For consumers, professionals, and the large category of people who are both, eCommerce websites represent an increasingly important part of the business and shopping landscape. Across industries, it’s become a normal part of how people make purchases and how companies do business.
eCommerce is a vast category. This post will help you understand what counts as eCommerce, and the many types of businesses the word contains.
What is eCommerce?
eCommerce is the buying and selling of goods and services online. The main root of the word “commerce” is defined as the exchange of goods and services between businesses, people, or entities. Add an e to the beginning of the word, and it simply refers to the same thing when it’s done via the web.
Any time you make a purchase online, you’re participating in eCommerce. And if you sell items or services through a website, then you have an eCommerce business.
The impact of eCommerce on retail can’t be understated. Worldwide eCommerce sales are expected to reach $4.9 trillion by 2021, growing 265%. The eCommerce label includes giants like Amazon and retail chains that also have an online store, like Walmart and Target. But it also includes hundreds of smaller businesses that have built online stores on their own websites or set up shop on sites like Etsy.
There’s not one right way to do eCommerce. And in recent years, building an eCommerce site has gotten easier and more affordable—no coding knowledge now required. More savvy business people are becoming eCommerce entrepreneurs and carving out profitable spaces in the vast landscape of online business.
How eCommerce Stores Work
Building an eCommerce website is similar to starting a business of any kind in a number of key ways—you need a business plan, a marketing strategy, and a product or service your audience genuinely wants. But there are a few specific features that are absolutely essential to any eCommerce business.
The core component of any eCommerce store is its website. Without a physical storefront, an eCommerce website is the main way consumers will come to know your brand.
It’s the primary place they’ll go to learn about the products you sell and how you fit into the larger industry. And the experience they have on the site—how easy it is to navigate, find what they need, and check out—will heavily influence what they think of your brand.
In short, you don’t just need a website. You need a really good website. That means one that’s:
- Easy to use
- Easy to find
- Attractive—nothing too cluttered or with clashing colors
- Friendly for mobile devices
If a consumer lands on your website and it looks like it was made in 1990 or thrown together by someone who did the bare minimum, they won’t trust that your business is legit. And your website is the main opportunity you have to convince them why you’re the best option for the products they want, so you have to do a good job selling yourself through your copy.
Web hosting is a necessary service for getting your site online. Every website you see around the web is hosted somewhere. Most of them pay a web hosting company for the service.
Thankfully, this step is easy. Signing up for a web hosting plan is quick, and shared plans for business websites start at around $6 a month.
The domain name is your address on the web. It’s what you’d type into a browser to bring up a website. In most cases, you’ll want a domain name that matches the name of your eCommerce store.
But if you want to grab the .com, your available options are limited. Most of the obvious choices are taken and you may need to get creative to find something that works for you. It’s best to consider available domain name options before you name your eCommerce business, so you choose one you can get.
eCommerce websites require a special set of features to allow people to make purchases. eCommerce software is how online businesses are able to provide:
- A shopping cart
- Secure payment processing
- A check out process
- Customer account creation
- Wish lists
- Customized recommendations
- Discount codes
A good eCommerce software makes setting up a lot of the features you need simple, and lets you provide customers with options that improve their shopping experience.
News about data breaches has become a regular part of life. But even if it’s a common occurrence, eCommerce website owners need to do everything in their power to make sure your website doesn’t become a target.
eCommerce websites have an obligation to customers to invest in security features to protect the personal and financial information you collect through the site.
Shipping and returns
Packaging and shipping items is a big part of the work of running an online business. And the cost of deliveries is a significant expense you have to account for.
You need to figure out whether you’ll cover the cost of shipping (and build the expense into your pricing), or if you’ll pass it along to customers and risk losing some purchases in the process.
Once you’ve figured that out, you need to make the same calculations in deciding how to handle returns. Many customers expect a seamless return experience at no, or at least minimal, cost to themselves. Having to pay for return shipping could make them less likely to purchase from you again, but shouldering the cost will affect your profits.
It’s a tricky balance to figure out, but one every eCommerce business that sells physical products faces.
Customers are increasingly expressing discomfort around online privacy issues. And governments are responding with regulations around how businesses collect and use data.
Ecommerce Marketing is how your customers learn you exist, and where you start to make the case for why they should buy from you.
For eCommerce businesses in online marketplaces, most—if not all—of your marketing will happen in online channels. You’ll need to explore search engine optimization (SEO), social media, pay-per-click advertising (PPC) , content marketing, and possibly tactics like affiliate marketing.
Marketing’s a big part of the job of running a successful online store. How successful you are is often directly related to how much you invest in eCommerce marketing.
7 Types of eCommerce Businesses
Those are the basics that pretty much every eCommerce business will have in common. But beyond that, there’s a ton of variety in what online businesses look like. These are seven of the most common types of eCommerce businesses (with some overlap between them).
Not sure which one is right for you? Read on for the benefits of eCommerce businesses.
1. Online retail
By now, most of the big retail brands also have thriving eCommerce stores. While plenty of people still like the experience of shopping in a store over online marketplaces, offering an online option in addition is a way to capture even more customers. And it keeps retail businesses competitive with eCommerce brands entering their space.
A quaint little bookshop now has to compete with the convenience of Amazon, no matter how much people enjoy the ambiance of the store. By setting up an online shop to supplement the physical store, they become just a little more competitive.
The same thing applies on a different scale for companies like Home Depot and Best Buy. They regain some of the customers they may have otherwise lost to online stores by letting customers choose between the store or website.
Dropshipping is a type of eCommerce in which a business owner takes on the work of creating and managing an online store, but outsources the work of storing and shipping products to a third party.
For entrepreneurs that want a simplified version of the experience of running an eCommerce store, dropshipping takes some of the work off your plate.
There are pluses and minuses to dropshipping though. You lose some control over the process, and if customers are unhappy with items they receive or the shipping experience, you’ll still be held accountable.
And dropshipping is competitive. Because it has a lower barrier to entry, it’s the option a lot of new business owners choose. You’ll have a harder time finding products to sell that aren’t already offered by a lot of other online stores, as well as finding a way to differentiate your brand so people choose you.
Nonetheless, if you manage a dropshipping business well and get your website and marketing right, it can be a profitable option.
Wholesale businesses work directly with the manufacturers that create products, then sell them to retailers. Wholesalers can skip some of the marketing work required to reach a large number of consumers.
If you prefer to focus more on the product side of things—dealing with manufacturers and managing the supply chain process—it may be a good option.
While wholesalers do still need to reach and manage their customers—the businesses that sell products to consumers—it’s a different kind of process than selling directly to the end consumer. You can get by with fewer customers, because they’ll buy larger quantities.
4. Digital products
Most eCommerce sites sell physical items, but it’s also possible to start an eCommerce store that focuses on digital items. That saves you the trouble of shipping costs and having to worry about stocking and storing inventory.
One of the most common categories of digital products is software—SaaS (Software-as-a-Service) is a particularly significant part of the eCommerce landscape.
You could also build an eCommerce business on information products, such as courses, ebooks, and tutorials. Infopreneurs have some of the lowest cost of any new business owners since you’re not dealing with real estate or product costs. But it can be challenging to find a niche for information products that hasn’t already been served.
And in the era of content marketing, in many topic areas, consumers have ample free resources to choose from.
5. Digital services
Many people think of service-based businesses as requiring some in-person component—like plumbers or cleaners that must come to your home or place of business. But the internet has opened up room for a lot of service-based businesses that can function entirely online.
From doctors offering telemedicine to business coaches to marketing consultants—a significant number of professions can transition to providing their help and expertise via emails, video calls, and live chat channels.
6. Subscription businesses
A subscription business sells a product that consumers have a recurring need for. That could be consumable necessities, like toiletries and food. It could be fun subscription boxes that mix and match products based on what categories people are interested in, like different snacks or beauty items. Or it could be digital products or services people need on a continual basis, like web hosting or software products.
If you have the right kind of product for a subscription business model to make sense, it’s a smart choice.
Subscriptions mean ongoing profits. You end up making more for each customer who signs up (assuming they like you enough to stick around), and you can more effectively predict future income.
But if you do go this route, you have to provide a high-quality product and top-notch customer service, because it only works if your customers are happy enough to continue their subscription for the long term. Subscriptions are great for measuring customer loyalty so that you can develop a customer retention strategy.
7. Businesses on online marketplaces
For people not quite ready to commit to building out a full eCommerce store on their own, you can dip your toes into eCommerce entrepreneurship on one of the online marketplaces that’s already popular. The biggest options are:
- Etsy – designed for artists and craftspeople
- Amazon – mostly for small-scale online retailers or those selling used goods
- eBay – the marketplace for used items
Using an online marketplace to sell your products has pros and cons. You can get started more easily, and reach a large audience faster since they’ve already done the marketing to get customers to the site for you. But they take a cut of what you make, and are competitive because a large number of online retailers use them for buying and selling as well.
It is possible to build an online store and also list your products on an online marketplace, if you want the best of both worlds.
Get Started with eCommerce
If you want to take advantage of the vast world of eCommerce, you have a lot of options. Clarify what kind of business you want to run and craft a business plan to guide you in your efforts.
Once you’re ready to build a website, HostGator’s website builder has eCommerce themes and features that can make that step much easier. It includes web hosting, a SSL certificate, and all the eCommerce functionality you could need—like the ability to manage inventory, process payments, and create coupons. Get started building your online store today.
Kristen Hicks is an Austin-based freelance content writer and lifelong learner with an ongoing curiosity to learn new things. She uses that curiosity, combined with her experience as a freelance business owner, to write about subjects valuable to small business owners on the HostGator blog. You can find her on Twitter at @atxcopywriter.