What is an eCommerce Business And What You Need To Get Started

Written by Nick Leffler | No Comments | 10 min read

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There are so many ways to get an eCommerce business up and running. If you’ve already started looking around then your head is probably spinning and you know how much there is to learn about eCommerce.

Understanding the basics of eCommerce will help you decide how to achieve your business goals. There are different eCommerce models for an online shop, important parts you shouldn’t leave out, and different ways you could host your eCommerce shop.

Whether you have a physical store and are already selling products or you are starting from scratch, there’s a lot to do and learn. If you’re just starting out then you have to make a choice between two different eCommerce models. If you already have a store then your choice is a bit easier.

I’ll break down eCommerce into its simplest form before getting into the different models.

Simple definition of eCommerce: eCommerce is the process of buying or selling goods or services online either through an online store or online marketplace.

Types of eCommerce Models

There are two types of eCommerce business models. Each one has different benefits and drawbacks. Your eCommerce business goals and capabilities will determine which one is best for you.

If you have a physical store and sell products to customers then you’ll probably go with the first one, stocking products, because you already have stock. If you aren’t really sure where to start, you have to weigh the benefits and drawbacks.

eCommerce Model Stock Products Warehouse shelves full of purses

Stock Products

The first model for an eCommerce business is to stock products. If you’re running a physical shop already then this will be the best option for you. You already stock your products in your store and you already have the space.

If you are starting with nothing then you have to consider the benefits and drawbacks. If you stock products then you’re in charge of packaging, shipping, returns, and determining shipping costs.

You’ll also need the space and organization to store your products until they’re sold. As your inventory grows it also becomes more difficult to organize your products. You’ll need to organize them in a way that makes it easy and quick to process orders and ship them out.

There are two big benefits to stocking your own products, though, and they are pretty important.

  1. When you stock your products you get more of the profit. You get to determine the price of your product based on your wholesale cost.
  2. Your product can be more unique because you can sell whatever you want instead of only what’s available for drop shipping by another company. Because others can drop ship the products easily also, you’ll be competing on price.

For some types of products the benefits of stocking products far outweigh the negatives. The ultimate deciding factor is if you have the money to invest in stock and time to invest in organizing the back end of your eCommerce business.

The second option for opening an eCommerce store is to use drop shipping.

eCommerce business model drop ship warehouse package conveyor lines

Drop Ship

Drop shipping means someone else maintains the warehouse of products and fulfills orders for their clients which is you. That means they will handle the back end of your eCommerce business including stocking products, shipping, and processing returns.

If you can find a company that drop ships a product then you can sell it. With drop shipping you tell the drop shipper who to send an order to. They will ship your customer the product in a non branded package.

Your drop shipper will also handle returns. That means the only part you have to worry about when setting up your online shop is the front end of your shop.

That means you have to take care of the following aspects of your shop:

  • Customer relationship
  • Managing product descriptions and prices.
  • Organizing returns in compliance with drop shipper (they will process returns, though).

It’s easier to start a drop shipping eCommerce business because you don’t have to invest in any back end infrastructure. Your investment will focus on the virtual element such as your website, marketing, and the product pages.

Profit margins are significantly less with drop shipping than stocking your own products. Click To Tweet

Profit margins with drop shipping is significantly less than buying products wholesale. Your drop shipping company will have higher prices that you pay because they throw in shipping and handling and their profit margin.

Drop shipping leaves you with less money.

Now that you know the two types of eCommerce business models to choose from, there are more details on what makes eCommerce eCommerce.

eCommerce Is Visual

I covered the basics of what eCommerce is but there’s more to it. Buying or selling goods or services online is a pretty basic description of eCommerce. The intricacies of eCommerce go a lot deeper including the best way to make sure customers get what they need.

Because your customer can’t physically pick up a product and see what it looks like, eCommerce is very visual. That means your photos are the most important part of your eCommerce shop.

eCommerce is all about how well you show your product off to customers. That means your job is to provide visuals that show a holistic view of your product along with more detailed views. Every angle needs to be easily seen and if size is relevant, that should be communicated visually.

Showing somebody use your product is the most captivating way to show it off to customers. Click To Tweet

Of course the description and details are important but the visual is what gets people interested. The next part of eCommerce is how well you treat your customers privacy and online safety.

eCommerce is Secure

The importance of security in eCommerce is underestimated by many stores. The payment gateway is usually seen as the only part of the store that needs to be secure. That doesn’t always look good to customers, though.

If you secure your entire website then you’re showing your customer upfront that you care about their safety and privacy. That means you care about your customer before they are even a customer.

Security should always be your first priority whenever customer data is at risk and even well before it may become at risk.

Next up on what makes up your eCommerce business is the platform, an important part of how you will run your eCommerce business.

Platforms

There are a lot of competing eCommerce store applications out there. Some platforms are built solely for eCommerce and then there are platforms that piggy back on the top of popular content management systems. There are even platforms that are hosted for you on a proprietary platform (similar to Wix or Weebly for websites).

The easiest and cheapest way to get started is to use a hosted solution or an already existing marketplace. While these options are easier, their flexibility for the future are lacking. You may be limited by these options and therefore they could cost you more in the long run as your eCommerce business grows.

Hosted Platforms

Here are some of the hosted and marketplace solutions:

  • eBay
  • Amazon
  • Shopify
  • Etsy
  • BigCommerce

Self Hosted Platform

Then there are self-hosted platforms that give you a lot more flexibility and personalization than a hosted platform but may come with a larger up-front cost. These include:

  • WooCommerce
  • Magento

In each of these categories there are small competitors but these are the major players. WooCommerce is an extension to the popular WordPress content management system while Magento is built only as an eCommerce solution but does have other features such as blogging available.

Even within each of these categories, cost can differ drastically. A Magento eCommerce store could cost you 10’s of thousands of dollars while a WooCommerce solution could only cost you thousands.

On the other hand, solutions such as eBay and Amazon have very little to no upfront costs but you won’t build your own brand. You just need to put your products on the store and they take a piece of your profit.

Deciding which of these platforms is best for your budget, product, and goals is difficult. The best way to make that decision is research each as an option for your product then make a decision or talk with someone who can help you decide.

eCommerce vs Commerce

How eCommerce Differs From Commerce

Moving from a physical shop (commerce) to an online shop (eCommerce) is more different than you might think. Yes you’re selling a product and yes a customer buys it but that’s where the similarities end.

Shipping

In regular commerce you don’t have to ship the product but in eCommerce you do. Seems simple, right? It’s not.

It’s harder than you might think to determine how much it will cost you to ship a product, which carrier you’ll use, and how to package your product securely.

Shipping can be a huge component to an eCommerce business too. If your shipping costs are too high, you’ll lose customers. If your shipping costs are too low, you’ll lose money. Not telling people your shipping costs upfront might lose you customers before they even give you a chance.

If you offer free shipping then you have to calculate that into your costs and account for different size orders in your calculations. Sometimes determining the shipping details is a learning process.

Product

Your product is the center of your shop. In regular commerce it’s easy to have customers see your product. There’s something physical a customer can touch and see so they know exactly what they’re getting.

In eCommerce your product is merely a figment of the customers imagination. Your job is to make that figment come to life as if it was sitting there in front of them.

We are visual beings and we want to see as much of the product we want to purchase as possible.

Space

Commerce requires a lot of space because customers come into your shop and walk around. Your shop and product have to look presentable because the first impression is everything.

Storing your product in eCommerce is easier than a shop and it doesn't have to look pretty either. Click To Tweet

With eCommerce you either don’t need any space because you use drop shipping or you require less space than a physical shop. Even if you stock your products a warehouse is quite sufficient and it doesn’t have to look pretty either.

Customer

The most difficult difference to overcome between commerce and eCommerce is your customer. In normal commerce you can meet your customer and help them in person. It’s much easier to build a relationship with customers in real life.

Online is different because you never see or get to understand your customers needs unless they decide to contact you. Your customer is usually just a number on an analytics report. It’s not as easy as it seems to put the data together to create a visual of how your customer interacts with your online shop.

eCommerce can be fun and easier to get started than a physical business but there are problems too.

Biggest Problems with eCommerce

Even the ease of starting an eCommerce business can be met with a lot of problems. Being aware of some of these problems will help you solve them before they happen.

With a little hard work and planning many problems with eCommerce can be overcome before you even open up shop. Some of the biggest problems with eCommerce you should keep an eye out for are:

Each problem has its own solutions and they will be unique to your product or service. I have written some articles to help you solve some of the problems. I will write additional articles to touch upon some of the other problems of eCommerce.

Start an eCommerce Business

Starting an eCommerce business takes a lot of planning but this post will help you understand the basics. There are different ways to approach an eCommerce business but yours will be unique.

You can learn more about what I do to help an eCommerce business grow successfully online on my eCommerce page. I also write about eCommerce on this blog often so subscribing will be helpful to you.

If you’re ready to get started and talk to me about growing your eCommerce business, I’ll give you a free quote and free 30-minute consultation.

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Author Bio:

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Nick Leffler

Nick Leffler is the owner of Exprance, a Sacramento web design and digital marketing agency which helps businesses reach their customer online. Nick has grown his online presence with a small marketing budget by blogging, organic social media posting, and email marketing.

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