For those who have never heard of the term ecommerce before, the first question that comes to mind may be, what is ecommerce? In this article, we discuss in detail what exactly ecommerce is, how to start an ecommerce business, how to run an ecommerce website, and much more. If you’re interested in anything to do with ecommerce or just need the question, “What is ecommerce?” answered, then this is the article for you!
What is Ecommerce: Table of Contents
What is Ecommerce
Ecommerce is a shortened version of the phrase “electronic commerce” which essentially describes any type of exchange of currency for goods or services online.
Ecommerce is an umbrella term that covers everything there is to do with buying or selling online, and can sometimes be otherwise written as “E Commerce,” “e-commerce,” or “eCommerce.” Any variation of the spelling is correct, and it all describes the same act of performing business via the internet.
Since the definition of ecommerce is so open-ended (it literally includes any type of buying or selling of goods or services online) there are so many different types of ecommerce businesses that exist. In this article, we dive deeper into the different options that are available for ecommerce business owners to run ecommerce businesses.
The Types of Ecommerce Business Models
First things first, when you ask yourself, “What is ecommerce?” the best way to begin to describe different ecommerce businesses, and the different types of ecommerce businesses, is to break them down into the types of ecommerce business models that exist.
Ecommerce business models can be differentiated into three main categories:
- What types of products are sold
- Who the products are sold to
- Where the products are sold on
Let’s look into these three identifiers further:
What Types of Products Are Sold
Every ecommerce business can be differentiated by the types of products that it sells. There are four main products that any ecommerce business can sell and they are:
- Physical Products
- Digital Products
Every single ecommerce business online can fit into one or more of these categories, and this basically just tells you what type of products they sell to their customers.
Some ecommerce businesses sell physical products which means that the business has actual tangible products that they ship to their customers, and when their customers open the shipping package there will be a physical product they can touch, feel and see.
Digital products, on the other hand, are something ecommerce businesses can sell online but they’re not an actual physical product that can be shipped to their customers. Oftentimes, once a digital product is purchased online a customer can download the digital files straight away with no need for the business to actually ship anything to the customer.
Businesses can also provide digital or in-person services that their customers can purchase online. These services can include anything from design services or streaming services (both are digital services) to home improvement services or dog-walking services (which are in-person services). Any business that provides a service, rather than a physical or digital product, can be included in this category.
Finally, ecommerce businesses can also earn commissions via affiliate links which pay them a portion of the revenue for facilitating a sale. Ecommerce businesses that earn affiliate commissions could be blogs, influencer websites, or even websites like Canopy that curate products sold online for consumers. If you’re interested in creating your own affiliate ecommerce store, check out our Beginner’s Guide to Creating an Affiliate Ecommerce Store article.
Who the Products Are Sold To
Next, ecommerce businesses can be differentiated by who the business is selling their products to. While it might be common thinking to assume that all products are sold to consumers, that isn’t always the case. Sometimes the “consumer” can be another business.
These are the three main categories that ecommerce businesses sell their products or services to:
- B2B: This stands for Business-to-Business. Ecommerce businesses that sell physical or digital products or services to other businesses fall under this category. For example, this could include manufacturers or suppliers that provide materials or products for other businesses.
- B2C: This stands for Business-to-Consumer. Ecommerce businesses that sell physical or digital products or services to consumers fall under this category. This includes retailers or ecommerce retailers that sell products to the end consumer.
- B2G: This stands for Business-to-Government. Ecommerce businesses that sell physical or digital products or services to government institutions or agencies fall under this category. For example, this could include businesses that create specialized software, office furniture, uniforms, etc.
While most businesses generally sell their products to one of these categories, it’s entirely possible for ecommerce businesses to sell to more than one category of consumers. It’s important for ecommerce businesses to understand who exactly they sell their products to because it impacts important decisions such as their marketing, their branding, their shipping procedures, their markup, etc.
Where the Products Are Sold On
Finally, ecommerce businesses can also be differentiated based on the way they sell their products to their customers. These options are:
- Branded Ecommerce Stores: These are ecommerce stores that are owned and operated by the founder(s) or creator(s) of the store, and they sell their own products on their own terms to their customer base. These types of stores are generally built on ecommerce platforms such as Shopify or BigCommerce.
- Ecommerce Marketplaces: Ecommerce businesses can also sell through online marketplaces such as Amazon, eBay or Etsy. For the business, this is kind of like renting space in a mall: The mall handles the marketing and brings in the foot traffic, which means the merchants don’t have to invest much time or money bringing customers their shops. They do, however, have to abide by the mall’s rules such as their opening hours, what products they can and cannot sell, etc.
- Conversational Commerce: With social media being a main part of consumers’ daily routines, social media platforms are making it easy for consumers to shop through the posts on their newsfeed. Instagram, Facebook, Pinterest, and Snapchat all have conversational commerce options that ecommerce brands can sell their products through.
The Different Ecommerce Platforms
Every ecommerce business needs an ecommerce store, which is essentially just an online landing place where their customers can come to explore, learn about, and purchase their products.
Ecommerce businesses have different options when it comes to the ecommerce platforms they use to sell their products online, as we discussed in our Ecommerce Platforms: The Best Software, Reviews & Comparisons article. No matter whether a store wants to sell on marketplaces like Amazon, eBay, or Etsy they should also have an ecommerce store set up so they aren’t selling all their products through a middleman. Creating a self-branded store on an ecommerce platform is the only way to get full control over your ecommerce business, and it’s the best way to get full say on branding, marketing, customer experience, and revenue.
We discussed the Top 10 Ecommerce Platforms in great detail in this article, so for anyone interested in becoming an ecommerce business owner, that’s the most in-depth guide on ecommerce platforms we can recommend. For those who just want to get started on the best ecommerce platform in the industry, we recommend building on Shopify. We’ve discussed why they’re they’re the most highly recommended ecommerce platform in our Shopify Review, so if you’re interested to learn more about the features and services they offer, check that out. We update it regularly as they come out with new features and services.
If you require specific features from your ecommerce platform or just want to get a personalized recommendation based on your unique situation and circumstances, check out our Personalized Ecommerce Platform Recommendation Tool. No matter where you are in the process of building, launching, or growing your ecommerce business, this tool can recommend the best ecommerce platform for you.
Who Can Start Their Own Ecommerce Business?
The short answer is: Anyone can start their own ecommerce business. Anyone can go from asking themselves, “What is ecommerce?” to building their very own ecommerce business in the span of weeks, months, or years. Some ecommerce businesses are easier to start than others, some ecommerce business owners may have more industry knowledge than others when first starting out, but the great thing about ecommerce is that anyone can build, launch and grow their own ecommerce business if they have some time, energy and resources and they’re ready to put in the work.
What’s so great about ecommerce is this:
- There’s a Low Barrier to Entry: What this means is that no matter how little time or money you have available to invest in starting your ecommerce business, there’s something you can do to get started. To start a brick-and-mortar business in the past when online business wasn’t an option, entrepreneurs had to get a bank loan to rent out a store and purchase inventory and equipment upfront before they could even get started selling to customers. They had one shot to succeed and if they failed, they would be out a huge sum of money and they’d repel any other bank they approached in future. With ecommerce, you can start your own business without inventory, or you can run your business online for less than your monthly cell phone bill.
- Unlimited Audience Reach: With brick-and-mortar businesses, the market of consumers you can sell to is limited to who’s in your nearby vicinity. With ecommerce, you can sell to your target market no matter where they are in the world, no matter where they live, and you’re not limited to the customers in one particular area or region. This means you can really hone in on your target market and sell to your niche, no matter how specific it is.
We truly believe that with the right resources, everyone and anyone can become an ecommerce business owner. You don’t have to quit your day job if you don’t want to, we just highly recommend that you start something. Building an ecommerce business teaches so many valuable lessons and even if you’re not quite ready to start your own fully-fledged ecommerce business yet there are still steps you can take to get something on the go! Check out our How to Start an Ecommerce Business When You’re Not Ready to Start an Ecommerce Business article to learn more.
It’s common for those starting their first ecommerce business to struggle with Imposter Syndrome, the feeling of being a “sheep in wolf’s clothing” or not feeling good enough to start your own business. We urge you to push past those feelings and to start your own ecommerce business anyways. Starting your own ecommerce business is about so much more than just being successful or earning lots of money. It’s about the journey from turning something into nothing and turning ideas, resources, and inspiration into something tangible.
In our manifesto, we discuss the 7 traits of successful entrepreneurs, so if you’re just getting started in ecommerce we recommend having a look over that article. You may not have all the industry knowledge or the time and money to get your ecommerce business started but if you have those 7 traits, you can still be successful.
The Pros and Cons of Starting Your Own Ecommerce Business
As with anything, starting your own ecommerce business comes with a range of advantages and disadvantages. Even though you might just be in the early stages of wondering “What is ecommerce?” and don’t actually know if you’re going to start your own ecommerce business for yourself, it’s useful to know the pros and cons ahead of time so you can decide whether it’s a good fit for you or not.
Pros of Starting Your Own Ecommerce Business
- Building Something from Nothing: With ecommerce, you have the ability to take ideas, knowledge, and inspiration and use them to build your own business from scratch.
- Connecting with Your Audience All Over the World: You’re not limited to one area or region when it comes to the customers you can sell to; you can sell to customers all over the world.
- Being Your Own Boss: When you build your own business you can be your own boss and have the autonomy to bring the vision of your business to life.
- Selling Online, Offline & Anywhere in Between: You’re not restricted to where you can sell. You can have a brick-and-mortar business and an online business, you can sell at pop-ups, you can sell at festivals, etc.
- Working from Anywhere: As long as you have a wifi connection and some of your systems and processes automated, you have the freedom to work from anywhere at any time.
- Making it Your Full-Time Job or Part-Time Hobby: You don’t have to go all-in on your ecommerce business if you don’t want to; it can be your side hustle. But, you make the rules so if you want to make it your full-time job and get out of the rat race you can do that, too!
Cons of Starting Your Own Ecommerce Business
- No Physical Storefront: Most ecommerce businesses run solely online, which has its advantages but when you don’t have a physical storefront it can be a hurdle to acquire initial traffic or to connect with existing customers.
- No Face-to-Face Time with Your Customers: Because you can’t see your customers face to face, you aren’t able to connect with them personally so to build a very personal brand you’ll have to go to greater lengths to connect with your customers.
- Competition & Standing Out from the Crowd: There’s a lot of competition online, and differentiating your ecommerce businesses from others can be a challenge. To stand out from the crowd your ecommerce business needs to offer something that other ones don’t, whether that’s based on service, selection, price, variety, brand, or something else.
- Time & Money: While you can start an ecommerce business on a bootstrapped budget, eventually every business needs funds to grow and scale.
- The Learning Curve: Starting a business, making a website, creating a brand, building a customer-based, etc. takes time and effort to learn how to do properly so at first, it can definitely be a bit of a learning curve. We suggest looking to reputable sources of information online such as our blog, the Shopify blog, and Skillshare to get started learning about “What is ecommerce?”
How to Start Your Own Ecommerce Business
Starting your own ecommerce business has never been easier, which is good news if you’re asking yourself, “What is Ecommerce?” and want to get started with building your own ecommerce business as soon as possible.
There are so many resources out there to help you start your own ecommerce business, and these are a few places we recommend checking out first to get you started:
- Find a Product Idea: To start an ecommerce business you’re going to need to have a product to sell to your customers. This can be anything, and like we listed above it could be a physical product, a digital product, a service, or even curated affiliate links. To learn more about what types of products you can sell online you might want to check out the list of Top Trending Products of the Year or our entire category of blog posts in the Product & Niche Selection category. We also have a free downloadable guide of 500 Niches to help you hone in on a niche you can find potential product ideas for.
- Plan Your Business: The next step is to start formulating a plan. When you’re new to ecommerce, there might be some aspects of building your ecommerce business that you may not know to consider, so this One Page Ecommerce Business Plan has been specifically created to help budding ecommerce entrepreneurs identify any advantages or disadvantages they may face when building their business, plus other aspects of building an ecommerce business that are important to consider.
- Sign Up to an Ecommerce Platform: Once you’ve found a product to sell and planned your business out thoughtfully, your next step is to sign up to an ecommerce platform so you can start working on the website you’re going to call your online store. When you sign up to an ecommerce platform like Shopify you’ll be able to pick your business name right away and your domain name, then you can start customizing your website with a theme, fonts, and colors to make it personal to your brand. It’s super easy, and it’s fun to see your website start to take shape!
Then when it comes to learning about how to actually design your ecommerce business’ website, such as your theme and branding, we recommend checking out these resources:
- Ecommerce Branding Guide: Build a great brand from the beginning so you can connect with your customers and get them engaged with your ecommerce business.
- 50 Beautiful Ecommerce Website Designs: Check out what other ecommerce businesses do to not only make their website beautiful but also functional for their visitors.
- How to Come Up With a Business Name: Your business name is likely going to be the first thing people hear about your brand, so you want it to be representative of what they can expect from you. Come up with a killer business name thanks to the tips and advice in this guide.
- Create a Beautiful Company Logo: Your logo is the face of your brand, so make sure you make the right impression with a beautiful company logo. This guide will help you get the best logo created for your business that you possibly can, no matter what your budget is (even if you don’t have one!).
- The Best Shopify Themes: In today’s online world a website is judged by its cover, so you have to make sure your store’s theme reflects your brand’s personality and values while still being functional and easy to navigate. With an ecommerce platform such as Shopify, however, creating a beautiful and functional online store is as easy as browsing through all the available Shopify themes and we’ve rounded up the top ones in this article.
What Kind of Ecommerce Business Can You Start?
It’s time to move on from asking yourself, “What is ecommerce?” and to start asking yourself, “What kind of ecommerce business can I start?” Since you’ve read this article up to this point you already know that anyone can start their own ecommerce business and that anyone can be you.
When it comes down to it, you can start any kind of ecommerce business you want as long as you:
- Have something you can sell to consumers whether it’s a physical product, digital product, service, or affiliate link.
- Have somewhere online you can sell your product from, like the ecommerce platforms we’ve discussed earlier in this article.
As long as you have a product to sell and somewhere to sell it you can start your own ecommerce business.
To get started, check out these articles to get step-by-step instruction on ecommerce businesses you can start from scratch:
Then, check out these ecommerce business case studies to learn how other ecommerce business owners have built, launched, and grown their own ecommerce businesses:
Finally, if you just want some more general knowledge on what product markets are trending at the moment or ways to find great product ideas, check out these resources:
Where to Source Products for Your Ecommerce Business
Sourcing products for your ecommerce business is going to be the next most important step when starting your own ecommerce business, and it depends largely on which ecommerce business model you choose to sell through.
There are 4 main ecommerce business models and each one dictates the way you’ll source your products. You can:
- Make your products
- Manufacture your products
- Wholesale your products
- Dropship your products
Make Your Products
If you choose to make your products, you’ll be in charge of sourcing all your materials so you can bring your products to life. The main challenge with making products for your ecommerce store is the time it takes to make your products, the cost, and difficulty incurred with sourcing materials to make your products and how difficult it may be to scale your business should demand for your products increase.
Manufacture Your Products
If you choose to get your products manufactured, you’ll need to source a manufacturer that can make your products. To do this, you could consult online directories such as our Manufacturer Directory to find a curated list of reputable manufacturers capable of making a range of different products, you could use a third-party manufacturer sourcing service such as Sourcify to help you find the perfect supplier for your products (the founder of Sourcify wrote two articles for our blog, check them out here: How to Source Products from Chinese Manufacturers and The Untold Secrets to Cutting Manufacturing Costs & Lead Times) and you could also find a manufacturer via an online manufacturer marketplace such as Alibaba or Maker’s Row. If you’re interested in sourcing your products from Alibaba, we highly recommend checking out our Guide to Sourcing Products from Alibaba so you can source your products as safely and securely as possible.
The main advantage of working with manufacturers to create your products is that you can custom-build products, you can get your products created exactly how you want them and you can keep your costs to a minimum. The biggest disadvantage of working with a manufacturer, however, is that you’ll very likely have to meet the minimum order quantities of your manufacturer which can be a major upfront cost.
Wholesale Your Products
When sourcing your products from wholesalers, you’ll be able to purchase your products in bulk without having to manufacture them yourself. Check out online wholesale directories (like our Wholesale Suppliers Directory!) to find wholesalers that sell products you’re interested in selling on your online store, or you could even source products in wholesale via AliExpress or these AliExpress Alternatives.
Dropship Your Products
If meeting upfront minimum order quantities sounds daunting or you just want the flexibility of not having to store inventory or ship products, then dropshipping may be the ideal business model for you. To source your products from dropshippers, your best bet is to check out an online dropshipping directory or even a roundup of the best Dropshipping Apps to Acquire Inventory for Your Business that integrates directly with Shopify stores, should you choose to start one.
What Kind of Budget Do You Need to Start an Ecommerce Business?
Ecommerce businesses can be built on any budget. As we discussed in the “What is Ecommerce?” section of this article, ecommerce businesses are so vast and varied, they’re nearly impossible to define by any other identifiers rather than simply, “ecommerce.”
Since each ecommerce business is solely up to the entrepreneur(s) starting it, ecommerce businesses can truly be built on any budget. If your an entrepreneur building your first-ever ecommerce business and you only have a small budget to work with, start a dropshipping business, and pay attention to money-saving resources such as blogs dedicated to helping ecommerce businesses save money such as Bootstrapping Ecommerce, and keep your eye out for discounts on services to help you build, launch and grow your business such as our own Exclusive Offers page or AppSumo.
In any other case, your budget is entirely dependant on what you have to work with and how you want to allocate your finances. Work with an accountant or a bookkeeping team like Bench to keep your finances in check and use handy resources such as a Business Loan Calculator or a Profit Margin Calculator and even our PayPal Fee Calculator & Stripe Fee Calculator to make sure you’re keeping an eye on your budget in the places that matter most.
How to Buy & Sell Ecommerce Businesses
If you’re not completely interested in starting your own ecommerce business from scratch, it is possible to purchase ecommerce businesses that ecommerce entrepreneurs have already put time, effort, and money into growing to where they are today.
The best place to look for ecommerce businesses to buy online is the Shopify Exchange. Shopify Exchange is a marketplace where Shopify store owners can go to list their businesses for sale or to purchase existing Shopify businesses, and the businesses available there are listed at a variety of prices depending on their traffic, customer base, revenue, etc.
If you’re interested in starting an ecommerce business and the idea of not having to completely start it from scratch is appealing to you, then check out Shopify Exchange and see what’s on the market!
No matter when you’re starting your ecommerce business, though, it’s imperative to have an exit strategy sorted out so that if and when the time comes to sell your business or shut it down, you and any of your potential partners or investors know what the procedure is. Having an exit strategy in place can also help you make better decisions for your business throughout the years of its existence and it can help make investors keener to jump on board with your business. Learn more about crafting an exit strategy in our How to Sell a Business: Why Ecommerce Entrepreneurs Need to Have an Exit Strategy article.
How to Grow Your Ecommerce Business
Once you’ve gotten past the “What is ecommerce?” stage and you move onto building your ecommerce business, the final step and the step that’s going to take up the majority of your time as your business ages and scales, is how to grow your ecommerce business.
There are many ways to grow an ecommerce business but two of the main ways are through traffic and conversions. The more traffic you get coming to your ecommerce store the more conversions you’re likely to make which means more revenue and thus, more profit.
Traffic + Conversions = Revenue & Profit!
There are an endless amount of ways you can increase your store’s traffic, which we discuss some of in our How to Increase Website Traffic article, but one of the most successful ways is to treat your customers like assets, not just numbers. If you focus too much on the numbers and how much revenue you’re making, you can lose sight of the most important aspect of your ecommerce business that makes everything worthwhile, and that’s your customers.
Obviously getting traffic to your store quickly helps keep you afloat when you’re new and just finding your footing and for that, we recommend checking out an article like our How to Get Your First 100 Sales article, but beyond that, take into serious consideration how you can add value to your customer’s lives so they’re more likely to purchase from your site again and spread the word about your company with their peers and social following.
To quickly bring traffic to your ecommerce store and generate buzz about your products or your store launch is to run a contest, sweepstakes, or giveaway. The best way for ecommerce stores to do that is through the ViralSweep software because of its ease of use, reasonable price, and the capabilities that it offers. We conducted a thorough review of the ViralSweep service and everything they do to help ecommerce businesses grow their traffic and customer base quickly, so check out our ViralSweep Review here.
Finally, if you’re looking for more in-depth ways to grow your traffic and conversions, we’ve created a 52 Week Marketing Plan to guide you through the process of growing your new business step by step. We created this guide because we noticed that growing a new business was such a daunting prospect for so many new merchants and we constantly receive questions from entrepreneurs asking us for our advice and recommendations. So, we put everything we know into one guide with the intention of helping as many new entrepreneurs as possible. By putting it into a 52-week format, it makes it easier to digest and implement which we’ve noticed is important for new ecommerce business owners who can sometimes be overwhelmed by everything there is to do once your new store is launched. This way, the 52 Week Marketing Plan will let you know what’s crucial to focus on in the first weeks and then progresses from there.
Once you start bringing more traffic to your ecommerce store then your conversion rate should grow organically from there but if you want to try out some other methods to get more visitors purchasing your products, check out our guide to Conversion Rate Optimization and this article on Conversion Rate Optimization for 1st Year Stores.
While you may have come to this article wondering “What is ecommerce?” we hope all the information provided in this comprehensive post has given you a thorough insight into what ecommerce is and what options are available to you to start your own ecommerce business.
Starting an ecommerce business really is accessible for anyone, so take the information, knowledge, resources, and guides provided throughout this article and start something for yourself. Now that you know “What is ecommerce?” you’re well equipped to build, launch, and grow your own ecommerce business and start the entrepreneurial journey for yourself.