What is ecommerce?

Ecommerce or "electronic commerce" is the trading of goods and services online.

The internet allows individuals and businesses to buy and sell an increasing
amount of physical goods, digital goods, and services electronically.

Some businesses sell exclusively online or use ecommerce to expand the reach of
their other distribution channels. Either way, ecommerce is thriving and can be a
profitable venture. Let’s dive into the details of how ecommerce works and find
out if it’s right for you.

Did you know?

The numbers show ecommerce growth trends
In 2023, brand owners’ sales grew more than 22% in the Amazon store compared
to the previous year. US-based sellers also sold more than 4.5 billion items to
customers and averaged more than $250,000 in annual sales.
How does ecommerce work?
Ecommerce works by connecting sellers with customers and allowing exchanges to
take place online. It can work in many different ways and take many forms. Here’s
a general overview of how the process can look:
1. The seller chooses online selling channels, like a website or social media,
and promotes products or services for sale.
2. Customers find the products or services and place orders.
3. A payment processor enables the exchange of the goods or services
electronically via payment options like credit cards or digital currencies.
4. The customer receives a confirmation email or SMS along with a printable
receipt.
5. If the transaction is for goods, the seller ships the products and sends the
customer a tracking number via email or SMS. If the transaction is for a
service, the service provider can reach out to schedule and complete the
service.
Along the way, many ecommerce tools and technologies work together to help
make online purchases possible. On the technical side, the transaction can depend
on data, logistics, warehousing, supply chains, and other systems and processes.

Did you know?

You can offer customers fast, free shipping through Amazon Prime
Shipping times and costs can be a major obstacle for customers as they make
purchasing decisions. To help sellers spend less and get orders to customers as
quickly as possible, Amazon provides free, two-day shipping through Prime.

To offer this, you can enroll products in Fulfillment by Amazon (FBA) to send
inventory into Amazon’s global fulfillment network and make use of a fully
automated set of services we call Supply Chain by Amazon.
Where and how does ecommerce take place?
Ecommerce offers people the convenience of shopping from their computers,
phones, tablets, and other devices. They visit websites, social media pages, and
other virtual channels to find what they’re looking for. Entrepreneurs, startups,
small and medium-sized businesses, and large retailers can all use ecommerce to
reach customers across the globe. Selling online might be a business’s sole revenue
source, or it might be part of a multi-channel selling strategy. For example, a large
brick-and-mortar retailer might adopt an online sales channel, or an entrepreneur
might sell a small number of specialty handcrafted goods through a social media
site like Facebook, Instagram, or Pinterest.

Another ecommerce example is social media commerce. Some websites like

Facebook support online purchases. A business that generates revenue solely
through its presence on social media, or entrepreneurs who supplement their
income using social media marketing techniques, are also engaging in social media
commerce.

Other ways you can participate in ecommerce include building standalone websites,
or setting up shop on an established selling website. For example, you can create a
storefront to represent your brand in the Amazon store.
What types of ecommerce are there?
Ecommerce takes as many different forms as there are various ways to interact
with online channels. For example, sellers and buyers exchange goods and services
through m-commerce, enterprise commerce, and social selling destinations
like Amazon Live.

A few common business models are:

• B2C: Businesses sell to individual consumers, sometimes called the “end
customer.”
• B2B: Businesses sell to other businesses. Often the buyer resells products to
the consumer.
• C2B: Consumers sell to businesses. C2B businesses allow customers to sell
to other companies.
• C2C: Consumers sell to other consumers. Businesses create online shopping
destinations to connect customers.
• B2G: Businesses sell to governments or government agencies.
• C2G: Consumers sell to governments or government agencies.
• G2B: Governments or government agencies sell to businesses.
• G2C: Governments or government agencies sell to consumers.
Business models can also vary. You might make direct sales, offer customer
subscriptions, or earn money through affiliate marketing and other methods.

What is an ecommerce website?

An ecommerce website is an online store where customers can find products,
browse offerings, and place purchases online. It facilitates the transaction between
a buyer and seller.

A digital storefront can serve as the virtual equivalent of the product shelves, sales
staff, and cash register of a physical shop. Other components of an online store
might include product listings, product categories, and customer reviews.
What is an ecommerce business?
An ecommerce business is a company that generates revenue from selling products
or services online, or uses the internet to pursue sales leads. For example, an
ecommerce company might sell software, apparel, housewares, or web design
services. You can run an ecommerce business from a single website or through
multiple online channels like social media and email.
Steps to starting an ecommerce business
The steps to starting an ecommerce business can vary depending on factors like
what you want to sell. For example, if you're selling services, then there’s no need
to manage inventory or fulfillment. However, if you want to sell products online,
then inventory and fulfillment will likely play a critical part in your operations.

Here are some steps you can follow to get started:

1. Research business ideas.
2. Make sure there’s demand for the products you want to sell.
3. Determine how you'll sell and ship products to customers.
4. Find suppliers and manufacturers.
5. Choose which online channels you'll sell through.
6. Create a website or online storefront and list products.
7. Create a plan for your fulfillment strategy.
8. Begin attracting customers with promotions.
What are the advantages and disadvantages of ecommerce?
Like any sales method, ecommerce can have upsides and downsides. Is ecommerce
right for you? It’ll depend on your business goals, your intended audience, and
other factors. Here are some considerations.
Benefits of ecommerce
Accessibility and convenience
Ecommerce owes its rapid growth in part to the ease of access to products and
speed of placing purchases. Once set up, an online store is open 24 hours a day
without the need to be monitored or staffed like a physical store. Customers can
browse a broad selection of offers from around the world, from anywhere with an
internet connection, and place purchases with just a few clicks.
Direct access to customers
The internet gives businesses direct-to-consumer access along with the ability to
build relationships with specific audiences and earn customer loyalty. You can
tailor your brand image and marketing to fit customer wants and needs right down
to special offers and personalized product recommendations.

Global marketing reach

In the past, a business’s reach was limited by the number of people able to
physically enter through a store’s front doors. Today, the internet allows you
to reach customers across the world. Make use of a wide variety of digital
marketing and advertising options like cost-per-click (CPC) ads and virtual bundles
to reach a diverse new mix of customers.
Relatively low operating costs
Creating and maintaining a website can be less expensive than running a brick-
and-mortar store. You can start an online business channel without leasing retail
space, hiring a team of employees, or having a large warehouse. Benefit from low
overhead when you don’t need to pay rent or worry about building maintenance.
Advances in technology
A wide range of specialists and businesses, including Software as a Service (SaaS)
providers, are continually innovating and finding new ways to improve the online
shopping experience. Emerging technologies like artificial intelligence (AI)
increasingly play a role in helping with tasks from managing stock levels and
storage to delivery and returns. Customers can also make voice-assisted purchases,
enjoy personalized shopping experiences, try out products with augmented reality,
and more.
Challenges of ecommerce
High competition
A low barrier to entry can translate to high competition. It’s important to select
products with care and conduct thorough competitor research to zero in
on profitable product ideas.

Once you find success in a niche, be on the lookout for counterfeiters and other
forms of infringement. Look into ways of dealing with bad actors like
Amazon’s Report a Violation tool. Available to brands registered in Amazon Brand
Registry, a free resource to help you build and protect your brand, this tool lets you
search the Amazon catalog for potential violations of your active trademarks,
copyrights, and patents.
Limited interaction with customers and products
If your business relies on interacting with customers in person, it could be a
challenge to expand into ecommerce. Alternatively, if you prefer communicating
with customers via email or phone, this drawback might be a huge plus. But keep
in mind customers could be deterred by a limited ability to test out or try on
products. You’ll also need a system for handling returns or exchanges.

A related challenge? If you work with a third-party fulfillment provider like

a dropshipper, you might not have the ability to inspect products and assess their
quality.

Shipping and fulfillment at scale

In contrast to visiting a brick-and-mortar store, online customers can’t instantly
take home the products they pick out. Sellers need to find a way to get products to
customers. This might involve working with delivery options and third-party
providers of other fulfillment services, from storage and packing to returns and
customer service. Learn more about logistics in our guide to fulfillment.
Reliance on technology
While technology can be a major benefit, technical difficulties can negatively
impact sales. Just as a hiccup in your supply chain can prevent timely delivery of
products, internet issues or a hard drive failure could cost you time and money.
Remember, for every technical issue you might encounter, there’s probably a
solution or a preventative measure you can take, like backing up your data
regularly. You can also lean on the reliable infrastructure of an established store
like Amazon.
Data security concerns
Placing a purchase online and sharing payment details and other sensitive
information can be a big barrier for customers. To earn customer trust and convert
shoppers to buyers, transparently share details on your privacy policy and security
precautions, like secure payment processing and how you safeguard personally
identifiable information. You can communicate this via your web presence and in
your terms and conditions.
5 tips for how to succeed in ecommerce
1. Select great products
High-quality products and services are at the heart of successful online brands.
Your product should solve an unmet customer need or challenge at a compelling
price point. Product quality and pricing can make or break your business. Do some
market research to get a sense of what types of products your competitors are
selling, as well as the value of similar products. You can also use ecommerce tools
like Amazon’s Automate Pricing.
2. Convey a compelling story
Unique businesses stand out, but it can take more than a great product to captivate
audiences. To catch a customer’s attention, convey your business’s purpose and
vision.

Ask yourself, why does your business need to exist? How will the products make
the lives of customers better? Your branding should convey the answers to these
questions.

Spend time thinking about the look and feel of your brand. Dig deep and find a
simple, powerful way to convey the origin and mission of your business
3. Focus on the customer
Define your ideal audience to help attract loyal and enthusiastic customers. Who
do you want to serve with the products? How can you alleviate their pain points?
Instead of chasing after customers who don’t need what you’re selling, focus
your marketing efforts with a targeted range of digital advertising techniques like
CPC ads, search engine optimization, and customer loyalty programs.
4. Provide a smooth online experience
Online stores should be user friendly so making a purchase feels effortless. High-
performing stores keep the spotlight on products by streamlining the checkout
process. Remove any unnecessary steps to make sure the shopping journey is
intuitive and straightforward.
5. Have a system for inventory and fulfillment
How will you get the right orders to the right customers? Fulfillment needs to be
efficient and cost-effective for products to arrive on time and in the condition
customers expect. Be sure to invest in the right packaging materials and inventory
management.