What is eCommerce (Business Models, Pros, Cons & How to Get Started)?

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eCommerce is a term that covers all types of businesses and transactions involving the internet. eCommerce can include many things, such as online shopping or selling of services. It can also include business transactions between different companies over the internet. So, eCommerce is a very broad term that covers many industries.

There is a wide range of eCommerce models. Below, we’ll look at the different eCommerce models that can suit your interests and skills. eCommerce for B2B (business to business) and B2C (business to consumer), consumer to consumer, and consumer to business are just the foundation of the eCommerce business models.

eCommerce models can come in a vast range of forms, and I’ll try to cover all of them so you can choose. But before that, I’ll like to shed some light on a company that we all know and will serve as an inspiration for those looking to get into eCommerce.

The tech giant, Amazon, who had a very humble beginning as an online bookstore, now boasts a net worth of over $1.75 Trillion (and counting).

The growth of many eCommerce sites and businesses is also thanks to the pandemic. With people staying home and carrying out all of their transactions (from food to furniture) online, it’s obvious why eCommerce will continue to grow. The worldwide eCommerce market is expected to cross $6 trillion by the year 2022.

A Brief History of eCommerce

The first online transaction occurred in 1994 when a CD was purchased using the then-available technology. By 1996, there were 43 million internet users worldwide and eCommerce was already growing at an exponential rate.

But it wasn’t until the late 1990s that eCommerce began to take off. In 1995, Amazon sold its first book online and in 1995 eBay was born.

And this is when eCommerce growth skyrocketed.

As more and more people gained access to the internet and they turned their attention online where there were a plethora of new opportunities.

With the introduction of eCommerce website builders like Shopify, WooCommece, BigCommerce or Wix, anyone could now create their own eCommerce business.

Today, eCommerce is one of the largest sectors in any economy and it’s continuing to grow at a rapid rate with no signs of slowing down.

Fun & Interesting eCommerce Statistics

Knowing what’s trending in eCommerce can help you stay ahead of the curve. Here are some statistics that will either give your business a leg up on the competition or entertain you. However, if you’re looking to completely dominate your industry, then I recommend that you keep abreast of these research papers.

eCommerce is accounted for 18 percent of total retail sales by the end of 2020.
There are over 28,000 eCommerce businesses in the US and over 19,000+ e-commerce companies in India.
It’s estimated that there’ll be an average of 2.14 billion online buyers globally as of 2021. That’s about 27.2% of the global population and a huge amount of potential customers that you could be reaching out to.
Amazon took in about 51.2% of all online sales in 2020 and about 49% in the previous year.
In the USA, 46 percent of people will use their mobile devices to buy products online (with 64 percent using them for product research).
It’s expected that eCommerce will overtake retail sales by 2024, becoming the largest sales channel in the world.

These statistics are a clear indication that eCommerce is here to stay, and if you’re not already taking advantage of this lucrative industry, now is the time to get on board.

What is an eCommerce Website?

To make this easier for you, you can visualize your new eCommerce website as your storefront but for the entire internet to view and browse. This is where you can showcase your products and services, and you can take orders online from your many online customers.

Everything you put into a physical brick-and-mortar store will still be available on your digital store. We’re talking about a cash register, product catalog, sales and contact teams, and so on!

You have the option to create your own branded eCommerce store that is an extension of your interests, hobbies, or creative thoughts. Or you can carry out e-business transactions without a brand. It will vary based on lower entry costs, ease, and convenience of use.

What are the Different eCommerce Models?

There is no single model that will suit all eCommerce businesses. However, there are a few models that have been quite successful and can be seen more often than others.

Business-to-Consumer

The first model is called the Business-to-Consumer (BtoC) model. This is where a business sells products or services to the end consumer. This is the most common model for eCommerce businesses and it’s what Amazon, eBay, and Walmart use.

You should note that B2C eCommerce customers don’t tend to buy in bulk. But you’ll have a larger number of customers than B2B eCommerce.

If you’re looking to become a part of the B2C eCommerce family, you’ll have to keep abreast of any future changes in the industry.

Thankfully, B2C eCommerce has a brilliant future. Statista Research Department outlines that the global retail e-commerce CAGR (Compound Annual Growth Rate) between 2020 to 2025 is 6.29 percent.

Despite being the most-popular eCommerce business model, it’s also the most competitive. So having a unique selling point or emotional selling point will give you a better chance of success.

Business-to-Business

The second eCommerce business model is Business-to-Business (B2B). It’s where a business sells to another business. This model is perfect for businesses that have a wide range of products and services for other businesses.

Because these products and services are not mass-produced, it’s often more difficult to find a B2B eCommerce store than a B2C. However, the upside for this eCommerce business model is that you can sell to other businesses in bulk.

For those of you who love to see future predictions of the eCommerce model for B2B, here you go:

According to Facts and Factors, the B2B eCommerce market is expected to grow at a CAGR of 15.24% during the forecast period (USD 7.35 Trillion in 2020 to about USD 18.57 Trillion by the end of 2026).

High-ticket products and services are usually the ones sold through B2B eCommerce stores. If you’re looking to get into this market, it’s important that you have a strong understanding of the industry you’re targeting.

Consumer to Consumer

The third eCommerce business model is Consumer-to-Consumer (C2C). It’s where a consumer sells products or services to another consumer. This eCommerce business model is common for Craigslist, eBay, and other online marketplaces.

While it’s possible to make a lot of money using this eCommerce business model, there are many challenges to face. Most notably is the lack of structure and organization when it comes to running this type of eCommerce business.

If you’re still keen to start this kind of eCommerce store, then here are some things that will be important to you:

Have a well-designed website that is easy for customers to navigate.
Also, have clear terms and conditions so you can avoid legal battles.
Be open and honest about the product you’re selling and provide as many details as possible. If it’s a used product, disclose that information.
Have good customer service and be prepared to resolve any disputes quickly and fairly.

Consumer-to-Business

The last model is called Consumer-to-Business (C-to-B). It’s where a consumer sells products or services to another business. This eCommerce model is common for online marketplaces that allow consumers can sell their items or services to businesses. An example of this is stock content marketplaces such as Shutterstock.

The great thing about this eCommerce business model is that you can gain access to a larger market. This means it’s easier for consumers to sell their products and services to both businesses or customers.

On the downside, it can be difficult to get businesses to buy from you. This is because they’re often hesitant about buying from unknown vendors.

Now that we understand the different eCommerce business models, let’s now look at the pros and cons of an eCommerce business so you can make the right logical choice for you.

Advantages of eCommerce

The sheer number of eCommerce stores and businesses continues to grow every day. This is in part due to the advantages that an eCommerce business has over a physical store.

Let’s take a look.

You can sell your products or services to anyone in the world.

With access to a global market, your potential for sales is huge, unlike a physical store that’s limited to a certain location. This is one of the biggest advantages of eCommerce. You can reach a larger audience than you would if you were selling through a physical store.

Low initial startup cost compared with traditional businesses.

All you need is a computer and an internet connection. you can start and run your eCommerce business from the comfort of your own home. You won’t need to rent or buy any additional property, and you can run the business completely online. Most of the money for an eCommerce store goes towards product storage. And if you choose to dropship your products, you won’t need to worry about storage costs at all.

You can manage your eCommerce business with little to no staff.

This is a great option if you’re starting a business on a tight budget. With the right tools and systems in place, you can run your entire eCommerce store by yourself. We’re looking at product research, supplying, marketing and sales can all be managed by you with a little effort.

You can track your sales and performance metrics in real-time.

This means you can see how well your eCommerce store is performing and make changes (if needed) on the fly. Plus, many eCommerce website builders come with built-in analytics tools that help you monitor the number of visitors to your store, where they’re coming from, and what products are most popular.

You can automate a lot of the processes in your eCommerce store.

This will help you to save time and money. For example, you can have your eCommerce store send shipping notifications and invoices automatically. Plus, you’ll never need to hire a full-time team if you’re using eCommerce website builders that have automation functions

Overall, eCommerce businesses are easier to scale than traditional businesses.

With the right systems in place, you can grow your eCommerce business at a much faster rate than a physical store.

Disadvantages of eCommerce

Take longer to grow than traditional businesses

eCommerce businesses take longer to grow than traditional brick and mortar stores because it takes time for consumers to trust you. The first sale is the hardest sale. However, with the right marketing skills, you can promote your offerings to your target audience and generate repeat sales.

You’re fully responsible for your business

You are responsible for everything to do with your eCommerce business, including marketing and customer service, sales, quality assurance. So managing a store by yourself can get overwhelming and lead to burnout really fast.

A lot more competition

There’s a lot more competition in eCommerce than there is in traditional brick-and-mortar stores. And the margins aren’t as good either unless you’re a very established business with the right marketing strategies in place.

Vulnerable to disasters and stock issues

eCommerce businesses are vulnerable to things like bad weather and stock shortages from suppliers. You can’t buy your way out of these problems. However, I recommend that you find the most reliable and affordable way to stock your business. And keep up to date for any upcoming natural disasters such as hurricanes, storms, and even the pandemic. This way you can plan ahead and prevent any major damages to your business operations.

eCommerce is still relatively new

eCommerce is still relatively new, so you won’t have the level of trust that you get from traditional businesses. You’ll have to build that level of trust by showcasing your products on your platform, with testimonials, or probably adding a face and personality to the brand.

Be well-versed in running an eCommerce business

You need to know how does eCommerce works in order to successfully run an eCommerce business. It’s not as simple as setting up a website and watching the money come in. eCommerce can be very different than running a traditional physical store, so it’s your job to learn the best ways to run a successful eCommerce store. Or at least hire an eCommerce specialist to help grow your eCommerce business.

You have to create a great buyer experience

You can’t try before you buy with eCommerce, which is a huge disadvantage for some consumers. This means that the onus is on you, the eCommerce store owner, to create a great buying experience for your customers.

How to Start With eCommerce

So, we’ve looked at the pros and cons of eCommerce businesses. If you’re still keen on starting an online store, then here are my top tips for starting an eCommerce business.

However, be warned that eCommerce is an investment. And with most investments, you have to give up a resource such as money and time. You can either spend the time to properly create an eCommerce business and website which may take weeks even months or you can pay someone to do this for you.

Here’s what you need to know about to start an eCommerce business:

Find a Unique or In-Demand Product or Service

To a product or service that will attract customers to your business, first you have to carry out deep research into your product, your competition, and the market. You also have to find a unique selling proposition (USP) or emotional selling point (ESP) that will make your product or service different from what’s already out there. This is the only way to stand out.

Assess Alternative Products Ideas

If you’re having a hard time coming up with a unique product or service, then assess alternative products ideas. You can do this by looking at your own interests, passions, and hobbies. What are the products or services that you’re already using? Can these be sold online? It would also benefit you greatly if you carry out market research. This will give you a good idea of what products are successful in the market and what are your competitors selling online.

Create a Business Plan

A business plan is your roadmap for eCommerce success. It’s where you’ll outline everything about your business, from the products to sell online, to how you’re going to get your first sale. This document is also important for getting funding from investors or getting a loan from the bank.

Create a Unique Storefront or Brand

You need an eCommerce website that catches your customer’s attention and builds trust in your business. You have to set yourself apart from other online stores, otherwise, people won’t bother buying anything because there are too many options available already. Show them why they should buy from you and not your competitors. You can choose to use an eCommerce website builder or even sell your products and service on other platforms such as social media.

Find Suppliers and Add the Products to Your Storefront

Now it’s time to find suppliers that meet your budget and business needs. This can be done by visiting trade shows, searching the internet, or even contacting manufacturers directly. Once you’ve sourced your products, it’s time to add them to your eCommerce store.

Launch your eCommerce Storefront

Launch your eCommerce storefront when you’re ready to start selling. You can either do this by launching and promoting your store on social media and other online directories to get traffic flowing in. Or you can directly sell to your existing customer base.

Market Your eCommerce Business

Once you’ve launched your eCommerce storefront, the next step is to market it. This includes organic methods or paid advertising on social media channels or Google Ads. You can also run marketing campaigns such as email marketing, content marketing, and even affiliate marketing.

The Future of eCommerce is Blindingly Bright!

eCommerce is a great way for entrepreneurs to start their own online businesses. You can leverage the power of eCommerce sites like Amazon, eBay, and Etsy or create your own marketplace with an eCommerce website builder.

Regardless of what you choose, marketing will be key in ensuring that people find out about your store. The future looks bright for those who are willing to take the leap into entrepreneurship!

Fran Powers has a strong background in digital marketing and a love for wealth management. She uses these skills to empower those who are willing to learn. You can reach her on Linkedin.