What is e-commerce? Thanks to new technologies and new advances in digital business, you may have heard about what e-commerce is or what the exact meaning of this term is.
Today, this system is very popular. However, despite its fame, many people are not sure what exactly it’s.
Hence, the aim of this article is to explain what e-commerce is. We will explain, its difference with other similar terms, its types, and the advantages it has over traditional commerce.
What is e-commerce?
E-commerce or electronic commerce is, according to the definition of different websites, a system of buying – selling products and services.
Likewise, it uses the Internet as the main means of exchange.
So, in conclusion, it’s a business that manages collections and payments through electronic means.
Differences between e-commerce and e-business
People often confuse the concept of e-commerce with that of e-business when, in reality, they have nothing to do with each other.
This system means the sale of goods and services between a buyer and a seller.
On the other hand.
e-business refers to the entire process that we must carry out to manage an online business.
For example, within e-business, there are:
The concept of e-business is larger compared to this system.
In fact, e-commerce is part of it as it’s a type of business model.
Main differences between e-commerce and marketplace
The platform where the web is hosted:
One of the main differences between this system and the marketplace is that the former has its own domain for its website.
In other words, the seller can create a custom name.
However, we recommend that this name is of the brand itself.
Since a marketplace displays many products from different companies at the same time, the name of it will be generic.
Thus, it won’t be related to our brand.
While this system allows the manager to change the design of their online store to their liking, the marketplace does not.
A point in favor of this system is that it can make the online store follow the same patterns as the brand, in terms of colors, fonts, and images.
Thus, we can create personalized content for our target audience.
The main element that we’re sure will help you to make a choice between this system and a marketplace is the visibility. This visibility, depending on how high or low it’s, is what will help you gain a great position on Google’s search results.
In the marketplace’s case, its visibility is higher than this system.
This is because marketplaces spend money on more publicity and offer more products and seller offers.
The appearance of competition:
For a user who doesn’t know exactly what to buy, a marketplace is more practical since it offers them endless options.
However, this isn’t an advantage for sellers, as a larger catalog means more competition.
In the same way, in a marketplace, the attention time of visitors to the same product will decrease.
In e-commerce, we don’t find this problem, since the user is only browsing your website.
In this system, when creating an online store from scratch, you have more initial purchase than a marketplace.
This is because the marketplace has an established platform.
Earnings per sale:
Another difference between e-commerce and the marketplace is what the seller earns for each purchase.
In the marketplace’s case, the owner of the page takes a commission per sale.
However, in this system, the seller takes all the profits since there are no people in between.
B2B / B2C relationship
This system uses a B2C business because the only intention is to sell its products.
The marketplace, besides being an online store, allows the establishment of business between the companies involved.
This is because it uses a B2B and B2C electronic commerce.
Responsibility for shipping:
The brand is the party responsible for the shipping, and warranty of the product. This is the same for both the marketplace and this system.
Forms of electronic commerce
In case you didn’t know, there’s a large world within this system where we can find many different types of models.
We can classify them into two:
- The function of who sells and who buys.
- Different “models” of this system.
According to the commercial profile
Each business has a client to which they direct it, and based on this.
We can classify it into:
- B2B (Business-to-Busines): Companies whose clients are other companies or organizations.
For example, a materials store that targets interior designers or architects.
- B2C (Business-to-Consumer):
Companies that sell directly to the final consumers of the product or service.
It’s one of the most common and there are thousands of examples.
Of stores for fashion, shoes, electronics, and more.
- C2B (Consumer-to-Business):
Entries in that consumers publish a product or service and companies bid for them.
They are the classic freelance job entries such as,
Freelancer, Twago, Nubelo, or Adtriboo.
- C2C (Consumer-to-Consumer): These are those companies that facilitate the sale of products from some consumers to others.
The clearest example would be eBay, Wallapop, or any other second-hand sales website.
Besides these forms of electronic commerce, there are other less popular ones such as G2C (Government-to-Consumer), C2G (Consumer-to-Government), or B2E (Business-to-Employer).
As you can see, e-commerce goes far beyond just being a simple buying and selling of products in a store.
According to the business model
The online sector is not yet mature.
Technological changes are constant and the new online businesses.
That arise adapt to the new needs that come with them.
Depending on how the income is generated or how the exchange between buyer and seller is carried out, we can divide them into:
- Online store with its own products: This the first thing that you could of think of when talking about this system. It has the same characteristics as a physical store but in an online version. For example Bebitus.com
- Dropshipping: At first sight, the consumer might think that everything is the same as normal e-commerce. The difference is that the seller does not send the product, but it’s a third party that does.
- Affiliate e-commerce: A delay in the purchase process is affiliate businesses. Here, the store not only does not send the product, but it also doesn’t do the closing of the sale on its platform. What it does is refer the customer to another store, which pays a commission when the sale is confirmed. Affiliations with Amazon are very common. Example: Gearpatrol.com
- Membership: This type of e-commerce looks for recurring purchases. The way to achieve this is with a periodical subscription, it can be weekly, monthly, or bi-monthly. These types of memberships are becoming more popular with the so-called “Mystery boxes”.
What does it consist of?
This is a box that is shipped each month with products, for example, a monthly box of craft beers.
Instead of selling the product only once, it offers the possibility of receiving it with a certain frequency.
For example craftbeerclub.com
- Marketplace: A marketplace is a store of stores.
It’s a website where different sellers offer their products of one or more themes. Amazon is also an example of a marketplace.
Although it also works as e-commerce, anyone can sell on this platform for a succulent commission for Mr. Bezos.
- Services: An e-commerce business doesn’t just have to be about selling items.
Training, consulting, mentoring, or any exchange of time for money is a very viable option to start without risk.
As we have mentioned, advances in this sector happen almost every day. This means that new types of this system are constantly appearing.
Advantages of E-commerce
Next, we will explain the advantages of this incredible business technique:
- More customers: In no store, local, or company with offices in several cities you can achieve the reach of this system.
The ability to buy and sell from anywhere in the world widens the target audience and allows us to get more customers.
- No hours: This system does not have hours, while there are rarely stores or companies that work 24 hours a day.
The website is open to the public all day and the customer can buy what they want whenever they want. If your business is not on the web, it’s time to think about it.
- Fewer costs: Knowing that you won’t need to pay a physical place, it lowers costs compared to traditional business.
- More profit margin: The reduction in costs and the increase in the customer market mean that, even by lowering prices, we can achieve a higher margin than with a traditional establishment. Thus, you will sell more which means more money for you.
- Scalability: This means that you can sell to one or a thousand people at the same time.
In a physical business, there is always a limit to the number of clients that can be served at the same time.
While in e-commerce the limits set by its ability to attract visitors.
While this system does have great advantages.
It’s important to say that not everything is rosy.
Because of this, it also has its cons which we will show you:
More than disadvantages or cons, we can call them “challenges”. We know that everything has its positive side and not so positive, but don’t look at it as a negative.
Everything has a solution and this can work so you’re aware of what this system can mean.
Lack of confidence:
The payment method has advanced a lot, to the point where it has become even more secure than those of a physical business.
However, many people still think that this is an unsafe transaction.
This results in mistrust. You can help solve it with an SSL certificate (HTTPS) that encrypts the transferred information, and with other seals that convey that much-needed trust.
Products or services “that cannot be seen or touched”:
We are all buyers and at some point, we have a sense distrust when making an investment.
One way to achieve confidence is to see and touch the product with our own hands. That intangible feeling is lost in e-commerce.
How can we solve this?
The need to have Internet access:
We might take it for granted, but we must highlight that to sell through the Internet we will need an Internet connection.
Forgive the repetition.
We will also need a digital device such as a computer.
Most people can do it, but in certain sectors, where the target audience is older or less “technological”, this might cause inconveniences for them.
Any undertaking, whether offline or online, implies entering unknown topics.
With e-commerce, the technology part requires minimum technical knowledge that not everyone has, and this is normal.
The best way to solve it’s by assigning that part that you or the person in charge don’t understand.
Remember that this has an added cost.
- Competition: the possibility of economic entry to create e-commerce is not as high as a physical business. That means more competition. Because of this, we recommend that you do a market study and from it, create strategies.
- Time to get results: When a physical business opens its doors for the first time, it’s already exposing itself to the customers that pass by.
In an online business, getting exposure is more complicated than you might think.
You can have a great product and a great platform, but if you don’t work to gain visibility, no one will ever see it.
Steps to create an e-commerce
Now that we know what this system comprises, its pros, and its remains, we will now explain how to create one:
This is one of the first questions you must ask yourself. Do you already have an idea? Or do you have to start from scratch?
If you aren’t sure, there are several techniques to detect potential opportunities.
They all consist of opening the mind and being attentive to observe, from a business point of view, almost every situation in your day-to-day.
If you go down the street, look at what physical businesses you could take to the Internet.
Think about your needs and those of the surrounding people:
- What do people wear every day? By what things do they usually complain?
A way to answer those questions is to go outside and watch people.
If you just sit in a square or shopping center, you will understand the current fashion trends and what people will buy.
See what people are wearing and how they behave. Observe and write every idea that comes to mind.
Always think of solving problems for people and keep in mind that your business mind is like a muscle to be trained.
But the most important thing is not to sell products, is about resolving problems.
Analysis of the idea
The second step involves refining the initial ideas until you have one or a few.
These are some e-commerce ideas that we will analyze:
- Value proposition: What value does it bring? What need does it satisfy?
- Market: Is it a new product? Is it a product that already exists, but with new features?
- Competition: Who is currently satisfying that need that you have seen in your potential clients? Could you improve it?
- Demand: Is that problem you are going to solve widespread enough that there is enough demand?
- Difficulties: You can make a list of challenges that will arise, such as technical difficulties, competition, and threats.
A good way to analyze an idea is with a basic entrepreneurship tool: the SWOT. The SWOT is a matrix that, from an internal and external point of view, analyzes the Strengths, Weaknesses, Opportunities, and Threats of your idea.
About 300 new companies are registered every day, but most go to the market without a set strategy. We assure you that knowing where you want to go and how you want to do it, will ensure the success of your e-commerce.
You can ask yourself the following questions such as:
- How will you meet your ideal customer?
- Why would they prefer the competition?
- What defines your customers? What common characteristics does your business have?
- Will you be cheaper?
- What goals does your business have? How are you going to create it?
To define your e-commerce strategy, you can use the Canvas or another business model canvas.
This template allows you to quickly and easily summarize the keys to a business. Taking the time to fill in your 9 boxes will help you figure out what is important to your idea and how to carry it out.
So far you have only set the general ideas and objectives.
In this fourth phase, you must be more objective by defining specific actions aligned with the established strategy.
We will give you some tips:
- Name: This is one of the biggest concerns at the beginning. We recommend that you follow some basic guidelines. Some of them can be keeping it short, easy to pronounce, having the .com domain, and the main social media platforms available.
- Hosting: An e-commerce business needs a server to host.
- Corporate identity: Here, it not only refers to the colors or the logo but also to the values to be sent. This is the true essence of the brand.
- Website: Who will build the website? If you are not going to do it, you will need someone to do it or advise you correctly. Evaluate the different options based on your business model: PrestaShop, WordPress, and Shopify.
- Visibility: Although this is the last point, it does not mean that it’s the least important. This is actually the most important and most forgotten part at the same time.
Most entrepreneurs strive to have a good product and a nice website where to sell it, but they don’t think about how customers will get to it.
Criteria to remember to enter the world of digital commerce
The first thing to keep in mind to implement a digital commerce platform is to achieve a unique online shopping experience for the customer.
To achieve this, several aspects must be implemented properly.
You must have a reliable and efficient management system that takes care of online purchases and sales, distribution, product information, and digital marketing.
This system should cover:
- Distribution: Inventory management, warehouse, orders, packaging, and transportation to the destination.
- Merchandising: Everything related to the virtual store, catalogs, prices, promotions, and discounts.
- Marketing: Advertising, sales guidelines, and target markets, as well as the analysis of information and communication channels.
- Finance: Sales or loss report and accounting books.
- Technical support: Administration and maintenance of the technological platform and system database.
- Customer Support. It’s essential to communicate with customers about any aspect of the online sales and purchasing process.
Our recommendations are thought out in every detail to make you and your ideal clients happy.
If you are ready to create your store, it’s important to highlight the importance of hiring a company to carry out this management.
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