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.
Definition of e-commerce
When it comes to the definition of e-commerce, many websites state that it’s a system of buying and selling products and services.
This system, also known as electronic commerce, uses the internet as its main means of exchange.
In short, this is a business that deals with collections and payments through electronic means.
Electronic commerce, also known as e-commerce, began in 1920 in the United States with catalog sales. These catalogs started the first way to buy without seeing the physical product first. The way they worked was through photos and illustrations of the products. This made it easy to sell in rural areas throughout the country.
By 1980, television gave these catalogs a modern touch through the creation of “telesales” or infomercials. These highlighted with great detail the main characteristics of the product.
To buy the product, all the client had to do was to make a call and then pay with their credit card. During the 90s, with the Internet and the web, electronic commerce grew like never before. This later gave birth to sites like eBay and Amazon.
Key points you should know
- 1997: The Dell Company exceeded a million dollars in online sales.
- 2002: eBay bought PayPal and became popular as “the fastest and safest way to send money, make payments online, receive money, or set up a merchant account.”
- 2007: Apple launched the iPhone, and a year later Google does the same with its version on Android.
- 2011: 8 out of 10 people own a cell phone.
- 2020 – At least 2.05 billion people worldwide were estimated to become digital shoppers.
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.
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.
On the other hand, since a marketplace displays many products from different companies at the same time, the name of it will be generic. Thus, it won’t relate to your brand.
While e-commerce allows the manager to modify the design of his online store to his 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 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.
On the contrary, in e-commerce, we don’t find this problem, since the user is only browsing your website.
In e-commerce, when you create an online store from scratch, you spend more money 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.
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.
They can be classified into two:
- The function of who sells and who buys.
- Different “models” of this system.
According to the commercial profile
Each business has a type of client to which it is directed, and based on this, it is classified into:
We can classify it into:
- B2B (Business-to-Busines): These are companies whose clients are other companies or businesses. For example, a building material store whose target audience are interior designers or architects.
- B2C (Business-to-Consumer):
These are companies that sell straight to the final consumers of the product or service.
It’s one of the most common and there are thousands of examples of this.
For example, fashion stores, shoes, electronics, and more.
- C2B (Consumer-to-Business):
Entries in which consumers post a product or service and companies raise 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 new online businesses.
That arises to 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: The first thing that will come to mind when talking about e-commerce. The same characteristics as a physical store, but in an online version.
- Dropshipping: At first sight, the consumer might think that everything is the same as normal e-commerce. The difference is that the seller doesn’t send the product, instead, it’s a third party that does it.
- Affiliate e-commerce: A delay in the purchase process are affiliate businesses. In this case, the store not only does not send the product but also the closing of the sale is not done on its platform. What it does is refer the customer to another store, which pays you a commission when the sale is confirmed. Affiliations with Amazon are very common.
- Membership: This type of e-commerce looks for regular purchases. For this, it offers a periodic subscription. This can be weekly, monthly, or bi-monthly. This type of membership is becoming 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 is 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:
In no store, local, or company with offices in several cities can you achieve the reach of e-commerce.
The ability to buy and sell from anywhere in the world broadens the target audience and allows for more customers.
E-commerce doesn’t 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.
With the fact of not needing a physical establishment, it reduces costs compared to the traditional business.
Higher profit margin
The reduction in costs and the increase in the customer market mean that, even by lowering prices, you can achieve a higher margin than with a traditional establishment.
Thus, you will sell more which means more money for you.
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 customers it can serve at the same time, while in e-commerce the limit is set by its ability to attract visitors.
Although e-commerce indeed has great advantages, it is important to say that not everything is rosy and it also has its cons, which we will explain below:
More than disadvantages or cons, we can call them “challenges”. We know that everything has its positive and not so positive part, but do not see it as a negative part, since everything has a solution and it is only so that you are aware of what E-commerce can mean.
Lack of trust
Although the payment space has advanced so much that they are now calmly confident that, if they are secure or more than a physical business, many people still think that there is less security in the economic transaction.
This results in mistrust. Of course, you can help solve it with an SSL certificate (HTTPS) that encrypts the transferred information and with other stamps that convey that much-needed confidence.
Products or services “that can neither be seen nor touched”:
We are all buyers and at some point, we have a sense of 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 it be solved?
The need for 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 type of undertaking, whether offline or online, involves getting into unknown topics.
In the case of e-commerce, the technology part needs a minimum technical knowledge that not everyone has, and it is normal.
The best way to solve it’s by delegating 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 are not very clear, there are several techniques to detect potential opportunities.
All of them are based on opening the mind and being attentive to observe from an entrepreneurial 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 people around you: What do people use every day? What things do they usually complain about?
One way to answer those questions is to go outside and observe people.
If you just sit in a square or shopping center, you will understand the fashion of the moment and what people are willing to buy. Look at what people are wearing and how they behave. Observe and write down every idea that comes to mind.
Always think about solving problems for people and keep in mind that your entrepreneurial mind is like a muscle to be trained. But, the most important thing is not to sell products, it is about solving problems.
Analysis of the idea
The second step refers to 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: SWOT analysis.
SWOT analysis 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 its 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’ll give some tips for this
- Name: it is one of the biggest concerns at the beginning. We recommend that you follow some basic guidelines. Such as keeping it short, keeping it short, easy to pronounce, having the .com domain, and the main social media platforms.
- 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 web?
- 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 doesn’t mean that it is the least important. In fact, this is the most important and most forgotten part at the same time. Most entrepreneurs strive to have a good product and a nice website to sell it to, but they don’t think about how customers will get there.
Standards to take into account to enter the world of digital commerce
Your main goal when creating your digital commerce platform should be to offer a unique online shopping experience to your client. For this, there are many factors that you must apply as best as possible.
Besides, you must have a trusty and efficient management system. This will allow you to take care of online purchases, 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 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.
In the same way, we invite you to follow us on our social media and to subscribe to our monthly newsletter.
How much does it cost to start e-commerce?
Many businesses are afraid of starting e-commerce because they don’t know the costs of an ideal platform for it. However, the first thing you must take into account is the size of your project and what special qualities you want your online store to have.
Keep in mind that e-commerce involves the creation of a lot of new pages, with a fairly high degree of customization. The price of e-commerce will depend on these circumstances:
- Hosting and domain.
- Web design (it can be personalized or under template which greatly influences the final price).
- Creation of an ad hoc SEO strategy to generate traffic to your website.
- The number of products you are going to sell.
- How many pages are you going to need (depending on product categories, etc)?
- The maintenance and updating of your store.
- SEO and Digital Marketing.
- How many payment methods do you want to integrate?
BluCactus, your ally in Digital marketing
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