Electronic commerce or e-commerce is the process of buying and selling between businesses and consumers without a physical store, usually through an electronic medium. Often, this term refers to the internet as a marketplace but the term can also refer to retail activity through any electronic method. The technologies that support e-commerce include e-commerce or mobile commerce, electronic transfer of funds, internet marketing, electronic data interchange, inventory management systems, and online transaction processing among others.

E-Commerce - A Complete Guide

© Shutterstock.com | Ellagrin

In this article, we will look at e-commerce basics such as, 1) what is e-commerce?, 2) making the e-commerce decision, 3) designing an e-store, 4) other e-store considerations, and the 5) pros and cons of e-commerce.

WHAT IS E-COMMERCE?

E-commerce can be successfully leveraged by businesses to create the sales aspect of their enterprise. It can be an effective market entry strategy for companies that do not have an established physical retail location.

Categories of E-commerce

There are three categories of e-commerce depending on who is involved in the process. These are:

  • B2B – Business to Business: When both the buyer and the seller are business entities, then their transaction is called business to business commerce. Entities such as manufacturers, traders, retailers come within this category.
  • B2C – Business to Consumer: As in any traditional retail situation, a B2C model involves a business selling to an end user through an electronic medium.
  • C2C – Consumer to Consumer: E-commerce has helped revived a version of the barter system where consumers are able to sell each other items that they own. Online auction sites and advertising portals are examples of this type of e-commerce.

Types of E-commerce Activities

E-commerce activitiesUnder the e-commerce umbrella there exist a variety of activities. These include:

  • Online Shopping: A prevalent example of e-commerce is shopping via the internet. Virtual stores are created online, often boasting more variety of choices than are available at physical stores. There are also stores that exist only online, and benefit from the lack of investment into physical infrastructure.
  • Electronic Payments: Payment systems for utility bills, phone, cable and internet bills, as well as online shopping are an important aspect of e-commerce. Here, security needs to be ensured regarding credit card and personal information.
  • Virtual Auctions: One version of e-commerce is the online auction popularized by eBay. These websites offer customers the benefit of selling to others at the best possible price.
  • Internet Banking: E-commerce has allowed many people to forego frequent visits to the bank and instead perform their regular banking activities online via secure banking services.
  • Online Ticketing: Ticketing for almost all types of activities is now done online. This include travel ticketing such as air travel, bus and trains, as well as tickets for entertainment and sports events. This allows people to avoid queues and just go on the day of the event.

Distribution Modes

As mentioned earlier, there are different ways in which e-commerce retailers offer their services. These can be defined as the pure-click, bricks-and-clicks and click-to-brick retailers.

  • Pure-Click: These are retailers which only sell through an online location and have no physical storefronts.
  • Bricks-and-Clicks: These are retailers that have both physical and virtual store locations.
  • Click-to-Brick: These are retailers who began as online stores but eventually expanded to a physical location as a supplement to their online enterprise.

What is E-Commerce?

MAKING THE E-COMMERCE DECISION

Before deciding to venture into an e-commerce business, it is a good idea to ask some basic questions to help establish readiness. Though this is not an exhaustive list but it does offer a good starting point for entrepreneurs.

The Basic Questions

  • If you have an existing business, does it suffer from internet competition?
  • Do customers ask for your website information?
  • Do competitors or similar products have an online retail presence?

The Logistics Question

  • Do you have the resources to run a shipping operation?
  • Do you have access to a storage and shipping area?
  • If not, can it be acquired for a manageable cost?
  • Will there be a need for additional staff to handle shipping?

Creating a Web Presence

  • Will you use an existing platform to list products or create your own website?
  • If using an existing platform, which model works best for you?
  • If setting up your own platform, does the cost make business sense?
  • Will you hire a professional to develop the website?

Shipping

  • What shipping mode will you use?
  • Do the shipping costs and costs of shipping materials make business sense?
  • Will you offer free shipping and absorb the cost?

DESIGNING AN E-STORE

There are many benefits to creating an independent website that is not part of an existing platform. It allows the business owner more control over the mechanics of the shop as well as its appearance. There is better opportunities to create a unique brand presence.

Develop Your Business Model or Idea

You may be starting from the very beginning or trying to give an online presence to an existing. In any case, it becomes necessary to be clear on what will be sold, how it will be sold, who the customer will be and what the mechanics of the operation will be.

  • Identify the product: Some products work well online as the decision to buy them can be made by viewing them online and using the information provided. Others may need to be examined in person before a transaction can happen. In any case, details such as shipping, inventory storage, product variety and the mechanics of creating the product to meet demand are some key areas to clarify.
  • Identify a Niche: Even if you are clear about the product you will sell and how it will be sold, it is important to be able to differentiate it from others in the market. The customer needs to have an incentive to choose your product from among the many others available in the market, both online and offline. Perhaps you can offer better product quality than the others. Or the product can offer a unique take on solving a problem. There may be special expertise than you can share or you can have a seamless buying experience.
  • Test Market: It is a good idea to sell the product at a small store on an existing platform such as ETSY or ebay to gauge the level of enthusiasm and the overall response to the product. This will also help understand who is buying the product and how much are they willing to pay.
  • Create a Sound Business Plan: With the first few steps complete, it is imperative to create a thorough business plan to ensure that all the steps are planned in detail. It will also help convince possible investors that you are prepared and ready. Important elements should be the production costs, details of production, shipping costs and structure, taxes, labor costs, and e-store related costs.

Acquire Website Basics

Before a website can be designed, there is groundwork to be laid out. This includes decisions on the following areas:

  • A Domain Name
  • A Web Host
  • A dedicated IP Address
  • A Private SSL Certificate
  • A Shopping Cart Script
  • A Payment Gateway (PayPal, Checkout etc)

Setup Website

Once the basics are setup, it is now time to develop the website and its customer interface. To begin, it is a good idea to finalize homepages as well as other static pages such as information about the company, contact pages and FAQ sections. For design, it may be a good idea to hire a web designer to ensure that the product is showcased on the best possible way and that the customers find it easy to navigate and order.

Though it is often tempting to make a website too catchy, flashy and complicated, it is a better idea to keep it clean and simple. The easier it is to navigate and find the right information, the higher the likelihood of a browsing customer turning into a paying one. There will also be more chances of repeat customers. The website should have cohesive fonts and pleasing colors and very few clicks necessary to get to checkout.

It is also a good idea to have an option for customers to sign up for alerts and offers. This creates a link to the customers and allows the business to keep itself visible.

Setup E-commerce Software and Merchant Account

This step is necessary in order to allow customers to securely make purchases after viewing products online. The chosen software will save customer information, both personal and financial. In some cases, this same software can also be used to send emails to customers. Whichever software is chosen will impact user experience so it is a good idea to carefully research this step.

There will also need to be an account setup with a bank to allow customers to use credit cards. Banks are often an expensive option and a less pricey alternative is a payment gateway such as PayPal.

Setup a Maintenance Schedule

It is necessary to monitor the online shop and its reports to keep an eye on how things are going. There may be a need to update software at the backend to keep up with improvements as well as continue to improve user experience and fix bugs.

Building an E-Commerce Business – Startups Uncensored 11

OTHER IMPORTANT E-STORE CONSIDERATIONS

Does Your Website need a Blog?

Often, websites are accompanied by a blog. Blogs should only be undertaken however, if there is enough time to update it regularly with material of interest and relevance. There are benefits to such an arrangement including:

  • A Channel of Communication: A blog will allow a place where positive conversation can be initiated with current and potential clients. It allows an insight into consumer thought and trends.
  • Credibility: A blog can allow an entrepreneur a platform to showcase their knowledge and expertise and therefore create credibility.
  • A Sense of Community: Interaction through a blog can create a sense of community within customers which is something people cherish.
  • Human Element: Often, people respond better to brands when they can place a face alongside. Blogging allows a personal repertoire to be established and a personal brand narrative to be created.
  • Better Search Engine Ranking: Blogs have a better chance of showing up during web searches than plain e-commerce sites. The original content in a blog is more likely to be picked up than similar supplier data that is usually found on e-stores.

Search Engine Optimization

SEO - e-commerce

© Flickr | Paloma Gómez

Strategies and tactics to increase website traffic are known as search engine optimization or SEO. SEO helps a website get placed higher in a search engine’s results page. SEO helps a website become searchable by using both technical tasks to allow search engines to find and index the site for the right keywords and marketing tasks to make the site appealing.

  • Monitor Rankings: Use tools to keep an eye on your current rankings.
  • Keywords: Appropriate keywords should be used in all areas of the website including headings, content, website address, and images. In fact, describing images are a great SEO tactic. Keywords should be considered search terms but be wary of putting in too many of them. This may flag you as a spammer and the website could be ignored for keyword-stuffing.
  • Link Back to Yourself: Linking back to own pages or archives help SEO activities as the more pages that point to a page, the higher the chances of it showing up in initial search results.
  • Sitemaps: Sitemaps that list all the content inside a website make it easy for search engines to scan and index the website, this increasing chances of search result success.
  • Relevant URLs: If the right keywords appear in the URLs, it makes the website more search engine friendly.
  • Avoid Flash: Although Flash looks good, it does not add to search engine friendliness.
  • Describe Images: Images cannot be searched. So if there are words in an image or it is relevant to keywords, it will not be seen by search engines. A good idea to fix this problem is to add image descriptions, and try to use relevant words in them.
  • Keep Content Fresh: The more updated the content is the more chances of it pulling in customers. Website blogs can help with this aspect.
  • Social Media: If links to content on the website are shared repeatedly on different social media outlets, it works towards increasing search engine results and customer views.
  • Link to Others: By developing relationships with relevant websites and blogs, you can link to them thereby creating more visibility. This should be done with relevant sites which enjoy good reputations otherwise this tactic may end up doing more harm than good.

E-COMMERCE PROS AND CONS

There are some clear advantages and disadvantages of using e-commerce to sell your product. There are also some less clear ones that can serve as both an advantage and disadvantage. These pros and cons are listed below.

Advantages of E-commerce

  • There is no need to wait in lines.
  • There is ease of access to stores that may be further away or even overseas. This can be especially useful for consumers in a rural locations.
  • There is no need to set up and invest in a physical store.
  • There are many options available, both in terms of competitors and variety of products offered by each of them.
  • There is no store timing restrictions and customers can shop 24 hours a day.
  • Internet commerce has allowed customers various platforms to sell to each other which is a valuable benefit.
  • In the case of digital items, the purchase is instant and there is no need to wait for delivery.
  • There is unlimited space to sell as many items as a storage locations can hold. This means more variety than a physical store location.

Disadvantages of E-commerce

  • There needs to be relatively fast and reliable internet service.
  • There also need to be a device that can allow access to the store such as a smartphone or a laptop.
  • The shopping experience can be somewhat impersonal and clinical.
  • There is no way to experience a product before purchase. The luxury of touching and feeling the item is taken away.
  • There is the ever present threat of credit card theft and fraud.
  • In the case of physical goods, the customer has to wait to receive their purchased items.
  • This is often confusion in terms of regulations as taxation as the buyer and seller may be in different locations that have different taxation mechanisms.

Both Advantage and Disadvantage

  • Easily available coupons and deals are both a pro and a con as this becomes a pro and an expectation by the customer and it draws them back again. On the other hand, it is a con because this comes at a cost to the seller.
  • Easy price comparisons are a pro and a con because this can either draw a customer to the business or filter the business out in a price based search.

In today’s world, there is usually no choice for a business when it comes to online presence. With demanding customers and increased competition, online stores allow businesses to reach new customers in faraway locations and in many cases save costs on physical storefronts.

The Future Of Ecommerce | Ask A VC

Image credit: Flickr | Paloma Gómez under Attribution-ShareAlike 2.0 Generic.

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