Business Of Ecommerce – Electronic commerce (e-commerce) refers to companies and individuals who buy and sell goods and services over the Internet. E-commerce operates in different types of market segments and can be conducted on computers, tablets, smartphones and other smart devices. Nearly every imaginable product and service is available through e-commerce transactions, including books, music, airline tickets, and financial services such as stock investing and online banking. As such, it is considered to be a very disruptive technology.
As noted above, e-commerce is the process of buying and selling tangible products and services online. It involves more than one party together exchanging data or currency to process a transaction. It is part of the larger industry known as electronic commerce (ebusiness), which involves all the processes needed to run a business online.
Business Of Ecommerce
E-commerce has helped businesses (especially those with a narrow reach like small businesses) to access and establish a larger market presence by providing cheaper and more efficient distribution channels for their products or services. Target (TGT) has supplemented its physical presence with an online store that allows customers to buy everything from clothes and coffee makers to toothpaste and action figures right from their homes.
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Providing goods and services is not as easy as it might seem. It requires a lot of research into the products and services you want to sell, the market, audience, competition, and anticipated business costs.
Once determined, you need to come up with a name and create a legal structure, such as a corporation. Next, build an ecommerce website with a payment gateway. For example, a small business owner who runs a clothing store might set up a website that promotes their clothing and other related products online and allow customers to pay by credit card or through a payment processing service such as PayPal.
E-commerce can be thought of as a digital version of mail order catalog shopping. Also called online commerce, e-commerce is the transaction between a buyer and a seller that takes advantage of technology.
E-commerce has changed the way people buy and consume products and services. More and more people are turning to their computers and smart devices to order goods, which can be easily delivered to their homes. As such, it has disrupted the retail landscape. Amazon and Alibaba have gained significant popularity, forcing traditional retailers to make changes to the way they do business.
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But that is not all. Not to be outdone, individual sellers have increasingly engaged in e-commerce transactions via their own personal websites. And digital marketplaces like eBay or Etsy serve as exchanges where multitudes of buyers and sellers come together to conduct business.
The US Department of Commerce recognizes e-commerce businesses such as transactional sites, static content sites, online marketplaces, and auction sites.
Most of us have shopped online at some point, which means we’ve taken part in e-commerce. So it stands to reason that e-commerce is everywhere. But very few people may know that e-commerce has a history dating back to before the inception of the internet.
E-commerce actually dates back to the 1960s when companies used an electronic system called Electronic Data Interchange to facilitate the transfer of documents. It wasn’t until 1994 that the first transaction. took place. This involved selling a CD to friends through an online retail website called NetMarket.
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The industry has gone through so many changes since then, leading to a great evolution. Traditional brick-and-mortar retailers have been forced to embrace new technology to stay afloat as companies like Alibaba, Amazon, eBay, and Etsy have become household names. These companies have created a virtual marketplace for goods and services that consumers can easily access.
New technology continues to make it easier for people to shop online. People can connect with businesses through smartphones and other devices and by downloading apps to make purchases. The introduction of free shipping, which cuts costs for consumers, has also helped increase the popularity of the e-commerce industry.
Depending on the goods, services and organization of an e-commerce company, the business can choose to operate in different ways. Here are some of the popular business models.
B2C ecommerce companies sell directly to the end user of the product. Instead of distributing goods to a middleman, a B2C business transacts with the consumer who will ultimately use the good. This type of business model can be used to sell products (e.g. your local sporting goods store website) or services (e.g. a lawn care mobile app to book landscaping services). This is the most common business model and is probably the concept most people think of when they hear about e-commerce.
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Similar to B2C, an e-commerce business can directly sell goods to a user. However, instead of being a consumer, that user could be another company. B2B transactions often involve larger quantities, higher specifications and longer lead times. The ordering company may also need to set up recurring goods if the purchase involves recurring manufacturing processes.
Some entities specialize as government contractors providing goods or services to agencies or governments. Similar to a B2B relationship, the business produces items of value and remits them to an entity. B2G e-commerce companies often have to meet government requests for proposal requirements, solicit bids for projects, and meet very specific product or service criteria. Additionally, there may be joint government efforts to solicit a single contract through a government-wide procurement contract.
Established companies are the only entities that can sell things. Ecommerce platforms such as digital marketplaces connect consumers with other consumers who can list their products and execute their own sales. These C2C platforms can be auction-style listings (e.g. eBay auctions) or may require further discussion regarding the item or service being provided (e.g. Craigslist posts). Enabled by technology, C2C ecommerce platforms allow consumers to buy and sell without the need for businesses.
Modern platforms have made it easier for consumers to engage with businesses and offer their services, especially related to short-term contracts, gigs, or freelance opportunities. For example, consider the listings on Upwork. A consumer can solicit offers or interact with companies that need particular jobs. In this way, the e-commerce platform connects businesses with freelancers to empower consumers with greater power to meet pricing, scheduling, and occupancy requests.
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Less than a traditional e-commerce relationship, consumers can interact with administrations, agencies or governments through C2G partnerships. These partnerships are often not in the exchange of services, but rather in the transaction of obligation. For example, uploading your federal tax return to the IRS digital website is an e-commerce transaction related to an exchange of information. Alternatively, you can pay tuition to your university online or submit property tax assessments to your county assessor.
The US Census Bureau estimates retail e-commerce sales in the United States. In the first quarter of 2022, retail e-commerce accounted for 14.3% of total sales in the country, totaling approximately $231.4 billion.
In addition to creating the type of e-commerce company a business wants to be, the business has to decide how it wants to make money. Due to the unique nature of e-commerce, the business has a few options for how it wants to process orders, carry inventory, and ship products.
Often considered one of the simplest forms of e-commerce, drop shipping allows a business to create a digital storefront, generate sales, then rely on a supplier to deliver the good. When you generate the sale, the e-commerce company collects payment via credit card, PayPal, cryptocurrency or other digital currency means. Then, the ecommerce store passes the order to the dropship supplier. This supplier manages the inventory, supervises the warehouse of the goods, packs the goods and delivers the product to the buyer.
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White label ecommerce companies leverage already successful products sold by another company. After a customer places an order, the ecommerce company receives the existing product, repackages the product with its own packaging and label, and distributes the product to the customer. Although the e-commerce company has little or no say in the product it receives, the company usually faces little or no internal production constraints.
A more capital-intensive approach to e-commerce, wholesaling involves maintaining quantities of inventory, tracking customer orders, maintaining customer shipping information, and generally owning the space of the warehouse to house the products. Wholesalers may charge wholesale prices to retailers or unit prices to consumers. However, the general approach to wholesaling is to engage with either large quantity buyers or many small buyers of a similar standardized product.
Private labeling is an e-commerce approach most appropriate for companies that may not have large start-up capital or may not have their own factory space to produce goods. Private label e-commerce companies send plans to a contract manufacturer who makes the product. The manufacturer may also have the option to ship directly to a customer or ship directly to the company receiving the order. This method of e-commerce is best suited for businesses that can take on-demand orders with short lead times but can’t handle capital expenditure requirements.
Ecommerce companies can also leverage repeat orders or loyal customers by implementing subscription services. For a fixed price, e-commerce
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