning to YouTube and Amazon to find brands. Gen Z even prefers TikTok over traditional search engines for brand research.

Paving your path in ecommerce

The ecommerce landscape invites fresh talent and innovation. With retail ecommerce sales on an upswing, this business avenue serves as an excellent starting point for budding entrepreneurs.

Keep this guide at the ready for when you’re set to turn your ecommerce aspirations into a reality. It’s your go-to resource for launching not just a business, but your online empire.