Should You Start an eCommerce Business?

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The eCommerce industry is growing day by day. However, people who are not familiar with this industry are not so eager to take their chances.

 

But in spite of the risks involved, starting an eCommerce business now can be an amazing move. There is still a good share of the eCommerce market waiting for brave entrepreneurs.


So, even if you already own a brick-and-mortar business or if you just know the basics of the online retail industry, the guide below will help you learn whether starting a business of this kind is promising.

 

Overview:

What do you mean by eCommerce?

Electronic commerce or eCommerce refers to the process of buying and selling of goods or services using the internet and the transfer of money and data to execute these transactions.

 

In other words, eCommerce refers to sales of physical products online but it can also refer to any kind of commercial transaction that is facilitated online. The main point here is that the process happens with the help of the internet.

 

It is also worth noting that e-business needs to be distinguished from eCommerce. This is because eCommerce specifically refers to the transaction of goods and services.

 

Even though this industry saw its boom five to six years ago, its roots go back to the 1990s. In 1994, a man sold a music CD using the website NetMarket. This is the first time a consumer purchased something online and everything that came after created the eCommerce industry.

What is eCommerce and its types?

We have established that eCommerce refers to sales that happen online. Now, let’s take a look at the four main types of eCommerce models that describe transactions that take place between consumers and businesses.

Business to Consumer (B2C)

All businesses that sell goods or services to individuals (common consumers) belong to B2C businesses. A good example of this type would be people buying clothes from online retailers.

Business to Business (B2B)

A business that sells goods or services to another business belongs to the B2B model. For instance, a company that sells software-as-a-service to other businesses.

Consumer to Consumer (C2C)

This type involves two individuals who make transactions independently but they do it through an online platform. A perfect example of this would be any transaction between two individuals on eBay.

Consumer to Business (C2B)

When an individual (consumer) sells its products or services to an organization or a business, this kind of transaction can be described as a C2B interaction.

For instance, when a photography professional licenses their photo material for a business to use, the model can be described as a C2B eCommerce model.

Additionally, bear in mind that eCommerce can take on a wide range of forms that involve different transactional relationships between businesses and consumers as well as different objects being exchanged as part of these transactions.

  1. Retail — the sale of a product by a business to a customer
  2. Wholesale — the sale of products in bulk
  3. Dropshipping — the sale of a product that is manufactured and shipped to the consumer by a third party
  4. Crowdfunding — the collection of money from consumers with the aim of raising the startup capital to release it to the market
  5. Subscription — the automatic recurring purchase of a product or service regularly
  6. Physical products — any tangible good that requires inventory to be replenished and orders to be shipped to customers as sales are made
  7. Digital products — downloadable digital goods
  8. Services — a skill or a set of skills provided in exchange for monetary remuneration

What are the applications of eCommerce?

Classifying eCommerce by application is not so straightforward. As you can see, there is more than one definition of this term.

One good definition that surely helps with understanding the applications is that eCommerce refers to the sharing of business information, maintenance of business relationships, and conducting business transactions with the help of computers that are connected to a telecommunication network without the use of hard copy.

Considering this broader definition and based on its applications, eCommerce can be classified into several categories.

Electronic markets

When it comes to electronic markets, buyers are presented with a wide scope of products and services available. Consumers can then compare prices and make the purchase.

Electronic data interchange

Electronic data interchange is a standardized system where computers interact with each other with no printed documents such as order forms or invoices. This way, delays and errors that are otherwise often found when paper material is used are avoided.

Internet commerce

This is the most common form. The medium is the internet and it is used to advertise, sell, and even create shipping orders.

Now let’s take a look at some more specific and narrower applications that are well-known among most people.

Retail and wholesale

Retailing in the eCommerce industry is done through online platforms designed to reenact proper stores.

 

A subset of retail eCommerce is mobile commerce where consumers buy goods or services using their mobile devices using the mobile-optimized website of the retailer.

 

The payment method here is the e-payment. It includes credit or debit cards, online wallets, or internet banking. No paper invoices or receipts are used.

Online marketing

Online marketing refers to the act of gathering data regarding consumer behaviors, preferences, needs, buying patterns, and so on.

 

This helps marketers fix prices, come up with better strategies, enhance products, and build overall better relationships with consumers.

Finance

Many banks and various financial institutions are using eCommerce to a considerable extent. Customers can check their account balances, transfer money, pay bills, pay insurance, and so on.

It is also possible to trade stocks online, get info about stocks from websites that display news, charts, performance reports, and analyst ratings of companies.

Manufacturing

Supply chain operations also use eCommerce. For instance, a few companies can form a group and create an electronic exchange and facilitate purchase and sale of goods, exchange of market information, back-office information like inventory control, and so on.

 

This way, the smooth flow of raw materials and finished products among the member companies is achieved.

Online booking

This one is fairly familiar. Consumers usually book hotels, holidays, airline tickets, travel insurance, and so on. These bookings and reservations are made possible through an internet booking engine.

Digital advertising

This one is fairly familiar. Consumers usually book hotels, holidays, airline tickets, travel insurance, and so on. These bookings and reservations are made possible through an internet booking engine.

Online publishing

Online publishing refers to the digital publication of books, magazines, catalogs, and so on.

Digital advertising

Online advertising uses the internet to deliver promotional material to consumers. This involves a publisher and an advertiser. The advertiser provides the ads and the publisher integrates them into online content.

eCommerce market

Anyone who plans on making a move in this industry should know at least some basics regarding the current state of affairs in the eCommerce market.

 

Below are listed the most important eCommerce statistics that currently influence eCommerce businesses:

  1. By 2040, almost 95% of all purchases everywhere will be made online (through eCommerce).
  2. The world’s fastest-growing eCommerce market in the future will be China.
  3. The US records the highest eCommerce penetration rates (80% of all internet users making at least one purchase).
  4. Almost half of the eCommerce traffic (43%) comes from Google search (organic).

These were just some general statistics that only prove how prosperous this industry is and how stable it will be in the years to come.

eCommerce trends

Now take a look at some important trends that shape the way people run their eCommerce businesses.

AR improves the reality of online shopping

Augmented reality is becoming a game-changer when it comes to shopping online. AR helps buyers visualize the products they are interested in.

Voice search

A lot of users rely on voice assistants to do almost everything online. They check the weather using Amazon Alexa or Siri and they even buy products with their help too.

Artificial intelligence

The growing Artificial intelligence and machine learning technology means that there will be new ways for businesses to enhance personalization and improve customer service. This is exactly the reason why businesses should invest in the development of this technology.

On-site personalization

Thanks to the increased use of AI in eCommerce, it is also possible to gather information about visitors using this technology. Once you gather important information about visitors, you can adjust the website to their wants and needs and thus improve the overall experience.

Chatbots

Chatbots can be used to mimic real persons greeting your shoppers or answering simple questions. This functionality allows stores to communicate with thousands of customers while giving them the feeling of personal attention and thoughtful recommendations based on the responses.

Mobile shopping

Mobile shopping is still growing in popularity. Even though most eCommerce businesses have implemented features that allow smooth mobile experience, some are still lagging.

 

Every eCommerce business needs to have a website with a flawless responsive design. A consumer should be able to shop using their phones just as easily as they do it on their computers.

Things to consider when starting an eCommerce business

Thanks to the advent of eCommerce platforms, nowadays it is not too difficult to start an eCommerce business.

However, there are still things to keep in mind before any decision is made just to ensure that the entire process is successful.

Market research

Analyzing the market is one of the most important things to do before starting an eCommerce business. With a good analysis, one gets a clear picture of the competition, market reach, as well as the audience that should be targeted. Initial research offers proper insights that can help entrepreneurs tweak their processes along the line.

Reach out to sellers

Once a business model is devised along with a plan, entrepreneurs need to reach out to sellers and get their support. This helps business owners avoid the situation where they have a marketplace but no available sellers. Hence, before launching the marketplace, one has to ensure that sellers are ready to start selling on the platform.

Choose the right eCommerce platform

The most convenient way to launch an online marketplace is through a good eCommerce platform. Compare eCommerce platforms and pick the best one. Check all the demos and reviews, narrow down the list to only three platforms, and then decide. Your ideal platform has to fit your business needs and ensure a smooth experience both for sellers and customers.

Promote your eCommerce store

To gain popularity, it is necessary to promote your store using the right methods. No matter what eCommerce solution you select, you can’t become profitable if you don’t promote your business.

So, don’t wait too long to set the budget for marketing. Pre-launch marketing earns much-needed popularity before the operations even start. Also, it would be wise to use paid ads for the promotion such as Google advertising campaigns.

Benefits of e-commerce

This industry has numerous benefits. In fact, many business owners have already made small fortunes utilizing eCommerce platforms.

To understand clearly how beneficial this industry is, let’s take a look at the most prominent benefits of eCommerce.

Attract global customers

One of the major benefits of eCommerce is that a business can sell to customers worldwide. An eCommerce business can discover their audience wherever they are.

On top of that, selling globally means that the brand image is built a lot faster and that the marketplace is broadened exponentially. Moreover, becoming profitable requires less time when you are an international business.

Save operational costs

Physical retail stores must pay up to thousands of dollars to rent one of their store locations. There are also upfront costs such as store signs, store design, buying inventory, sales equipment, and so on.

However, with eCommerce businesses, the startup costs are lower. For instance, an average drop shipping store startup costs are estimated at around $400 in 2019. 

Less risk to start

The risk of starting an eCommerce business is considerably lower than what people experience when opening brick-and-mortar stores.

 

This is obvious because an eCommerce store can be up and running in a matter of a few clicks. Platforms such as Shopify or BigCommerce use pre-made templates to create a store. These platforms also take care of hosting, PCI compliance, platform maintenance, and more.

 

To make it even better, marketplaces such as Amazon or eBay only require a user to set up an account before they can start selling.

Operate and earn 24/7

Online stores are always open for business, whereas most physical stores are open between 9 am to 9 pm. Being available at all hours means that it is possible to attract people who would normally pick up a product in stores if the stores were open.

Add the individuals who don’t work normal hours or are too busy to go to physical shops to the equation and it becomes obvious that an eCommerce store allows you to attract almost all kinds of shoppers. 

More data about your customers

With an eCommerce store, one can easily get access to customer data that can be further analyzed.

Most consumers are not always willing to give away email addresses or postal codes to physical retailers. In e commerce, however, it is possible to get a name, mailing address, email address, and even phone number.

This means that owners have at least three different ways to communicate and build a relationship with them.

Offer personalized shopping experience

Website personalization can improve the online shopping experience. Creating personalized landing pages for different audiences can entice them to buy from your shop without much extra effort on your side.

All the hard work can be done before launching a campaign. Once the campaign is released, you can sit back and enjoy the results.

A good first step would be to start segmenting your email list based on purchases made, location, or even how much a customer spends. It is also wise to retarget customers who visited the store, showing them an ad for a product they added to their cart and then forgot about it.

Wrap Up

It can’t be denied that people face a lot of challenges when launching eCommerce businesses. However, the best bit about running an eCommerce store is that you get to shape it, create it, and every result is a direct effect of your decisions.

So, even when something bad happens, do not dwell too much on it. Try to get back up and carry on. Do not hesitate, as this industry is dynamic. Acting a day too late might mean not hitting the sweet spot and reaping the maximum rewards.

Finally, feel free to materialize your ideas, be innovative, and don’t be afraid. No great thing ever happened without at least a little bit of risk.

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