How Does eCommerce Work?

ByVladana Donevski
February 02,2022

Many will say that shopping from the comfort of your home is the best way to shop. Luckily, many merchants jumped on board and seized this opportunity - which is why we can now shop without having to get out of our pajamas. Catalogs moved to the internet, and eCommerce (short for electronic commerce) allows you to have everything delivered to your doorstep with just a couple of clicks.

ECommerce is one of the biggest industries these days, weighing trillions of dollars. If you are interested in selling your product or service online, you might be wondering, “How does eCommerce work?” Let’s dive in and explain this skyrocketing market in detail.

What Is eCommerce?

The simple definition of eCommerce is that it is a business model that allows people to buy and sell products and services on the internet. Nowadays, you can buy almost anything through your computer, tablet, or mobile device. It's this convenience that's making it one of the fastest-growing markets.

Almost every retail business now has an eCommerce shop as an addition to their brick-and-mortar ones. Online-only retail business numbers are growing each day, too, and many shops have closed their physical doors in favor of an online storefront. After all, sellers want to be where their customers are.

So, if you want to become a part of an eCommerce world, let’s discuss what makes an eCommerce store. We'll cover its types, how eCommerce businesses work, and how to start an eCommerce store yourself.

What Are the Aspects of the eCommerce Industry?

An eCommerce system doesn’t differ much from a regular physical store. It all starts with a product you want to sell. From there, you would need a place to sell the product. In eCommerce, your website is your store - the site takes on the role of the shelves and display, and your customers use it to browse and purchase your goods.

The internet is a crowded place, so it will be hard for your shoppers to just stumble upon your store. You have to attract them, so catchy and carefully planned eCommerce marketing will be crucial to your success.

Once customers start shopping on your site, they’ll have to be able to order and pay you for the products. You’ll also need to put some security measures in place, as you’ll be dealing with a lot of sensitive information.

Figuring out how to get the product to your customers’ doorstep is the next link in the chain. You’ll typically need to sort out a fulfillment method and shipping, unless you are selling digital goods.

ECommerce sites also have to handle returns and, if applicable, warranty claims. To do this, you need to find a way to provide support to your customers. In a regular brick-and-mortar business, you have shop assistants to accommodate your buyer’s requests. You can rely on email, phone calls, online forms, or live chat.

Depending on your business model, you might want to add additional features for a better user experience and more satisfied customers.

How eCommerce Works

Typically, your customers will land on your site with some help from the search engine where they looked for a product you sell. They could have also clicked on a paid ad, social media image, or received a recommendation from a friend.

Your eCommerce site then presents them with your listed products, with images, descriptions, and prices. The customer browses, selects the product they like, and places them in their virtual shopping cart. If they decide to make a purchase, they will head on to the check-out page.

There, the shopper completes the check-out process. They add their payment information and finalize the transaction. The order is then processed by a payment gateway, for example, your bank or PayPal. This step provides secure payment processing.

In the meantime, your website provides the customer with information about their order. It could be estimated shipping times, postal tracking numbers, or other information they need to track their purchase.

As mentioned, the next step for ​​eCommerce services is order fulfillment - or the actual process of getting the goods delivered. Depending on who stores and ships the product, it could be an in-house team or outsourced to an order-fulfillment company.

Of course, the last step is the product arriving to your customer’s address. You want to ensure that the customer is satisfied with the product and service provided, so you might forward them a survey inquiring about their impressions once the order is delivered. 

Types of eCommerce

Your business model when setting up an eCommerce company will typically fall under one of the four main categories:

B2C (Business to Consumer)

The first type of eCommerce we’re going to cover here is the B2C model. It’s the one people are most familiar with: A business sells directly to consumers; Amazon is a great example.

B2B (Business to Business)

The business-to-business model is one where a company sells to another company. Outside the internet, we associate this business model with wholesalers. However, it’s also used by companies that sell ready-to-use software to other businesses, for example.

C2C (Consumer to Consumer)

The C2C model was popularized by digital commerce platforms that allow regular Jos to sell products or services to other regular Jos. Some good examples of the C2C model are eBay and Etsy.

C2B (Consumer to Business)

This model is used when a business extracts extra value from its consumer base, like when influencers get paid to promote a product, or customers agree to share their data for market research purposes in exchange for discounted goods.

To make understanding eCommerce easier, let’s discuss the different shapes these models can take:

Of course, the most common kind of eCommerce is retail - businesses selling directly to their customers. But, there are also wholesale eCommerce sites that sell products in bulk, as well as stores selling digital products to companies and consumers alike. On a whole different level, dropshipping businesses work together with wholesalers, so they don’t have to handle inventory and shipping.

Subscription-based eCommerce websites recurrently sell the same product on an agreed schedule. Of course, people can also offer their services on eCommerce sites.

Overall, eCommerce can take many forms. As long as someone is selling or buying something via the internet - it is eCommerce.

eCommerce vs. Traditional Stores

There are many benefits to starting an eCommerce business over opening a brick-and-mortar shop. For example, your reach will be much broader. Expanding your business globally is also much easier to do online, as you won’t be limited to the customers in the vicinity of your physical store.

What’s more, one of the many benefits of eCommerce is that your overhead costs are typically much lower. Not only do you get to avoid rent, but your transaction costs will also likely be cheaper. Also, with this type of business, you can rely on different inventory management software for help, and outsource your customer support, instead of having to hire employees.

If you decide to join the eCommerce system, it's good to know that the right software can automate many aspects of your day-to-day business operations. For example, with the dropshipping model, entrepreneurs don’t even have to handle inventory or shipping. All the dropshippers need to do is forward the order to their supplier.

With eCommerce, there is also no limit or rule on what you can sell. Just like you could order an entire house to be shipped to you by mail via a catalog back in the day, the same goes for eCommerce. Golf clubs, children’s Halloween costumes, plants, or candy - if you can think of it, there’s someone on the internet who’ll want to buy it.

Speaking of customers, starting an eCommerce business means earning regulars quickly, thanks to the wide selection of software that can help you establish a connection with your customers. There are also tools to provide excellent support to your buyers and have them rely on you for your product or services for as long as you are in business.

However, there are also cons to this type of selling. It takes a bit of a tech-savvy customer to shop online, which narrows the customer base slightly. Also, people might feel reserved about shopping online because they can’t touch or see the product before purchasing. Lastly, there is also the lack of personal shopping experience that some people appreciate.

Lastly, the biggest issue is security: eCommerce stores are often targets for hackers, and your customers’ personal and payment data can be in danger unless you introduce strong safety measures.

How to Start an eCommerce Business

Starting this type of business is no mean feat. You’ve got many things to check off your to-do list before the launch:

The first step is, of course, figuring out what you would like to sell. Are you going to offer physical or digital goods, or your services? How will you obtain the products - are you manufacturing them yourself or relying on a wholesaler for your inventory?

Once you have these basic questions answered, it is time to research the competition and their prices, and crunch the numbers. This will also allow you to see how saturated a particular niche is and find out what you can do better to rise above other eCommerce companies.

It will also give you a great insight into the prices you can expect to charge and pay for running your store. You should use this information and the information on how much it will cost you to fill your inventory to gauge your margins. If the idea is viable, and there is a market, then it is time to start working on your store. 

How to Build Your eCommerce Store

Typically the first step is to define your eCommerce store’s name. You should have a domain name pinned down before you get down to building the site. Your domain name should match your store's name, and should be descriptive of what you’re selling, so take your time with it. You also want it to be memorable and, most importantly, unique.

Building your store is the next step. You can approach this by using an eCommerce website builder or relying on an eCommerce platform to help you get set up. Your store should be easy to navigate, have detailed descriptions of the products, excellent visuals, and a simple payment process. Making your eCommerce web design as memorable as possible and adding as many payment options as possible is a good idea.

You should also consider adding features that will help you maintain and promote your store as effortlessly as possible. For example, tools for promo codes or options to start eCommerce sales without changing the price for each product manually.

Once your store is complete, it’s time to find your customers. Start by working on your SEO first, then start advertising. There are many marketing approaches you could take, from social media and email marketing, to paid ads. Which one will work best depends entirely on what kind of product or service you’re selling and who your target customer is. Understanding who your perfect customer is will help you narrow down your eCommerce marketing to-do list, and significantly increase your revenue.

Even after the launch, your job is not done. You need to keep an eye out on your store’s KPI, conversion rates, and overall performance at all times, and look for room for improvement. You might need to find cart-abandonment solutions, or improve your support system. You’ll also have to manage inventory, negotiate with wholesalers and suppliers, and provide support to your customers. And if you want to have many new customers at all times, marketing never stops, either.

FAQ
What are the main features of an eCommerce website?

A successful eCommerce website, by definition, puts its customers first. Excellent navigation and an easy-to-use checkout are a must. The website should also feature many payment options to accommodate as many users as possible. Promotion and discount tools are also excellent features to have.

From the business owner’s side, a good eCommerce site has excellent content management and scaling capabilities. It should allow easy maintenance, product addition, and marketing. You need email marketing features and search-engine-optimization tools for a good eCommerce site.

Is eCommerce safe?

Shopping on eCommerce websites is typically safe, especially with big and renowned companies. Still, it would be best if you always double-check things before entering your credit card information anywhere on the web. Check whether there is a lock symbol in the address bar that indicates that the company is using an SSL certificate. Also, double-check the actual address of the eCommerce site for any typos, and trust your gut - if it feels fishy, try shopping on another platform.

What is an eCommerce website?

An eCommerce website is nothing more than a website that has all the features one needs to buy or sell products. An essential part of the answer to “How does eCommerce work?” a website takes on the role of an actual storefront. Retailers can display their products, and buyers can browse and shop - all from their devices.

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Conversion Strategies Will Focus on Building Trust In order to convert leads into customers, businesses need to focus on building trust. Multi-channel selling, Facebook advertising, and Instagram marketing are great ways to convert leads into customers, provided you focus on building trust with your target audience.  As recent online sales trends indicate, consumers are more and more skeptical of advertising and are looking for brands they can have confidence in. This can be achieved in a number of ways, such as by displaying customer testimonials and reviews, social proof, and security seals. Another way to build trust is to offer a money-back guarantee or free shipping. This shows that you are confident in your product and that you are willing to stand behind it. 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However, big data carries big challenges as customers are more and more concerned about data privacy. So, businesses need to make sure they are handling customer data responsibly and transparently if they want to keep using it to boost profits. Mobile Commerce Will Continue To Grow Mobile commerce is expected to continue growing in the coming years. According to statistics, mobile devices are used for over 40% of online transactions, their rising popularity indicates that this is one of the trends in online shopping that’s here to stay. Mobile commerce offers a number of advantages for businesses, such as increased reach, shorter buying cycles, and improved conversion rates. It also offers many advantages for customers, including the ability to shop anywhere at any time. If you want to stay ahead of the competition, it’s important to make sure your eCommerce platform is mobile-friendly. This means having a responsive design that looks good on all devices, as well as providing a smooth and easy-to-use mobile shopping experience. Omnichannel Selling Will Become the Norm Omnichannel selling is a term used to describe the practice of selling products through multiple channels, such as brick-and-mortar stores, online stores, mobile apps, and more. This eCommerce trend and approach allows businesses to reach more potential customers and provides a more seamless shopping experience. In the past, businesses have often treated each selling channel as a separate entity. However, this is changing as more and more businesses are adopting an omnichannel approach. This shift is driven by the increasing popularity of online shopping and the need for businesses to provide a more cohesive customer experience. As omnichannel selling becomes more common, it’s important for businesses to make sure they’re building eCommerce websites that can support it. This means having a platform that is integrated with all of your other selling channels and that provides a consistent experience for customers regardless of how they shop.  Environmental Sustainability Will Play a Big Role As we become more and more aware of the impact our consumption has on the environment, sustainability is becoming an important factor in purchasing decisions. Customers that follow new online shopping trends want to know if the products they’re buying have been ethically sourced and if the company they are buying from is taking steps to reduce its carbon footprint. In order to stay ahead of the competition, businesses need to make sure they’re considering environmental sustainability in all aspects of their operations. This includes everything from the sourcing of materials to the packaging and shipping of products. Customers are now more willing to pay extra for sustainable products, so there is a big opportunity for businesses that are able to meet this demand. How To Make the Best Use of ECommerce Trends ECommerce is constantly evolving, and it can be difficult to keep up. However, by staying informed and making sure your eCommerce platform is up to date, you can ensure that your business is able to stay ahead of the competition. To make the most of the latest eCommerce developments, consider the following: 1. Keep Up With the Latest Trends To stay on top of your game, you must be proactive and regularly seek out new information. There is a number of ways to do this, such as reading industry news, following relevant blogs and industry influencers, and attending eCommerce conferences. You can get to know what’s going on in the industry and find inspiration for your own business.  Read up on the research data and statistics that are available on eCommerce growth trends. This can help you understand the current landscape and make informed decisions about where to focus your efforts.  2. Take Advantage of Digital Tools There are a number of digital tools that can help you improve your eCommerce business. From marketing automation software to customer relationship management systems, there’s a variety of features that can make it easier to run your business and provide a better experience for your customers. Check the data and sales figures, and invest in analytical tools so you can understand where your customers are coming from and what they are looking for. 3. Learn From Your Competitors It’s important to keep an eye on your competitors to see what they are doing and how they are reacting to the latest eCommerce retail trends. You can learn a lot from observing their strategies and understanding their strengths and weaknesses. Should they fail, you can learn from their mistakes. If they succeed, you can try to replicate their success. Final Words As the global eCommerce ecosystem continues to grow and evolve, it's important to stay on top of the latest trends. Instead of leaning on traditional shopping methods, more and more consumers are turning to the internet to purchase items. Mobile phones play a big role here, as they provide a convenient way to shop on the go. What's more, consumers are getting more comfortable with new technologies such as AI, AR, chatbots, and voice search. These eCommerce trends in technology are changing the way we interact with eCommerce platforms and retailers. With all that said, we're confident that you now have a solid understanding of the current eCommerce landscape. Just remember to keep your eyes peeled for new trends so you can stay ahead of the curve.
By Danica Djokic · September 15,2022
As a business owner, you are likely responsible for overseeing all aspects of your company’s operations. This includes setting your own salary. This decision can be difficult to make, especially if you’re not sure what’s standard or how to determine what’s appropriate for your situation. In this article, we’ll discuss some factors you should consider when deciding how much to pay yourself as a small business owner. What To Consider When Setting Your Salary Setting your own salary can be daunting, especially if you’re a freelancer or small-business owner. After all, you need to make enough money to cover your expenses and earn a profit, but you don’t want to price yourself out of the market. So, what factors should you consider when paying yourself from your business? Business Structure One of the first things you should consider is your company’s business structure. Are you a sole proprietor? Do you have a business partner? Are you an S corp? Your company’s business structure will affect how much money you take home and how much in taxes you need to pay. For example, if you’re a sole proprietor, you’ll likely take home less money than if you’re running a corporation because you’ll be paying taxes on both your business income and personal income. On the other hand, if you’re running a corporation, you’ll only be taxed for your corporate income. This means that more of your business profits will stay within the company, which can be reinvested or distributed to shareholders. Business Expenses Another factor to consider when paying yourself as a small business owner is your business expenses. How much does it cost to run your small business? You should consider expenses like rent, utilities, payroll, and marketing. You’ll need to make enough money to cover these costs, plus your personal living expenses. One common mistake small business owners make is not accounting for all of their business-related expenses. Make sure you have a clear understanding of all the costs associated with running your business before you start setting your salary. Personal Living Expenses In addition to business-related expenses, you also need to account for your personal expenses, such as housing, food, transportation, and health care. Again, one common mistake people make is not accounting for all their personal expenses when calculating the business owner’s salary. Industry Standards Another factor to consider is industry standards. What do other businesses in your industry pay their employees? This will help you determine a reasonable salary for yourself as the business owner. Of course, you don’t want to undervalue your services.  Ultimately, setting your salary comes down to determining what you need to earn to cover your costs and make a profit and then finding the right balance between pricing yourself too high and too low. By taking the time to consider all the relevant factors, you can ensure that you set a fair and competitive price for your services. How to Calculate Your Owner’s Pay You should consider a few balance sheet items when calculating your salary as a small-business owner. These include your monthly net income, all business-related taxes and fees, and business expenses.  According to some small business revenue statistics, 86.3% of small business owners earn less than $100,000 a year. However, this does not mean you must stay within this bracket. Below are some steps you can take to get a clear picture of a small business owner’s salary and how to calculate it yourself. Calculate Your Monthly Net Income Your monthly net income is the total revenue your business brings in minus any taxes or fees. This number can fluctuate from month to month, so it’s important to take an average over a period of time to get an accurate number.  Next, you’ll need to subtract all business-related taxes and fees. This includes income taxes, self-employment tax, and any other business-related expenses. Once you have your monthly net income minus taxes and fees, you’ll be left with your profit.  Calculate Your Tax Savings The next step in calculating owner pay is determining your tax savings. This includes any deductions you can take for business expenses, home office expenses, and health insurance premiums. You can consult with a tax professional or use a tax calculator to get an accurate number. Once you have your tax savings figured out, you can add this amount to your monthly net income to get your total monthly compensation. Calculate Your Business Expenses The final thing you’ll need to consider when setting your salary is your business expenses, including office rent, utilities, supplies, and employee salaries. Once you know how much it costs to run your business each month, it will be easier to calculate how much to pay yourself as a small business owner. One mistake many small business owners make is not accounting for their salary when calculating their business expenses. This can lead to severe financial problems down the road, so be sure to include yourself in the equation. By following these steps, you should be able to come up with fair and reasonable compensation for yourself as a small business owner. Remember to avoid common mistakes, and you’ll be on your way to success.  Ways To Pay Yourself As a business owner, you have two options: Either pay yourself a salary or take distributions from your small business. Here are the pros and cons of an owner’s draw vs. a salary.  Paying Yourself a Regular Salary To pay yourself a regular wage, just like you would an employee, you’ll need to set up payroll for your business and withhold taxes from your paycheck. One advantage of this method is that it can help you separate your personal and business expenses and make it easier to track your business expenses come tax time. The downside of drawing a salary is that it’s subject to payroll taxes, which can eat into your earnings. Additionally, if you have a slow month or two, you may find yourself struggling to cover your personal expenses if you’re relying solely on your business income. An Owner’s Draw If you are self-employed and paying yourself a salary, an owner’s draw is another method you can use. This method is often used by small business owners with irregular or variable income. With an owner’s draw, you simply draw money out of your business bank account as needed to cover your personal expenses. One advantage of this method is that you don’t have to worry about payroll taxes. Additionally, it can give you more flexibility regarding how much money you take out of your business each month. However, one downside is that it can be challenging to track your small business expenses come tax time. So, which method is right for you? How to pay yourself as a sole proprietor? Ultimately, it depends on your circumstances and the needs of your business. If you have a stable and predictable income, having a regular salary may be the best option. However, if your income is variable or unpredictable, an owner’s draw may be a better option. Final Thoughts Paying yourself as a business owner can be a tricky task. And there’s no universal rule on how much business owners should pay themselves. However, by following some simple guidelines, you can ensure that you are fairly compensated for your work without putting your business finances at risk.  What’s most important is to find a method that works for you and your business. And, of course, to avoid any common pitfalls.
By Nikolina Cveticanin · September 14,2022

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