The term “e-commerce” simply means the sale of goods or services on the internet. In its most basic form, e-commerce involves electronically transferring funds and data between 2 or more parties. This form of business has evolved quite a bit since its beginnings in the electronic data interchange of the 1960s and the inception of online shopping in the 1990s.
In recent years, e-commerce has enjoyed a massive boost from the rise of smartphones, which allow consumers to shop from nearly anywhere. In fact, business experts predicted that mobile e-commerce alone would surpass $284 billion in 2020.
Much like a traditional physical retail store, e-commerce websites allow consumers and businesses to buy and sell to one another on a designated platform. The main difference between e-commerce and physical commerce, however, is that e-commerce transactions occur entirely over the internet rather than at a brick-and-mortar location.
The scope of e-commerce is vast, but the types of sites that host electronic transactions can be broken down according to the parties involved.
The digital component of e-commerce allows sellers to offer a wide range of products, some of which wouldn’t be possible to sell in a physical location.
Physical goods
Items such as clothing, furniture, food, or supplies are tangible products that can be stored in a warehouse. Sellers display goods on their e-commerce website, where consumers can like, save, or purchase them. Upon purchase, the business ships the item to the customer.
Services
E-commerce sites are also a popular way to sell services, like consultations, maintenance, tutoring, lessons, and more. Whether you want to learn to code a website or you’re looking for an experienced trainer to help fix your dog’s troublesome barking habit, there’s no shortage of assistance available online.
Digital products
Digital products—like online courses, software, podcasts, music, and e-books—are becoming increasingly popular on e-commerce sites as well. The rise of digital products has opened up a new way to learn skills on demand.
When it comes to selling goods and services online, there are a few basic functions every e-commerce site should include.
If you’re running a business that sells a product, your e-commerce site must be able to accept orders from your customers. This process can be more complex than you might expect. For each order, your site will need to:
There should be a seamless transition from your website to a payment gateway. Typically, payment gateways allow customers to:
Once your site has handled the order and payment process for a customer, the next step is delivery.
As a seller, your goal is to ensure that customers receive the right product on time and in perfect condition. To help this process along, you can either handle shipping and logistics yourself or use a third-party provider. No matter which method you choose, your website should be able to initiate the process accurately and consistently.
Your site will also need to have a process in place for accepting returned items. Also known as reverse logistics, this process is just as important as shipping outbound goods.
Inevitably, your customers will need to communicate with you about their order or experience. They may need to correct their personal information, make an exchange, or return a faulty product. Your website is where these customers will turn to get in touch with you. The easier you make it for customers to connect—with a contact form or chat service, for example—the easier it will be to solve their problems quickly.
Tracking e-commerce metrics can help you measure success, showing you what’s working for your customers and what might need some improvement. Most e-commerce platforms have some built-in data tracking, but for truly robust metrics, you’ll want to connect your website to an analytics platform, such as Google Analytics.
Your website traffic is a straightforward measurement of visitors to your site and the number of people who buy something while they’re there. Traffic often paints a clear picture of the effectiveness of your latest marketing efforts.
Your bounce rate is the percentage of visitors who leave your site after viewing only one page or interacting with just one area of your site. If you see a high bounce rate, consumers probably aren’t making many purchases, so it’s important to figure out why they’re leaving. The problem may come down to marketing, pricing, the layout of your site, or a host of other factors.
The visitor conversion rate captures the percentage of website visitors who become paying customers. Conversion rates are important because they show how effectively you’re able to persuade folks to make a purchase. When you have a low conversion rate, customers are letting you know that something is missing from your business or your marketing.
Just like in a physical store, an abandoned cart in e-commerce is one that has been filled and deserted by the shopper. While abandoned carts can be frustrating as a seller, they’re not always a bad sign. Many shoppers use their carts as a wishlist or placeholder as they look around for the right product.
Regardless, you want customers to re-engage and buy those items in their cart. You can encourage them to complete their purchase by offering a discount or nudging them with a promotional email.
It’s easy to track how many people are reading your emails—and how many are becoming customers. Monitoring your email subscriber engagement can help you determine which aspects of your email marketing are effective and what might still need some work.
Mobile e-commerce has become so prevalent that it’s even earned its own name—m-commerce. This makes it even more critical for you to track the number of mobile visitors to your site. It’s also helpful to pay attention to how many of your mobile visitors eventually become customers.
Looking at the time customers spend on your site can give you valuable insight into their behavior. Are your visitors browsing but not buying? Maybe your website is appealing, but your price point is too high. Are visitors bouncing almost immediately? Maybe your site is difficult to navigate.
Another metric that can help unpack customer behavior is pages-per-visit. This measures how many individual pages on your site customers are visiting and can help you measure the effectiveness of your online store.
Starting an e-commerce business takes research, planning, and passion. With the right tools, you can tap into the market of online shoppers seeking products from the comfort of their own homes.
Here are steps to follow when you’re ready to move your venture forward.
Before you get started, make sure you have a clear idea of your niche. Even better, it helps to consider what you want to contribute to the market and begin with a vision of the items you hope to sell.
Once you’ve landed on a specific product or service, take your time and do some research. Start by looking into other businesses in your industry. Pay attention to what they’re doing well and what you think you could improve on. Carefully examine their business model, marketing techniques, and the functionality of their website. These observations can help shape your own plan.
Make sure you also consider the potential for market saturation, the ease (or difficulty) of entry into the market, and what unique needs your product may be able to fill.
Once you know what you want to sell, it’s time to identify your target customer. Consider who your ideal buyer is and what qualities they have. It can be helpful to develop a customer persona during this part of the process.
A customer or buyer persona is a fictionalized version of your ideal customer. This persona can help you predict customer behavior and understand your future clients more deeply. Factors you might want to consider when developing a persona are age, location, income level, and personal goals or values. Whether you build detailed personas or not, keeping these qualities in mind can help you predict your real customers’ online presence and marketing preferences.
Even with a vision of your product and a clear picture of your target audience, you still have some significant hurdles to clear before you can launch your brand. First, you need to determine whether your idea will be viable in the actual marketplace. You’ll want to consider both market-based criteria like market size, competitors, and industry trends and product-based criteria like price point, markups, sales tactics, and regulations.
When validating your product, you should come away with a firm understanding of the costs you’ll face as a business owner. For e-commerce sellers, you often have more flexibility in your pricing since you won’t have the cost of a storefront or, in the case of digital products, warehouse and manufacturing expenses.
If your business is centered around a physical product, you’ll need to establish a model for obtaining, packaging, and shipping your orders. Some of your options include:
Once you’ve determined how you’ll move your product, it’s time to write a business plan. This plan will be essential to refining your goals and guiding your next steps. Think about the type of business you’re starting, your product, your ideal customer, your source of income, your staffing needs, and your operations model.
An effective business plan is often between 15 and 20 pages and includes:
If you don’t already have one in mind, your e-commerce store will need a memorable name. A great business name is compelling, descriptive, and one of a kind. Check to make sure your business name is available on your secretary of state’s website and the U.S. Patent and Trademark Office website. After you’ve made a decision, you’ll want to:
After you’ve created your new business, it’s finally time to build your e-commerce website. Your goal should be to create a polished website that reflects your new brand’s values and aesthetics. The basic steps of website-building include:
Marketing is essential to your store, both before and after you launch, so you’ll want to make sure you develop a compelling marketing strategy to get the word out.
When it comes to marketing, it’s often beneficial to use multiple channels to reach your customers. For example, you could:
Search engine optimization is an ongoing process. To maintain visibility, focus on developing your site’s SEO with effective copy, product descriptions, and up-to-date blog posts. Keep in mind that your entire site should align with current SEO standards to maximize your exposure.
Customer relationship management, or CRM, is a game-changer for online businesses. A CRM platform can support or handle your e-commerce marketing ventures by gathering important data about demographics and behaviors. In other words, investing in CRM can help you optimize your marketing choices and boost sales.
Email plays a significant role in any marketing efforts because it allows you to connect with people who’ve already shown interest in your product. Email marketing campaigns are a great way to share exclusive offers, promotions, company updates, and product launch details. You could even add surveys to your email to collect customer feedback and help shape the future of your brand.