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As a result of the boom in e-commerce, more and more traditional businesses are also making the leap into the digital world. This allows them to reach a much larger audience and to broaden their commercial horizons.
If you are also considering creating a company to market your products or services online, there are several things you should know before taking the first step. It is important to acquire specific e-commerce training in order to succeed on your digital journey, such as the free training offered through the Amazon Despega programme.
As a starting point, this guide will provide you with a full definition of e-commerce, its origin and history, the different e-commerce models that exist and how they are classified, and their main advantages and disadvantages.
We also offer you some fundamental guidelines for you to set up an e-commerce business and start selling online, as well as lots of tips and guidelines on how to create a successful e-commerce business using marketing tools, the right fulfilment strategy, efficient inventory management etc.
If you are also considering creating a company to market your products or services online, there are several things you should know before taking the first step. It is important to acquire specific e-commerce training in order to succeed on your digital journey, such as the free training offered through the Amazon Despega programme.
As a starting point, this guide will provide you with a full definition of e-commerce, its origin and history, the different e-commerce models that exist and how they are classified, and their main advantages and disadvantages.
We also offer you some fundamental guidelines for you to set up an e-commerce business and start selling online, as well as lots of tips and guidelines on how to create a successful e-commerce business using marketing tools, the right fulfilment strategy, efficient inventory management etc.
What is e-commerce?
E-commerce, a term that is widely used online by digital users, is the process of buying and selling products and services over the Internet.
Under this business model, which has boomed over the last decade, customers can make their purchases from a mobile device, tablet or computer, as well as from smartwatches and digital assistants, like Amazon's Echo devices.
All you need is an Internet connection and then you can visit any kind of digital store, where the range of products and services is truly endless, from food and fashion to appliances and books. If the product in question exists, there is an e-commerce store that sells it. And it's only a few clicks away.
E-commerce should not be confused with e-business, which encompasses all kinds of companies that operate on the Internet and that use communication technologies to conduct their business and improve their efficiency and reach through marketing tools, for example. In other words, e-business is not just limited to buying and selling products but also includes other activities that form part of a business's operations.
Under this business model, which has boomed over the last decade, customers can make their purchases from a mobile device, tablet or computer, as well as from smartwatches and digital assistants, like Amazon's Echo devices.
All you need is an Internet connection and then you can visit any kind of digital store, where the range of products and services is truly endless, from food and fashion to appliances and books. If the product in question exists, there is an e-commerce store that sells it. And it's only a few clicks away.
E-commerce should not be confused with e-business, which encompasses all kinds of companies that operate on the Internet and that use communication technologies to conduct their business and improve their efficiency and reach through marketing tools, for example. In other words, e-business is not just limited to buying and selling products but also includes other activities that form part of a business's operations.
E-commerce: the past, present and future of commerce
There is no doubt that digital commerce is still booming. And not just in Spain; this type of business has seen global growth since the beginning of the coronavirus pandemic in the first quarter of 2020. In Spain, for example, 23% of all purchases in 2020 were made via the Internet. In fact, by the end of the first year of the pandemic, e-commerce became the solution that allowed us to continue doing our everyday shopping while protecting each other.
Being unable to leave our homes and the closure of physical stores in many countries contributed to this increase in shopping online.
However, although many users have recently started shopping for the first time online, the concept of e-commerce is actually a century old, dating back to around 1920 with the beginning of catalogue sales in the United States. With this new business model, it was possible to purchase a product without physically having seen it or having to go to the actual point of sale.
This innovation offered advantages for both parties, as the customer didn't have to travel and the brand had the opportunity to sell its products to potential customers living in other areas/cities.
Later, as telephones and televisions in homes became the norm, along with the development of the first credit cards and the exchange of electronic data, it became even easier for companies to sell products without direct contact with the customer.
Being unable to leave our homes and the closure of physical stores in many countries contributed to this increase in shopping online.
However, although many users have recently started shopping for the first time online, the concept of e-commerce is actually a century old, dating back to around 1920 with the beginning of catalogue sales in the United States. With this new business model, it was possible to purchase a product without physically having seen it or having to go to the actual point of sale.
This innovation offered advantages for both parties, as the customer didn't have to travel and the brand had the opportunity to sell its products to potential customers living in other areas/cities.
Later, as telephones and televisions in homes became the norm, along with the development of the first credit cards and the exchange of electronic data, it became even easier for companies to sell products without direct contact with the customer.
Television sales, which took off in the 1980s, became an improved version of catalogue sales, as television advertisements offered greater realism and a much more detailed description of the functions and features of the product being advertised.
But, without a doubt, the greatest revolution in e-commerce was the arrival of the Internet in homes in the 1990s. As it expanded, the first online shopping portals were born, which organised products into categories. Over the years, the use of the Internet became more and more normalised, as more and more platforms emerged for online shopping.
Nowadays, the global turnover for online sales is growing year after year, and e-commerce has become a major channel for making purchases. In 2019, 75% of all Internet users worldwide had made a purchase online, and half of these confirmed having done so through a mobile device.
This upward trend means that more and more people are deciding to buy online and, for this reason, different e-commerce models have emerged, including those explained below.
But, without a doubt, the greatest revolution in e-commerce was the arrival of the Internet in homes in the 1990s. As it expanded, the first online shopping portals were born, which organised products into categories. Over the years, the use of the Internet became more and more normalised, as more and more platforms emerged for online shopping.
Nowadays, the global turnover for online sales is growing year after year, and e-commerce has become a major channel for making purchases. In 2019, 75% of all Internet users worldwide had made a purchase online, and half of these confirmed having done so through a mobile device.
This upward trend means that more and more people are deciding to buy online and, for this reason, different e-commerce models have emerged, including those explained below.
What types of e-commerce are there?
Depending on the actors involved in the purchase and sale of products and services, e-commerce is divided into different classes:
B2B e-commerce
On the one hand, we have business-to-business or B2B e-commerce. In this model, transactions are carried out between companies operating on the Internet, i.e. the end customer is not involved. Most wholesale or distribution businesses belong to the B2B model.
B2C e-commerce
On the other hand, business-to-consumer or B2C e-commerce is carried out between the company and the end customer. A consumer visits an e-commerce store to purchase a product or service for themselves.
C2C e-commerce
When the agents involved in the purchase of the product or service are two consumers, it is C2C (consumer-to-consumer) e-commerce. This type of business is usually considered more as a platform to advertise second-hand products than as a regular online store. The main advantage of the C2C model is that it favours the reuse of products, such as clothing, and the option to purchase them at a lower price.
C2B e-commerce
The fourth model, where the consumer is also the origin, is the C2B (consumer-to-business) model. Unlike C2C, where both parties are consumers, the destination of C2B transactions is the company. That is, the customers themselves are the ones who generate value for the companies.
Affiliate programmes are a clear example of this e-commerce model, where e-commerce customers receive a payment or benefit for sharing a link to an online business that then results in another customer making a purchase at the store in question. These links are often promoted on blogs, forums and social media, and are an important part of the marketing strategies of many digital companies today.
Affiliate programmes are a clear example of this e-commerce model, where e-commerce customers receive a payment or benefit for sharing a link to an online business that then results in another customer making a purchase at the store in question. These links are often promoted on blogs, forums and social media, and are an important part of the marketing strategies of many digital companies today.
B2E e-commerce
The business-to-employee or B2E e-commerce model involves a company and its employees; that is, transactions are carried out internally. This model is very common in large corporations that can offer their workers advantages such as discounts and offers for good performance or for meeting objectives.
G2C e-commerce
Finally, there is an e-commerce model that also includes the government: government-to-citizen or G2C e-commerce allows consumers to pay fines or taxes, for example, as well as carry out administrative procedures such as requesting and sending official documents.
What are the different types of e-commerce model?
Now that it's clear that e-commerce is here to stay, if you want to create your own digital business, or want your existing online store to go global, then keep reading.
The term "business model" refers to the way companies generate value. In addition to the traditional system of buying and selling products or services, companies that operate online also use other models such as:
The term "business model" refers to the way companies generate value. In addition to the traditional system of buying and selling products or services, companies that operate online also use other models such as:
Dropshipping
This is a widespread model in e-commerce that is based on the company that sells the product to the customer not having said product in stock, but rather acquiring it from a third party, who ships the product directly to the end customer. In this model, e-commerce acts like a shop window.
Marketplace
This is an online service where buyers and selling partners come together. Buyers have access to a wide range of products and services, and selling partners can reach a multitude of potential buyers.
Auctions
Auction portals are electronic stores that connect consumers with either businesses or other consumers in exchange for a percentage of the sale when it occurs. The main advantage for selling partners is the wide reach of their ads.
Freemium
This model arises from combining the words "free" and "premium" and consists of offering basic service packages free of charge but with advertising, and paid premium packages, which offer more features and usually eliminate disadvantages such as ads.
Subscription
This model is widely used on entertainment platforms, where a product or service with restricted access is provided for a fixed monthly or annual fee. In the case of Amazon, its paid subscription programme, Amazon Prime, already has more than 150 million subscribers globally. The platform aims to double that figure in just five years.
What are the advantages and disadvantages of e-commerce?
Like any revolution, e-commerce has many advantages for society, but undeniably also has certain drawbacks. Below is a brief analysis of the most noteworthy pros and cons:
ADVANTAGES
DRAWBACKS
- The disappearance of geographical boundaries: With e-commerce, companies have been able to reach even the most remote places. People who live in rural areas are now able to get any product or service delivered to their doorstep without the hassle of having to travel long distances.
By the same token, companies have managed to increase their potential customer base. - Reduction in time spent buying: As distances disappear, shopping time is also reduced, as customers don't have to go to a physical store. In just a few minutes, they can visit dozens of online stores in search of the perfect item, with all the convenience and savings that provides.
- 24-hour availability: E-commerce operates without set opening hours or holidays, in contrast to the often limited hours of conventional commerce.
- Increased clientele: If there is one thing that the Internet offers, it's visibility. As such, many companies have succeeded in boosting their sales thanks to online advertising, social media and a comprehensive network-based marketing strategy.
- Ease of finding products: E-commerce has undoubtedly made it easier for customers to find the right product for them. Online sales platforms provide a huge catalogue of products, allowing customers to compare many different items at the same time.
- Ease of advertising products: Sellers have also come up with a solution that streamlines the process of marketing a product. A few photos or videos are enough to present any item to the market.
- Easier entrepreneurship and maintenance: Setting up an online store is completely different to opening a physical establishment, in particular in terms of cost. In addition, maintenance costs are also lower.
- Resistance to take the plunge: Many consumers, especially older ones, are very reluctant to jump into online shopping. The fear of not seeing the product in person and of Internet scams are the main reasons for them rejecting the change.
- Inability to test the product: The resistance we mentioned in the previous point is often due to potential customers not being able to see or touch the product before buying it.
- Increase in the price of the product due to shipping costs: Buying a high-priced item is usually not a problem. But things change when what we're looking for is a very low-priced product that isn't worth the high shipping costs.
- Customer loyalty: The impersonality of the purchasing process and the enormous amount of competition make customer loyalty an arduous task. Businesses need an appropriate marketing strategy that differentiates them from their competitors.
Steps to create your own e-commerce business
As with the creation of any business, the most important thing is to carry out an analysis of the environment. Is there a lot of competitiveness? How can I stand out? What are the legal requirements for the type of business I want to create? These are just some of the questions we need to ask ourselves.
If you've already made your decision and want to open an online store that operates 24/7 without the need to have a physical establishment where you can receive your customers, as well as all the advantages mentioned above, you just need to know what steps you need to take to make this happen:
If you've already made your decision and want to open an online store that operates 24/7 without the need to have a physical establishment where you can receive your customers, as well as all the advantages mentioned above, you just need to know what steps you need to take to make this happen:
1. Choosing a brand, logo and domain
The same things you would need for any conventional business, but instead of physical premises you'll have an Internet domain, which will be the virtual store that your customers will visit. If you already have a physical store, you most likely already have a trademark and a logo, so you will only be one click away from registering your brand.
2. Setting up a content management system
The CMS (Content Management System) is a software that allows you to manage, organise, publish, edit and delete the contents of your web store.
For the CMS, you have to select the products or services that you want to sell in your store.
For the CMS, you have to select the products or services that you want to sell in your store.
3. Finding a good hosting service
Your website will be your virtual store and shop window. If it fails, your store will fail and be closed to the public, which will harm your business. That's why you should invest in the right hosting service, which offers great storage possibilities, bandwidth, usability and strong capabilities for integration with other applications.
It is also recommended that the hosting service provides excellent customer service so that, if there is a problem with the website, it can be resolved as quickly as possible and service can continue to be provided to your customers.
It is also recommended that the hosting service provides excellent customer service so that, if there is a problem with the website, it can be resolved as quickly as possible and service can continue to be provided to your customers.
4. Ensuring an attractive design and interface
It is worth investing a little money to ensure you have a striking interface that is easy to use, that makes you stand out and where the products are easy to find. In addition, the registration or purchase process should not be tedious so as not to deter more impatient shoppers.
5. Providing information to customers
Potential customers will be less afraid of buying from your online store if there is a lot of information available about your company. The more complete the information on your website is (privacy policy, FAQs, contact information, shipping methods, etc.), the more trust you'll gain.
6. Deciding on payment methods
When the customer has already decided to buy your product, it's important that you offer payment methods that match their preferences. Nowadays, payment by bank transfer has been relegated in favour of gateways for credit or debit card payments, as well as virtual wallets such as PayPal.
7. Choosing your shipping methods
In the world of immediacy, customers are increasingly motivated to buy if they know that their order will be delivered as soon as possible. In many cases, this immediacy goes as far as receiving the product the day after purchase. Therefore, having a fulfilment service that offers you this type of service will significantly grow your reach.
8. Creating a marketing strategy
To ensure greater reach and to be visible to your target audience, it is advised that you develop and implement an appropriate marketing strategy. Posting on social networks or blogs, sending newsletters, and employing referral programmes or affiliate links are just some of the techniques most used today to increase sales and build customer loyalty.
How can you make your business a success? Marketing, fulfilment strategy, stock, etc.
Starting an e-commerce business from scratch may seem simple, but making it a success is a much more complicated task. It requires certain knowledge or resources that are often better to outsource to specialised people or companies:
Marketing
- SEO: or how to increase traffic to your website. The answer is with search engine optimisation (SEO) — the process of improving search engine positioning or search engine optimisation to give a website greater visibility.
How is this achieved? Mainly through the use of a blog on the website where posts include keywords that allow the website to rank high in search engine results. - Social media: Some social networks, such as Instagram, can catapult the reach of a marketing campaign to unprecedented heights. Ads on this social network are aimed at very specific target users based on characteristics such as age, sex, interests, etc.
- Pricing policies: E-commerce businesses make the most of important events in the year to launch great deals and promotional campaigns marking special dates: Valentine's Day, Christmas, Black Friday, Cyber Monday and Mother's Day are some of the most important dates of the year.
- Traffic analysis: Some tools, such as Google Analytics, can provide a lot of data about the people (and, therefore, potential buyers) that visit your online store. Knowing information such as age, gender or place of residence can help you to focus your marketing strategy more appropriately.
Fulfilment
Whether you decide to develop your fulfilment strategy in-house or outsource part or all of it, creating or updating a fulfilment strategy is a complex process, so it is essential to choose a fulfilment company that meets your needs and those of your end customers.
What does e-commerce fulfilment involve?
E-commerce fulfilment companies are responsible for receiving, processing and delivering orders to customers. The process is similar to that of dropshipping, since the seller contracts all the above tasks to a third party, who is in charge of fulfilment. This eliminates the need for a warehouse to store stock and reduces shipping costs.
In order for order fulfilment to take place, it is necessary to have the items in stock. Inventory storage keeps products safe and allows operators to see product availability in real time.
However, a fulfilment centre is not just a warehouse, but a place from where orders are processed, prepared and delivered quickly. A traditional warehouse is a place where products that will be kept for a long time, such as stock for the following Christmas, are stored.
Inventory management is an important part of the order fulfilment process, requiring e-commerce software that allows you to see at a glance what stock is available and when it will need to be replenished.
What does e-commerce fulfilment involve?
E-commerce fulfilment companies are responsible for receiving, processing and delivering orders to customers. The process is similar to that of dropshipping, since the seller contracts all the above tasks to a third party, who is in charge of fulfilment. This eliminates the need for a warehouse to store stock and reduces shipping costs.
In order for order fulfilment to take place, it is necessary to have the items in stock. Inventory storage keeps products safe and allows operators to see product availability in real time.
However, a fulfilment centre is not just a warehouse, but a place from where orders are processed, prepared and delivered quickly. A traditional warehouse is a place where products that will be kept for a long time, such as stock for the following Christmas, are stored.
Inventory management is an important part of the order fulfilment process, requiring e-commerce software that allows you to see at a glance what stock is available and when it will need to be replenished.
Stock
Stock storage can be one of the biggest problems for any e-commerce business, especially the smallest ones. These businesses usually start with private spaces, such as personal storage units or even space inside the owner's home, being used to store stock. However, if the online store grows or if further growth is expected in the future, it is necessary to think about alternatives.
On the other hand, renting storage space often drives up a company's fixed costs. The need to hire staff to manage stock often goes hand in hand with renting a warehouse. In these cases, it is usually advisable to choose one of the following strategies:
On the other hand, renting storage space often drives up a company's fixed costs. The need to hire staff to manage stock often goes hand in hand with renting a warehouse. In these cases, it is usually advisable to choose one of the following strategies:
- 3PL e-commerce fulfilment
With this option, the e-commerce business can buy inventory in bulk without needing to worry about storing the accumulated stock itself and, consequently, the need for a warehouse or staff to manage said stock. - Dropshipping or order fulfilment with drop shipping
On the other hand, in dropshipping or order fulfilment with drop shipping, the company is not responsible for fulfilment as this responsibility lies directly with the manufacturer.
Some of the advantages of this model include a lower investment in inventory upfront and increased availability to focus on other tasks, such as marketing strategy development, due to not having to manage or worry about fulfilment issues.
However, this model also has its drawbacks, such as the lower profit margin due to the need to stick to the indicative prices of dropshippers. In addition, competition becomes fierce because every day the number of advertisers for similar products soars, given how easy it is to enter the dropshipping market.
Conclusion
Given the growth of e-commerce and all its potential, it seems like a good time to open an online business.
In short, the creation of an e-commerce business will depend to a large extent on the circumstances and characteristics of the existing traditional business or of the business idea, if it is newly created.
We encourage you to learn everything you need to know about how to start selling on Amazon that we have shared in our article, to help you decide whether to take the step of launching your business online.
In short, the creation of an e-commerce business will depend to a large extent on the circumstances and characteristics of the existing traditional business or of the business idea, if it is newly created.
We encourage you to learn everything you need to know about how to start selling on Amazon that we have shared in our article, to help you decide whether to take the step of launching your business online.
FAQs
What does "e-commerce" mean?
E-commerce consists of buying and selling products over the Internet.
Is e-commerce the future of sales transactions?
Everything seems to point that way. The transformation has been very striking over the last decade, but the COVID-19 pandemic and the global lockdown has shot e-commerce purchases through the roof.
What type of e-commerce works for my idea or business concept?
Practically everything can be bought and sold over the Internet. The improvement in fulfilment and messaging services makes it possible for any product, regardless of its size, properties or requirements, to reach the destination in a short time and in the right conditions.
Deciding on the type of e-commerce that suits your business will depend on who your target group is (end customer, another company, your company's employees etc.).
Deciding on the type of e-commerce that suits your business will depend on who your target group is (end customer, another company, your company's employees etc.).
What do I need to do to set up my online store?
- Choose a brand name and domain
- Select a hosting company
- Choose an e-commerce CMS tool
- Set up payment methods
- Organise logistics: warehouse, dropshipper, shipping methods, etc.
- Analyse the market to establish your marketing strategy
- Create marketing campaigns
- Regularise the legal status of your e-business
Do I need to make a big investment?
The best thing about setting up an online business is that they don't require large investments to start trading. By not requiring a physical store, you save on leasing or buying premises, as well as the cost of supplies and furniture. The investment will therefore be much smaller than if setting up a traditional business.
Will my e-commerce business succeed if there is a lot of competition in the sector?
It all depends on the analysis you make of your competitors and the tools you use to differentiate yourself from them. Do you offer the same product? Are your prices lower? Do you have a better offer regarding payment or shipping methods? Are your delivery times shorter?
How should I advertise my new online store?
There are many techniques for advertising an online business. Some of them include:
- Writing a blog
- Social media advertising campaigns
- A referral programme
Is e-commerce secure?
E-commerce is a method of buying and selling that has evolved over the years, and security measures have been adapted to protect both the buyer and the seller.
The use of secure payment platforms, data protection, security certifications on websites and selling through recognised websites are some of the security methods that every seller must follow to ensure the proper usage of e-commerce sites.
The use of secure payment platforms, data protection, security certifications on websites and selling through recognised websites are some of the security methods that every seller must follow to ensure the proper usage of e-commerce sites.
How do I start an e-commerce business?
To start an e-commerce business, you need to develop a strategy that is based on your objectives and includes your business idea and market research, choose the products you want to sell and decide between launching your own website or listing your products through e-commerce sites such as Amazon.
Selling on Amazon is a quick and easy option for starting your e-commerce business.
Selling on Amazon is a quick and easy option for starting your e-commerce business.
How can I improve the positioning of my e-commerce store?
Since competition is often fierce, the key to improving the positioning of your online store is in search engine optimisation and search engine marketing. Find out the keywords related to your business and use them in the titles and descriptions of the products being sold on your online store and in blog posts to make your store rank better in search engine results.
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