eCommerce is kind of a big deal.

Global eCommerce sales for 2019 made up roughly 14.1 percent of all retail sales, according to Statista. That comes out to around 3.7 trillion dollars. To give you some perspective, that's almost as much as the U.S. federal budget for an entire year. 

In 2020, this figure was expected to reach $3.9 trillion.

However, nobody expected the Coronavirus. COVID-19 has exploded the demand for certain eCommerce fulfilled goods/services and completely destroyed the demand for others.

So, we really won't know until the end of the year what the actual figure will look like. 

Regardless, there's no turning back with eCommerce. It's going to keep changing our lives for years to come. So let's answer the question today, "What is eCommerce?"

What Is eCommerce?

The term eCommerce refers to the electronic purchase and sales of goods or services via the internet. 

Instead of a customer being required to enter a physical location or make a phone call to make a purchase, they can make that purchase online. They can browse a company’s website (or a marketplace), find what they need, and complete the transaction via the website.

This allows customers to shop from the comfort of their homes, and it enables companies to reach customers that they may not have been able to reach before.

A Brief eCommerce History

While most people probably think that eCommerce is a recent invention from within the last 10-15 years, they aren’t correct.

eCommerce has its roots as far back as 1991 during the birth of the internet.

Book Stacks Unlimited was one of the earliest eCommerce websites. It started back in 1992 and even competed with Amazon. It was eventually bought out by Barnes and Noble.

Here's an image of Barnes and Noble's website way back on December 1st 1999. 

Seems incredibly dated and clunky now, but this was cutting edge in 1999! There were a few web developers that were very proud of what they'd put together here.

It took years for companies to embrace and harness this power. And today, eCommerce is now a platform that no business can be without.

How eCommerce Sales Are Conducted

eCommerce sales are simple at their core and chances are overwhelmingly high that you have participated in eCommerce yourself.

A customer selects the items/services that they want, they place them in an online shopping cart, they proceed to checkout, and they input their shipping and payment information. At this point, the transaction is complete. The retailer will now fulfill their end of the bargain. They may ship your goods, send a downloadable product to your email, allow you to access a program, etc. It depends on what you've purchased.

Types Of eCommerce

There are six basic styles of eCommerce. 

1. Business to Business (B2B)

This refers to the commerce between two businesses.

2. Business to Consumer (B2C)

This is the most common form of eCommerce that we all think of. This involves consumers buying goods or services from a business on a website.

3. Consumer to Consumer (C2C)

This type of eCommerce takes place between two consumers (think Craigslist or Facebook Marketplace). An entity like PayPal or Venmo serves as the method to transmit payment electronically.

4. Consumer to Business (C2B)

This happens when a consumer sells their goods to businesses, such as a photographer taking pictures for a company or a graphic designer completing a logo for a business.

5. Business to Administration (B2A)

This involves transactions between companies and public entities around such items as legal documents or social security.

6. Consumer to Administration (C2A)

This type of eCommerce involves consumers using electronic services to book goods and services from public entities, such as filing taxes.

eCommerce Business Models

eCommerce comes in a variety of different models.

1. Retail Sales

In this model, you have the product and you sell the product on the internet. A customer buys it, you ship it to their front door.

• Pros: 
  • Relatively straightforward
  • No middle-man so you keep more of your profits
• Cons: 
  • Difficult to pivot
  • More work (you have to maintain the digital side of your company and the product fulfillment side)

2. Wholesale

Selling your products to other businesses, often for them to resell. Wholesale eCommerce sites usually require you to setup an account with them so that you can view their prices and products and make a purchase. They have to ensure that you're a business and not an end-consumer because they don't charge sales tax. They also generally have a minimum order amount.

• Pros: 
  • Large orders
  • No end-customer contact
• Cons:
  • Smaller margins per unit sold
  • Slow to pivot

3. Drop Shipping:

Drop Shipping involves selling a product that you do not physically have. You create an arrangement with a supplier where you sell their products online and they ship them for you. We teach students how to run profitable drop shipping businesses here at Drop Ship Lifestyle.

• Pros:
  • Easy to Pivot
  • No inventory to worry about
  • Can be done from anywhere
• Cons:
  • Smaller margins than retail
  • Less control over products

4. Crowdfunding

Crowdfunding is sort of a weird one. It involves collecting money from donors in order to bring a product or service to market. GoFundMe is a well-known crowdfunding website.

Here's a campaign from GoFundMe for Hoop Bus. 

And if you're thinking, "Isn't 25k a lot of money to attach a hoop to a bus?" You'd be correct. They're also shooting a documentary to track their travels across the country.

• Pros:
  • You're receiving money in exchange for promises
• Cons:
  • You have to deliver on the promises that you made eventually or risk having to give the money back

5. Subscriptions

Recurring automatic purchases for services or goods, traditionally on a weekly or monthly basis. For instance, internet service or a meal-kit service.

• Pros:
  • You get money from your customers regularly
• Cons:
  • Customers have to be consistently happy with your service or they may opt for a competitor

6. Print-on-Demand

Print-on-Demand involves selling something that doesn't exist, creating it, and shipping it to your customer. T-shirt companies are the most notable example of this. They sell a concept for a shirt on their website or allow a customer to design it for themselves, then they print it onto a blank stock shirt, and send it to the customer.

Zazzle is currently offering Print-on-Demand Face masks.

• Pros:
  • Easy to provide a HUGE array of design options
  • Highly customizable to individual customers
• Cons:
  • You're selling generally inexpensive items that aren't being mass-produced
  • Easily replicated by competitors that have the appropriate equipment

7. Digital Products

Items that can be purchased and accessed or downloaded online. These items are generally immediately available after purchase, such as courses, eBooks, and video games.

Purchasing an ebook on Amazon is a simple example of a digital product. It's available for download right after you purchase it.

• Pros:
  • No physical inventory
  • Customers immediately access your product/service
• Cons:
  • Capable of being bootlegged or shared by users

8. Services

Some common services you might find online would be tax preparation, search engine optimization, or resume creation.

• Pros: 
  • Can be done from anywhere
• Cons:
  • Considerable competition

eCommerce Security Concerns

With a new form of commerce came new challenges as well. One of the biggest being securing customer data and payment information. There are several steps that retailers should take to secure this data.

Use HTTPS protocols and SSL/TLS certificates

SSL/TLS certificates are a layer of protection that a business needs across its entire site to protect their customers (and themselves) from cybercriminals. SSL stands for Secure Sockets Layer. It's the standard technology for keeping an internet connection secure and encrypting any sensitive data that is sent between two systems. This keeps criminals from accessing any transferred information.

SSL was originally used only on the payment processing section of a website, but now businesses are using this security on their entire site. As cybercrime increases, this provides one more level of protection to a site and its customers.

TLS stands for Transport Layer Security. It is simply a more updated version of SSL that features greater security. Many professionals in the web security industry still refer to TLS as SSL though.

Once you have acquired an SSL certificate, your site will be displayed as HTTPS in the URL.

Verify the CVV and AVS of cards used for purchases on your platform

Credit card numbers are available for purchase if an individual knows where to look, unfortunately. You strengthen the security of your processing system by requiring the security code from the back of the card. It’s highly unlikely that a cybercriminal has the card physically with them.

AVS (address verification services) is also an excellent security tool for a business to have. These systems can help your business detect fraudulent purchases by checking to see if packages are being shipped to a customer’s actual address. While these systems are still fallible,they  still provide excellent layers of security to you and your customers.

Using multilayer security

No security system is foolproof, so eCommerce retailers are encouraged to have multiple layers of security for their site. A firewall is the first layer of protection for any retailer. Second, is having Access Control. This puts restrictions on what users are able to do on your site. And third, bot protection is incredibly important. This is because 95% of all wesite attacks are done by bots.

CDNs (Content Delivery Networks) are helpful for preventing DDoS (denial of service) attacks. CDN's help to ensure a DDoS attack doesn’t reach the origin server and make your site completely unavailable.

Perform transaction monitoring

It's helpful to use software programs that spot potentially fraudulent transactions. You don’t have to vet each and every purchase from your website. There is a good chance that isn’t even possible. But using software to spot potential issues is important for your business. You can then flag those transactions for further review, and potentially save yourself from fraud.

Avoid storing payment information

While it may seem like a convenience to save a customer’s payment information for future transactions, this is a liability. You don't want to be held responsible if your servers are breached. 

Allowing PayPal integrations with your site is a good solution for this. Customers can perform quick transactions and you don't have to worry about storing sensitive information.

Benefits To Businesses With an eCommerce Presence 

• Additional Revenue

eCommerce sales grow every single year. Online giant Amazon did 280 billion alone in sales in 2019. Companies cannot afford to miss out on the opportunity to capitalize on this channel of selling.

A well-developed online site helps raise the profile of any brand. 

• Brand Exposure and Market Growth

Traditional stores are limited by their location; eCommerce stores remove that barrier.

Shoppers visiting your eCommerce store also save the time and hassle involved in traveling to your store, as well as dealing with any parking issues at your shopping center, etc.

• Extend and Improve Your Consumer Experience

Use eCommerce as an extension of your current brick-and-mortar store experience. Many companies utilize store inventory to fill eCommerce warehouse shortages and vice versa.

For clothing retail companies, it isn’t uncommon to find additional colors and sizes available online that aren’t for sale in the store. This permits brands to extend size ranges and color pallets without needing to rent more square footage of retail space.

To drive traffic to both shopping destinations, clothing stores can have items that are online exclusives and retail exclusives.

Successful brands don’t see eCommerce as a threat; they see it as one more way to grow and develop their business. They use both channels to work together in building their brand.

Does eCommerce Have A Negative Impact On Traditional Brick-and-mortar Retail Locations?

Yes and no. eCommerce has been cited as the cause of the current “retail apocalypse." While online sales can seriously affect traditional outlets, it opens new doors for them as well. It's up to business owners to adapt to the changing times. 

Click-and-Collect eCommerce

Brick-and-mortar stores can implement Click-and-collect eCommerce to take advantage of eCommerce.

This simply involves consumers placing an order online for in-store pickup. There's no upcharge for this service with customers and it streamlines the shopping process. This practice has been rapidly implemented since the beginning of the Coronavirus pandemic.

So, in this way, eCommerce has saved thousands of brick-and-mortar businesses across the country. Going forward, these retail stores should see this as an opportunity outside of just being a solution for the current global pandemic. 

Price Awareness

eCommerce does lead to more shopping around for the best price. 

You've no doubt done this yourself. You go to a retail store and find the item you're looking for, but it's more expensive than you expected.

What do you do?

You pull out your phone and begin price shopping online.

Because of this, brick-and-mortar stores should ensure that they're pricing their goods competitively.

A few dollars over an online price is usually not enough to lose a sale. At that point, people are usually more motivated to receive the item instantly for a slightly higher cost. But the further apart your price and the online price are, the more likely they will order the item and leave your store empty-handed.

FAQs

What is ecommerce and how does it work?

The term eCommerce refers to the electronic purchase and sales of goods or services via the internet.

Instead of a customer being required to enter a physical location or make a phone call to make a purchase, they can make that purchase online.

How do I get into eCommerce?

1. Decide on the type of eCommerce business you'd like to start.

2. Find a profitable niche for you to exist in.

3. Apply for an EIN, as well as any applicable permits/licenses.

4. Create a website.

5. Setup a fulfillment system for your product or service

Is eCommerce the future?

Absolutely. eCommerce sales grow with each passing year. Global eCommerce sales were expected to reach $3.9 trillion in 2020.

Wrapping Up "What is eCommerce?"

eCommerce isn't going anywhere. It's going to keep improving over time and it will continue to change the way that we live our daily lives. There is limitless opportunity for almost anybody to start capitalizing on it. 

If you have a brick-and-mortar store, start integrating eCommerce into it.

If you don't have a business, but you want to get involved in eCommerce, start a dropshipping business, or a blog, or an affiliate website.

Whatever you do, keep your eyes peeled for new opportunities and keep learning.