The history of the eCommerce business dates back to the early 1990s when retailers found a new way of expanding their businesses with the use of the internet. Since then, online retail sales grew in leaps and bounds – whether it be through to the sale of products or services.
According to a report by Statista, global e-commerce sales in the retail sector amounted to USD 3.53 trillion in 2019, and this figure is expected to increase to USD 6.54 trillion by 2022. This phenomenon is because online shopping has become one of the most popular activities for people to engage in online.
Thus, it is vital for anyone who is thinking about venturing into such a business to have a piece of fundamental knowledge about the sector. This knowledge can help to frame a strategy for the expansion of these businesses in the virtual sphere, thereby supporting business owners come up with online portals and sites through which they can conduct their trade.
Besides learning how to set up businesses through online forums, other factors can also involve understanding the different kinds of merchants, and their domain of expertise. This article will also help us throw some light on what it takes for businesses to survive in the industry.
What is eCommerce?
Before we start off trying to understand the different types of e-commerce practices, we need to understand the eCommerce definition. For people who might not be familiar with the ecommerce meaning, it is a combination of two words – ‘electronic commerce.’
This concept of e-commerce is usually defined as the buying and selling of goods and services, or the transmitting of funds or data, over an electronic network, primarily the internet. Previously, this sector only referred to the online retail industry, which focuses on the sale of physical goods.
Over time, this sector has also included industries that are engaged in the sale of non-physical goods, such as the sale of software, other digital devices, and products. In this century, there seems to be a thin line of difference between traditional retail and e-commerce. It has become imperative for firms to be listed among the top eCommerce development firms.
More and more users have started adopting the practice of visiting the physical stores just to compare the prices and the quality of the physical product to what is available online. This practice can also be the method for them to get a look and feel of the product before they purchase it.
Some of the businesses in the ecommerce sphere have an exclusively online presence. This practice has dramatically reduced the costs related to setting up of industries by eliminating the cost of having a store. Businesses can easily carry out their transactions through online portals and ship the goods from their homes using a logistics partner using this model.
Freelancers, small and large businesses have made it possible for these sellers to sell their goods at a level that might not have been possible before.
E-commerce should not be confused with e-business. While e-commerce refers exclusively to the exchange of goods and services between a seller and a consumer, e-business refers to a broader concept. E-business chalks out the steps that are essential to set up and manage a business online.
There are several sup-parts of any form of e-business. These include processes such as sales promotions, inbound marketing, stock control, email marketing, search engine optimization, and more. E-commerce forms only a fraction of this vast spectrum of services, known as e-business.
While the picture that comes to mind most of the time that we think about ecommerce is mostly a business-to-consumer (B2C) framework, there are several other kinds of e-commerce services.
Apart from the B2C framework, which directly delivers the products or services to the customers, some businesses provide goods and services exclusively to other companies. Such a strategy is known as a business to business (B2B) strategy.
Related: B2B eCommerce trends 2020
Other different types of ecommerce also include internet banking services, online auction sites, and online reservations services.
With the widespread use of mobile phones and advancements in wireless connectivity and increased internet penetration, people become less skeptical about using the internet to carry out purchases. Therefore, it can be concluded that the market is on an upward growth trajectory.
E-commerce can be facilitated through the use of several channels, such as shopping carts, online catalogs, web services, emails, and mobile devices. Primarily when ecommerce came about, the business was conducted through websites, using which the customers could place their orders and make their payments.
M-commerce is a branch of eCommerce that facilitates these online transactions through mobile devices such as tablets and smartphones. This channel of e-commerce encompasses mobile banking, mobile shopping, and mobile payments.
Over the years, m-commerce has gradually shifted to an app-based existence. This existence has made the e-commerce process easier with people being able to access the eCommerce portal more conveniently.
Mobile chatbots allow consumers to perform a complete purchase from companies by walking them through the process using text or voice conversations, thus providing significant opportunities to the businesses.
Types of e-commerce merchants:
The e-commerce field is gigantic, and there are many ways to classify the business models that can be seen in this field. We are going to first sort them according to the type of products they sell.
- Stores for physical goods
This category comprises the typical online resellers – mainly the people who have their showrooms, physical stores, or gift outlets. Such kinds of stores advertise these items online so that the users gain awareness of their product offerings remotely as well.
Once the order has been placed, the store ships the new order to the customer almost immediately using logistics services. It also provides the user with the option to collect the order from the shop itself.
This facility makes it convenient for shoppers to check whether the product they require is available or not. Having a website also saves the entrepreneur from having to maintain a large inventory at the shop instead of stocking it at a warehouse from where the products can be shipped conveniently.
Some businesses like this include Spencers Retail, KFC, McD, Shoppers Stop have adopted these models.
- E-tailers providing services
As we have seen, previously, the world of ecommerce was only restricted to the sale of physical goods, but this has broadened to include services as well. This category consists of online educators, consultants, and freelancers, who are usually the ones engaged in the provision of services through online forums.
Some examples of such e-tailers include food delivery services such as Swiggy and Zomato.
The purchasing process varies from one merchant to another. Some may have the provision to allow sales directly through their websites or platforms, while others might require the customer to speak to the salesperson to initiate the selling process. This strategy is usually adopted to ensure that the customer has a more tailored experience.
Other apps that provide these kinds of personalized services are usually consulting firms or businesses involved in the financial services e-tail industry.
- Digital products
With the world becoming increasingly digital in terms of both products and services, products that fall into the digital product categories experience increased demand—otherwise known as ‘e-goods.’ These products include a broad type of products such as e-learning modules, online courses, e-books, graphics, software, and other virtual goods.
A few examples of ecommerce businesses that are into the sale of these virtual products include Byju’s (which provides online courses for students), Shutterstock (a platform that engages in the sale of stock photos), Canva (graphic designing software), and many more.
Types of e-commerce service providers, according to the parties involved:
- Business-to-Business (B2B)
This kind of business process refers to an exchange of products, information, and services through electronic channels between two businesses rather than between the company and the end consumer.
Such a business would include companies that sell intermediary products to other companies. These companies include meat suppliers who supply meat to restaurants in bulk or construction companies that sell the building materials to architectural companies or interior designers.
- Business-to-Consumer (B2C):
This category includes businesses that sell both physical and digital services as well as products to regular customers or end-users. This category is the most common type of e-commerce service provider where the merchants cater to the customers who usually buy in small quantities.
These types of sellers are most prevalent in the fields of consumer goods such as groceries where the consumers would not purchase anything in bulk, but would instead purchase smaller quantities of a lot of things. Some businesses where this kind of framework is prevalent are Amazon, Flipkart, and more.
- Consumer to business (C2B):
The kind of businesses that fall into this category are those instances when a certain end-consumer sells a particular product or a service to a company in exchange for a fee. This model is the complete opposite of the traditional B2C model of e-commerce.
An excellent example of this kind of an ecommerce business would be when a social media influencer provides a brand an exposure to their online audience while charging a fee for the same. Another example of this can be when a photographer transfers the license for his photos to a business that intends to use it commercially.
- Consumer-to-Consumer (C2C):
This type of business transaction in the ecommerce domain usually occurs when the end-consumer sells their goods to another consumer. This model is a relatively new business model in which the customers who bought an article previously seek to resell the commodity to someone else.
Websites such as eBay, Olx, Craigslist adopt such business models that aim at creating a C2C marketplace. This kind of market can present a lucrative opportunity to end-users who own products that are of no use to them anymore.
- Business-to-Government (B2G):
Another name for these types of e-commerce services is business-to-administration (B2A). These types of transactions usually take place when a firm in the private sector supplies goods or services to any agency that operates in the public sector. Often these government-based agencies go into contracts with private businesses to perform a mandated task.
A simple ecommerce example of such a business transaction might occur when a government body employs a private web design firm to design and maintain its website. Such a type of deal falls under the B2G category.
- Government-to-Business (G2B):
This variant of an e-commerce transaction usually takes place when a particular company operating in the private sphere has to pay fees to the government or buy goods or services from the government through online channels.
The best example of a transaction that falls into this category occurs when a company pays its taxes through the mode of online payment.
- Consumer-to-Government (C2G):
When a transaction takes place where an end-user pays any government agency through an online payment portal in exchange for goods or services, such a type of a deal falls into the category of C2G online sales.
Paying for parking tickets online or going for online renewal of car registration certificates both fall under this category of ecommerce transactions.
Types of e-commerce service providers according to the different transactional relationships:
Ecommerce can also be classified according to several categories based on the kinds of transactional relationships it has between the various businesses and its customers. It can also be separated according to the different types of products or services being exchanged through these transactions.
In this kind of an ecommerce transaction, goods are sold in bulk, most often to other businesses or retailers who either use these goods to manufacture some other products or directly sell them to the consumers. Most B2B sales are of this type.
Such type of an e-commerce sale involves a retailer selling the products directly to an end-user. These kinds of transactions do not include any intermediaries as the products are shipped directly to the consumers. Usually, goods are purchased in small quantities in retail orders, and most B2C transactions follow this route.
This type of an ecommerce sale usually occurs between an agent who makes the sale to the customer, but the goods are produced and shipped by a third party. In such a transaction, the seller has minimal liability since they neither store the products nor deliver them. The drop-shipping agent makes a profit by attracting customers and making sales through online platforms.
Through this method, companies try to source capital from the end-users before the product is available in the market to raise enough money required to bring such products to the market. In such a process, small amounts of money are collected from a large number of people who believe in a startup idea.
This process entails a subscriber purchasing a product or a service regularly until they choose to cancel the subscription. This kind of a subscription package gets renewed on a monthly or a yearly basis either automatically or manually, on request of the consumer.
- Digital goods:
This category includes the entire spectrum of downloadable digital products or widgets, softwares, courses, templates, or media that would require the customer to purchase them before obtaining a license to use them.
In terms of ecommerce, this refers to a particular skill or a set of skills that are traded in for compensation. The time that the service provider takes out to provide a specific service can be exchanged for a fee.
Benefits of Ecommerce:
The market for ecommerce has witnessed explosive growth over the years. The internet has become an essential part of the lives of people all around the globe, and imagining a life without it has become impossible.
With the internet fulfilling not only the requirements of our everyday lives but also bringing in profits in the business scenario, the benefits of ecommerce are manifold. Some of the notable benefits of ecommerce include:
- Access to a global market:
One of the many restrictions of limiting business to a physical store is remaining confined to a particular geographical area. This restriction is not a problem for companies based in the ecommerce sector. For any business that operates in the ecommerce domain, the whole world is the market.
Thus, shifting from a local to a global presence incurring only a minimal cost of expansion, in terms of designing an online platform, is a considerable advantage of having a business that is based online.
In 2019, online purchases accounted for 14.1% of the total amount of global sales recorded. Experts expect this figure to increase from year to year, thus accounting for a more significant fraction of the retail market.
- Round-the-clock availability:
Unlike physical stores which have well-defined working hours, online stores have no such restrictions, since they are open throughout the day as well as throughout the week. This feature accounts for a significant increase in the volume of sales since customers can purchase from the website anytime they want to do so.
No longer do people have to encounter the hassle of visiting a physical store to source their daily essentials and groceries. With the option to view all the items that these businesses have in stock, people can conveniently order the things that they need from the websites with just a click of a button.
The unrestricted access to order online 24*7*365 gives a tremendous advantage to both the consumers, as well as the other parties involved in the business. The presence of so many options available for a customer to choose from is another advantage of going for an ecommerce model.
- Reduction in Costs:
One of the most significant benefits of going for an ecommerce model are the significantly lower operational costs that it incurs. Since the company does not encounter any need to maintain a brick-and-mortar establishment or to hire sales executives, most of the investment of the company goes into storage and warehousing costs.
The people operating a business engaging in dropshipping do not even need to incur those costs since they do not have to maintain a warehouse either. Since these measures save a company from incurring higher operational costs, they end up providing better offers to its customers.
The only added costs that the companies engaged in this business tend to incur are the delivery costs, which they would not have suffered in case of having a physical store. But most of the time, the shipping charges are borne by the consumers, and free shipping is only available on orders above a certain amount.
- Efficient Inventory Management:
The businesses operating in the sphere of ecommerce can make the inventory management process automated through the use of electronic tools to expedite the process of ordering, payment, and delivery of the goods. These automated systems help companies save billions of dollars through optimizing inventory and operational costs.
- Serving Niche Markets:
Sometimes, it is especially hard to reach out to customers for companies operating in niche markets. Pushing a niche product to gain popularity in the market requires a bit of effort. In contrast, niche businesses have a high chance of flourishing without any additional investment if they have a presence in the ecommerce sector.
Consumers or businesses all over the world would be able to view the categories of products that are offered through a simple search for these products. Besides this, companies can create targeted ads that can be used to reach out to the target customers who would require these specific products.
- Using Marketing Tools to Reach Out to The Target Audience:
The internet provides more access to a treasure trove of information in terms of customer data and the opportunity to monitor consumer buying patterns, as well as new trends in the industry. Ecommerce businesses can be made to adapt to the emerging industry scenarios and offer a better and more customized experience to more unique customers.
For this purpose, targeted ads, search engine optimization, SMS, and email marketing methods have gained momentum across all levels of the market strategies that are prevalent in these ecommerce-based businesses.
- Decreased demand for brick-and-mortar offices for managing businesses:
Previously, businesses needed some physical office buildings from where it could operate. With the development of newer and more effective methods of internet communication, most companies can be operated from home. The employees can be spared from the additional travel and other costs that travelling to work every day might incur.
Companies that provide physical goods for sale face the need to maintain physical facilities through which they conduct business operations. But a drop-shipping startup does not need to worry about that either.
An entrepreneur who has operations in the drop-shipping domain can efficiently conduct the services of the business sitting at home. A computer and a good internet connection are both pre-requisites of such a business scenario.
How to establish an eCommerce business:
Since this market is doing so well, any time is the right time to venture into such a business. There exists a specific logical order through which one can go to set up an online store within the shortest time possible.
But even this process will involve the process of research, building, launching, and also expanding such a business, based on fulfilling several steps and making some critical decisions.
- Selecting a product and establishing a supply network
The first step for such a venture is through deciding on the kind of products or services the business intends to sell. Finding an idea that might yield profits and not have too much competition in the sector either might be a bit of a challenge, so this will require some brainstorming.
It’s important to consider three things while coming up with such a plan – whether the product or service can generate a high-profit margin, its scalability, and future scope of expansion. After figuring out what exactly to sell, it is also vital to contact suppliers to source these products or the raw materials from and make storage decisions.
There are four main channels through which any ecommerce business can source the products or raw materials. One is through manufacturing the products in-house, purchasing the products in bulk, through wholesale purchases, and finally, dropshipping.
This step also includes searching for and selecting the right vendor who can supply the products or provide the raw materials that are required to create the end products. The company will also have to gauge whether the partnership will be fruitful for the company in the long run.
- Planning through conducting research
Choosing the central area and the depth of the research study will depend on the product and service that is selected. Most industries are different from each other, and their research methodologies vary from one sector to another, depending on what factor we are trying to analyze.
The preliminary idea behind conducting research is to analyze the competitor’s data, their plan of action, and their pricing strategies. The primary purpose is to come up with a specific unique value proposition that differentiates the business from its competition.
At such a point, it is vital to come up with a business plan that helps to chalk out the company’s long term growth strategy and also identify the potential obstacles that might come its way.
If even at this stage, the company finds the business not to be profitable, they can reverse the process and choose to opt for a field that has lesser competition and more scope for expansion.
At this point, it is also crucial for the company to apply for and obtain the necessary licenses and permits for conducting business. Operating a virtual business does not excuse the company from having to gather these permits. These permits vary from one city, state or country to another, so the company also has to check if it is following all the legal rules of business for that particular region.
- Establishing a brand in the right way
Once the company has selected a product idea, a value proposition and a clear idea about the market to go with it, it is crucial to start thinking about the elements that go into the web store. These elements include the brand name, brand guidelines, domain name, and the company’s logo.
Choosing a brand name that strikes a chord with the target customers can boost the growth of the brands and help to win over potential customers. Therefore, before venturing into the development of the website, it is essential to invest in branding to reach the target customers.
Techniques for search engine optimization (SEO) helps to ensure more visibility on the website or the app through which the e-commerce platform will be constructed. Thus, it is also essential for companies to opt for an eCommerce development company which is an expert in its field.
That way, the branding can be done in a proper manner, which provides a good start for the business.
- Deciding on the selling method
The process of deciding how to build up your own ecommerce business can be fulfilled in the two following ways:
- Building from scratch
Through this process, the company builds the e-commerce store from ground-up, by either designing the interface themselves or by employing an e-commerce development company or a freelance designer to create the interface.
The process can be cost-intensive and might consume a considerable amount of time as well, but it provides a level of customization that is otherwise not possible to attain. Designing your website from scratch ensures that it is made to the customer’s order and provides the company with the ability to choose all the toggles according to their preferences.
- Using an already existing website template
Some online websites, such as Shopify, allow the customers to choose from an already-existing pool of templates to design their website. This technology simplifies the process of building a website but allows less room for customization, as compared to the process of building a website from scratch.
Businesses have the option of selecting from a particular set of tools and themes that are offered by the platforms. The advantage of opting for such a route of designing a website is that a store can just get its platform up and running in a matter of only a few hours.
- Marketing the app or website
Another significant action that this stage involves is the marketing of the app through different online media. This stage will include the process of creating the initial hype around the ecommerce platform.
Before this stage, it is essential to get the online platform ready and include facilities such as email marketing, getting Google Analytics installed, searching for the optimum keywords, and having a promotions plan in place. These methods will help to keep track of the traffic that you generate on the app platform and also help to promote the platform effectively.
Creating a presence on social media forums to create a hype around the app is another important feature of this stage. This process involves being as creative about the different methods of marketing as possible – possibly going for campaigns that grab the attention of the target audience.
These methods might include tactics such as guerilla marketing, online quizzes, and other similar ways of marketing that can engage the audience and create a buzz. These factors will ensure that the app gains an audience who will be willing to test it out when it finally appears on the market.
- Forming the pre-launch strategies
Before the launch of the app or the website, it is vital to have different kinds of strategies in place that will allow the company to function better in the long run. Some of these strategies involve developing key performance indicators (KPIs) that will be able to measure the progress of the company efficiently.
These KPIs will be able to track the progress and also allow the companies to figure out the issues and solve them as they emerge. At this point, it is also essential for the company to look into its shipping strategy, if the company is involved in the physical delivery of goods and services.
Developing a long-term strategy for the brand is also vital at this point and would involve engaging in research about the different markets that it can expand to in the future. This planning would also include chalking out the future trajectory for the company to seek funding for its expansion.
All the above processes are extensive and involve a lot of work, but once completed, it can help to chalk out a proper plan for its future.
- Post-launch activities
The real work for an ecommerce platform begins after the launch of the app. This phase will involve the companies opting for aggressive methods of promotion aimed at the target audience. At that point, marketing will play the most critical role in reaching out to the customers, ensuring visibility, and ensuring that the awareness gets converted to sales.
This stage can involve methods of marketing, which include making the customers subscribe to the company’s newsletters and enable push notifications through which they can be informed about the newest trends and stock. Other methods involve using sponsored content, pay-per-click ads, search engine ads, and more.
Email and SMS marketing are some of the areas that can help to generate sales. These emails and text messages should concentrate on maximizing customer interactions and building relationships through the same.
The site is not the only thing that traffic would need to be driven to. The individual products and services that a company provides would also require similar kinds of publicity to attract customers from areas that are not limited to online marketing.
For this, the company can also collaborate with bloggers and social media influencers and ask them to review their products, or it can also concentrate on above-the-line marketing methods such as TV and billboards.
At this point, it is critical to ensure the stocking up and replenishment of the company’s inventory based on projections made on data collected from analyzing consumer purchasing patterns. This process would also be instrumental in ensuring a smooth supply of products after the launch of the platform.
This process is more streamlined for a dropshipping business since they depend on other manufacturers to produce and supply their products. But streamlining the inventory processes should be a priority if the company seeks to manufacture its products by itself, thereby ensuring that the production curve remains ahead of the selling curve.
Tips For Getting Started
If you have an idea for venturing into the ecommerce business, then the best way to go about it is through doing extensive research about the domain and employing an expert e-commerce developer.
Through this way, the company can obtain the best results and be able to attain the best level of app customization and search engine optimization. These firms can also help to analyze the data collected from studying the reach of the advertisements, the apps, and any other marketing tool that records data regarding the traffic on the app.
Once this data is available, the companies can evaluate this data, use the results to make the necessary changes, and repeat the whole process. This method will also provide information about which of the marketing channels is getting the maximum reach and conversions. The company might then want to come up with innovative ways to attract that particular demographic of people.
In this article, we have discussed the different methods, types, and channels of online commerce. This sector presents a lucrative opportunity for companies to invest in, what with the industry trends pointing towards an upward trajectory for the companies in this industry.
Whether you are planning to start your business from an online presence or simply plan to expand from a physical store to a digital one, just to attract new customers, the process for establishing the business, as mentioned above, remains the same.
Since eCommerce platforms are accessible to everyone, if you have an idea, you can start working on it from anywhere across the globe without any restrictions. In such a situation, the best way to start is to take action and work towards creating your website today!