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What is eCommerce? A complete guide


what is ecommerce

Ecommerce is the online exchange of goods and services over the internet. It involves online transactions between businesses (B2B), businesses and consumers (B2C) as well as between consumers and consumers (C2C). Ecommerce encompasses a wide range of activities, including electronic business, online shopping, online marketplaces, electronic payments, online banking and online auctions.


Ecommerce is an integral part of the modern global economy. Over the past couple of decades, it has transformed both the way we shop and the way we do business. In fact, eCommerce is on track to take over traditional retail sales altogether. According to Nasdaq, by 2040, eCommerce could facilitate as much as 95% of all retail sales. By 2027 it's on track to account for around 23% of all retail sales.


With Wix, it’s easier than ever to set up an eCommerce website. An online store created with an all-in-one platform like Wix lets you sell products or services anywhere in the world.


If you’re brand new to eCommerce, you’ve come to the right place. This article will answer all of your questions about the world of online retail when it comes to starting a business.



What is eCommerce?


Ecommerce (short for “electronic commerce”) is an umbrella term for any transaction done over the internet. Ecommerce can involve the sale of physical or digital products as well as services of all types, from scheduling a yoga class to booking a hotel. It's like a digital marketplace that's always open.


In an increasingly digital world, eCommerce, as a type of business, is more prominent than ever. The U.S. Census Bureau reported that eCommerce sales totaled $277.6 billion during the second quarter of 2023 alone. And according to Statista, global eCommerce sales are forecast to reach $8.1 trillion by 2026.


Ready to start selling? Create your online store with Wix.



what is ecommerce


How does eCommerce work?


Here is a simplified overview of how an eCommerce transaction works:


  1. A customer visits an eCommerce website, marketplace or app and browses the products or services offered.

  2. If the customer finds something they want to buy, they add it to their shopping cart.

  3. The customer proceeds to checkout, where they enter their shipping and billing information and select a payment method.

  4. The eCommerce merchant processes the payment and ships the product or provides the service to the customer.


Each of these steps could look a little different depending on the exact nature of your eCommerce business. For example, you could partner with a third-party logistics company to handle packaging and shipping for you. Or instead of selling retail goods, you may choose to sell online services or courses that don’t require any physical inventory.


At its core eCommerce includes:



Ecommerce now comes in many shapes and sizes, and often involves multiple players. It also involves a variety of touchpoints, including a well-built website.



What is an eCommerce website?


If you want to succeed in your endeavor, it's crucial to know how to create a website that's tailor-made for eCommerce. Simply put, an eCommerce website allows your business to sell products and services online. It's a digital storefront where your customers can browse, select and purchase items (see eCommerce website development). A typical eCommerce website includes features, such as:


  • A desktop and mobile interface

  • A product catalog with product descriptions and images

  • A shopping cart software system for customers to keep track of the items that they want to purchase

  • A checkout process where customers can enter their shipping and billing information

  • Secure website security features to ensure the protection of your data and that of your customers

  • High uptime and site reliability to handle large numbers of traffic to an ecommerce site - Wix sites have 99.98% uptime, for example

  • Secure payment processing

  • Order tracking and customer support resources



what is ecommerce - website


Types of eCommerce businesses


The main types of ecommerce include:



Business to consumer (B2C)


Business to consumer is one of the most common types of eCommerce models. B2C businesses sell goods and services directly to the end customer, and can include anything from physical products to online services. Think: Amazon, Nike or an online tutoring business.



Business to business (B2B)


Business-to-business models are also very common, and refer to companies that provide goods or services for other businesses. B2B eCommerce covers a wide range of businesses, including wholesalers, raw material manufacturers and service providers.



Consumer to consumer (C2C)


Any transaction done between two people, rather than business entities, is considered consumer to consumer. This type of business model includes transactions done on platforms such as eBay or Craigslist, or on social media marketplaces like Facebook Marketplace.



Consumer to business (C2B)


Consumer to business covers services provided by individuals, for businesses. This model is often used to include freelancers and other small service providers. A common form of C2B is when a business purchases stock images, videos or music created by individuals.



Business to government (B2G)


Business to government provides products and services for the federal or local government to purchase. These include a wide range of sectors like cyber security, waste management, urban planning, etc.



Government to business (G2B)


Government-to-business transactions reverse the B2G model. This model is often used to refer to information that companies can purchase access to, such as blueprints or legal files.




what is ecommerce - types of


Examples of eCommerce business models


There are several types of common eCommerce businesses that operate under the structures listed above. A useful way of breaking them down is by explaining the various types of products or services they offer.



Dropshipping


Dropshipping is a business model in which you can sell products online without physically holding any inventory. Think of it as being the middle-person who connects the customer with the manufacturer or supplier.


When a customer places an order for a product in your online store, the order details are forwarded to a trusted supplier, like Modalyst. (Alibaba, Taobao and Aliexpress are China based suppliers and wholesalers popular with global drop shippers). The supplier then ships the product directly to the customer. When you start a dropshipping business, you don't have to stress about logistics, manufacturing, inventory, warehousing or order fulfillment. You're also not limited by space—you can sell an unlimited array of products.


Take Wix merchant The Boho Birdy, for example. The Australian e-tailer offers a wide array of clothing, including colorful boho, beach and bridal fashion, housewares and baby items to a global customer base. According to the store’s FAQ page, it partners with “suppliers and manufacturers to ship directly to … the customer.”




what is ecommerce - dropshipping examples


Print on demand (POD)


The print-on-demand business model is a form of dropshipping. As a business owner, you’ll create designs and artwork, then select what products you want those designs printed on. A third-party supplier or print on demand company like Printful handles the actual printing, fulfillment and shipping.


When starting a print-on-demand business, you can choose from all kinds of products to offer, spanning T-shirts, hats, coffee mugs, phone cases, stickers and more. Plus, you have the freedom to experiment with designs until you hit your stride with one that takes off with your customer base.


For example, Wix user LemonMade Apparel operates a print-on-demand business model that partners with social media influencers. From LemonMade’s storefront, buyers can browse shirts, tote bags, ornaments, stickers and other merchandise for their favorite influencer. Both LemonMade and the influencers receive a portion of the sales.




what is ecommerce - print on demand examples


White labeling


While labeling is another form of dropshipping where you can create your own brand without the need to develop products from scratch.


With white labeling, you’ll sell products that are already successfully produced by another company under your brand name. Your company name, logo and designs will appear on the packaging. The white label provider handles product development, manufacturing and fulfillment.



Private labeling


Private labeling involves selling products under your own brand, but having them manufactured by a third-party. This is a common practice for eCommerce businesses that don’t have the capabilities, space or capital to handle their own manufacturing.


Private labeling differs from white labeling in that the products are unique and exclusive to you and your business, while white labeled products are generic. Some providers will also handle fulfillment for you.


This approach lets you build a unique brand identity without the headache and expense of product development or manufacturing.



Ghost commerce


Ghost commerce also involves selling products under your own brand while keeping the source confidential. The foundation of a successful ghost commerce operation lies in establishing a website or online store, producing engaging content, and cultivating a strong social media presence. Characterized by low operational costs and straightforward setup, this model allows you to operate efficiently, relying on your marketing capabilities and customer service skills. Like dropshipping, you will want to find a reliable manufacturer to partner with.



Subscription service


Finally, another common eCommerce business model is subscriptions. Subscription box services help you gain repeat orders and customer loyalty. For a set price, your company will create and/or curate a package of products or services delivered at set intervals—usually every month or every three months. You can offer incentives for long-term commitments at a reduced monthly cost (e.g., offering a 15% discount if a customer buys a three-month subscription rather than one month).


Common examples of subscription services include meal prep delivery (like Hello Fresh or Blue Apron), fashion boxes (like Stitch Fix or Nuuly), streaming services (like Netflix or Hulu) and software as a service (like Adobe Creative Cloud or Ahrefs).


Wix user House of Suppliez utilizes this model in addition to their offering of supplies and classes for professional nail and lash technicians. Their monthly subscription box offers a curated collection of nail and lash products for professionals in the industry.



what is ecommerce, subscription business


Types of eCommerce products



Physical products


Businesses that sell their own physical products online are common, and are often what people refer to when they mention eCommerce.These online stores include both retailers and wholesalers that sell any sort of physical product; this could include clothes, books, groceries, gardening accessories, artwork, etc.


Most businesses that sell physical goods online operate through their own store website, and/or as a merchant on an eCommerce marketplace like Amazon or Etsy.


Artist and Wix user Lauren Simpson is a great example. Lauren’s website and online shop features prints, cards and stickers depicting an incredible series of paintings inspired by the Alaskan wilderness.



what is ecommerce, physical products


Services


There is an endless variety of services you can purchase online, from hiring freelancers to streaming movies. As such, not all service-based eCommerce businesses operate similarly.


Many business owners sell their services on their own website or on a dedicated platform for similar services. It’s also not uncommon for a business to ask first-time customers to contact them or fill out a form, rather than purchase the service upfront. This often depends on the type of business, as well as the clientele.



Digital products


There’s a type of eCommerce product that’s sort of in between physical products and services—digital products. This sector has gained popularity over the past couple decades with the growth of online retail. It includes software, music files, in-game purchases (in video games) and more.


Digital products are the easiest to provide to the customer, as it’s just a matter of enabling a download. They also have the added benefit of being freely duplicatable, as opposed to a physical product, which requires manufacturing.


See Sewn Ideas for inspiration here. This Arizona-based online shop offers a complete line of PDF patterns for various shapes and styles of handbags, designed for everyone from beginners to advanced sewers. Once you pay for a pattern, you also unlock a password to access instructional videos.



what is ecommerce, digital products


Pros and cons of eCommerce


There are many reasons to start an online business. But before you start bouncing around eCommerce business ideas, it’s important to understand what advantages and challenges eCommerce holds.



Pros of an eCommerce business


  • Low investment and operational costs: Compared to a physical brick-and-mortar storefront, eCommerce requires a much smaller initial investment. Instead of renting a location and remodeling it to create the perfect store, you simply need to create a website. Operational costs are also much lower, as you can avoid the rent and high utility bills associated with physical storefronts.

  • Stays open 24/7: Online stores and online auctions, as opposed to physical businesses, aren’t limited to business hours. An eCommerce business can operate 24/7, always generating income, even when you sleep.

  • Reaches more customers: By operating your business online, your clientele isn’t limited to a physical location. Your online store or mobile eCommerce app can cater to customers around the world, shipping internationally from day one. Ecommerce in emerging markets, such as China and India, is also on the rise in terms of both sellers and buyers.

  • Fast and easy for customers: Letting your customers order their products online and receive them at home makes the purchasing process much faster and simpler than going out to the store. Online shopping also gives them the additional convenience and flexibility of payment options, such as one-click purchases via digital wallets such as PayPal or Apple Pay. This means customers are more likely to make impulse buys, as well as come back for more, given they’re happy with your products.

  • Facilitates omnichannel retail and selling: Thanks to platforms like Wix that let you manage multiple sales channels in one place, you can easily list one product on various online platforms—online store, mobile app, social media (Tik Tok for example), online marketplaces (Ebay, Etsy, etc.)—to increase your chances of making a sale.

  • Easily scalable: Scaling up an eCommerce business is much easier than scaling up a physical one. Sure, you may need more storage and have to hire a few employees to deal with order fulfillment and other tasks, but you won’t have to find new locations or hire enough employees to run an entire store.



Cons of an eCommerce business


  • Harder to interact with customers: Most of the disadvantages of eCommerce stem from the inability to physically communicate with your customers. This makes it harder to understand their needs and to make sure they’re happy with your business. To counteract this, it’s important to keep in touch with your customer base however you can, be it social media, emails, surveys, etc.

  • Shoppers can’t try before they buy: In an online store, customers can’t physically try on clothes, test gadgets or even get a general feel from just holding an item in their hands. Many online stores offer a free return policy to ensure their customers don’t hesitate. Great product photos and videos can also help give your customers a better understanding. Learn more about ecommerce photography in our guide.

  • Faulty tech can ruin sales: When your business is online, any error or bug can cost you. There are many unexpected hurdles that can pop up—transaction errors, glitchy page designs, server crashes and more. These can not only botch a sale, but also deter customers from coming back to your online store. Make sure to build your website and store using a platform with a history of site reliability. Wix, in particular, has a proven track record of minimizing these issues.

  • Crowded and competitive: In many cases, eCommerce is more competitive than physical retail. Rather than compete with other businesses in your town or neighborhood, you’re competing with the entire world. Things can get ugly trying to compete on product and shipping prices, especially with bigger companies that can often undercut you on both. Good marketing is the key to success in eCommerce and standing out from the crowd.



Where different types of eCommerce take place


Ecommerce can take place in spaces all across the internet. Different types of eCommerce can take the following forms:


  • Online store: An online store is the most straightforward and customizable option for eCommerce. A platform like Wix allows businesses to create and manage their own online stores easily. Its success can be attributed to its user-friendly interface, scalability, affordability and wide range of features.

  • Social commerce: This is the practice of selling products through social media platforms. Businesses can create online stores on these platforms or use them to promote their products and generate sales. These days, you can even conduct transactions directly through social platforms in most cases. Some popular social commerce platforms include Facebook, Instagram and Pinterest.

  • Mobile commerce (mCommerce): This is the practice of buying and selling products through mobile devices. Mobile commerce is becoming increasingly popular as more people use their smartphones and tablets to shop online. Some popular mobile commerce platforms include apps from Amazon, eBay and Walmart.

  • Online marketplace: These are websites that allow sellers to list their products for sale. Some popular marketplaces include Amazon, eBay and Etsy. Marketplaces offer a variety of benefits for sellers, including access to a large pool of customers, reduced marketing costs and simplified payment processing.



what is ecommerce - ecommerce marketplaces


Getting started with eCommerce


If you’re looking to create an eCommerce business, starting an online store is a great first step. These five steps will get you off on the right foot:



How to start an eCommerce business in 5 steps




01. Choose what to sell online


The first thing you’ll need to do before you learn how to sell online is decide on what you actually want to sell.


Start by identifying your interests and passions. It's much easier to dive into a project when you're enthusiastic about it. Then, do some market research, taking notes on what similar online stores are doing. Look at trends, including what's popular, what's unique and what’s profitable. Don't be afraid to fill a niche—it's often where the magic happens. Remember, your products should not only resonate with you, but should also resonate with your potential customers.



02. Build and design your ecommerce website


To start your online store, you’ll need to make your own website to sell using a platform that can facilitate eCommerce. That’s where Wix comes in. Wix is an all-encompassing, end-to-end solution for e-tailers of all sizes. Through Wix, you can sell goods through your online store, social media and sales channels, or in-person with Wix point of sale software. You can additionally manage shipping, inventory, shopping cart software, marketing, analytics and more, all from one unified dashboard.


Once you build your website and create your store, it’s time to design it. Ecommerce website design is crucial in creating a positive shopping experience and can make or break an eCommerce business. Wix offers hundreds of designer-made online store templates that you can customize to your own preferences.


It’s time to design your dream store. Sign up for Wix today.



03. Find a manufacturer


After you’ve decided on a product, or line of products, you’ll need to figure out how to manufacture them. The type of manufacturer you need to find depends entirely on what kind of products you’ll be offering, and how many.


Alternatively, you may choose to dropship or only offer digital products and services, in which case you may not need a manufacturer at all.



04. Find shipping partners


Shipping is a big part of any online store. You want every single customer to receive their products fast and in one piece. To pull that off, you’ll need a great eCommerce shipping company.


Look for a shipping company with a track record of reliability; remember, your own business reputation is at stake with each delivery. Speed is important, too, since fast delivery times can give you an edge in online shopping. Finally, consider excellent customer service. When things go wrong, you need a shipping partner who can address concerns quickly and efficiently.


Again, for business models centered around services, digital goods or dropshipping, you may not need to worry about this step. But, for digital sales, you still need to make sure your products are distributed properly, meaning emails go out without errors and download links are always live.



05. Connect a payment provider


No business is complete without getting paid. In order to process transactions and receive payments, you’ll need to connect your online store to a payment solution system or process, like Wix Payments.


To ensure customers always have a comfortable way to pay, you may want to provide several payment options, including credit cards, Buy Now, Pay Later, mobile payments and digital wallets like PayPal.



How to make eCommerce work: marketing strategies and tips to get started


The importance of marketing in your eCommerce strategies can’t be understated. It’s a critical part of gaining new customers, as well as retaining your existing clientele. No eCommerce business is complete without it. Below are a few important ways to maximize your marketing efforts.



Optimize your online store’s SEO


One of the most important ways to drive traffic to your online store is by optimizing it to appear higher in search engine results. This is called SEO (search engine optimization).

Boosting the SEO for your online store isn't difficult; it's about consistency and knowing your audience. Start by understanding what your target customers are searching for, and tailor your product descriptions to those keywords. Make sure you answer their search questions. Next, make sure your website is easy to navigate, loads quickly and is mobile-friendly. Good SEO is a marathon, not a sprint.



what is ecommerce - marketing it


Make use of content marketing


Content marketing is a common practice in starting a business of any type. In short, it means creating engaging blog posts, newsletters, social media posts and other content to attract visitors to your website. Using content marketing wisely, in conjunction with SEO, can have a huge impact on your store’s traffic.



Utilize Facebook and Google Ads


Facebook Ads and Google Ads are two of the most common paid advertising channels for eCommerce, and they can be very effective. Between Facebook, Instagram and Google, you can cover an enormous share of all internet users.


With all that reach, you’ll need to be very precise when setting up your campaign, or you risk spending your marketing dollars on the wrong audiences. Wix can help you with built-in functionality to create, run and manage Facebook and Instagram Ads, as well as Google Ads.



creating facebook ads


Stay in touch with your customers using email


Marketing emails are a great way to stay in touch with your customers after you start an online business, letting them know about new products, sales or even to send a friendly holiday greeting. Email marketing is considered to have one of the best returns on investment (ROI) in eCommerce marketing; WebFX reports that this can be as high as 4,400%. Another great eCommerce marketing tool can be creating flash sales which you can promote via email.



eCommerce regulations and global guidelines


There are many regulations and laws governing the practice of eCommerce globally.

In the US many of these can be found here. Examples include, Electronic Signatures in Global and National Commerce Act which validates contracts with an electronic signature and is designed to protect consumers who must give consent to a purchase. The Federal Trade Commission Act (FTC Act) aims to protect consumers, incuding those buying online, from deceptive trade practices - it makes it mandatory for companies to publish a privacy policy, to put in place data security measures (to protect consumers private information and payment details) and puts the onus on businesses to refrain from false advertising in any form.


Other countries have enacted similar legislation or bolstered it as eCommerce grows in popularity, for example:





eCommerce trends, current and emerging


eCommerce continues to grow both in terms of the number of online stores available and the growing numbers of consumers purchasing online. Over the last few years a few trends have emerged including:


  • Omnichannel shopping: Integrating physical and digital shopping experiences for a seamless customer journey. Let's say a consumer searches for shoes on her phone. She researched a specific brand. Later that day or week she receives a targeted email from the shoe brand she researched earlier. She then visits the brand's physical store to try on the shoes. Maybe she then uses the mobile app to pay and receives an SMS receipt. Or the shoes are not in stock in store in her size, so the sales assistant helps her order them online with delivery to her home.

  • Mobile-first shopping: Consumers shop on their phones, this has been a rising ecommerce trend for awhile now. However an emerging trend is big ticket purchases from the mobile. Many consumers still prefer to make big purchases, such as airline tickets or furniture, from a computer. ecommerce retailers are trying to shift this focus to get more sales made from mobile due to it's accessibility, buy from anywhere.

  • Social commerce: Selling online via social media has taken off in a big way, whether it's brands directly selling or via influencers. How long consumers enjoy being sold to from social media, remains to be seen with some pushback against sponsored content. In 2022 over US$992 billion was spent on goods bought via social platforms. Thailand and India are the two biggest markets for social commerce. It's anticipated to reach $8.3 trillion by 2030.

  • Sustainability and ethical brands: While fast fashion remains popular in the world of online selling, there is a growing shift away from it. Consumers are more aware than ever that often cheap online goods means an impact down the production line, either on the environment or in poor conditions for those involved in their manufacturing. eCommerce brands that that prioritize eco friendly products are gaining in popularity as a result.



What is eCommerce FAQ


How to make money with eCommerce?

Making money with eCommerce involves creating a successful online business that generates revenue through the sale of products or services. It starts with choosing the right eCommerce model or type. From there you'll need to choose a specific product niche or category to sell. Then, do your market research, choose an online store builder such as Wix, source customers and market your site.

What is the difference between eCommerce and eBusiness?

Is eCommerce worth it?

Is eCommerce easy?

What are the different eCommerce revenue models?

What's the future of eCommerce?


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