What is ecommerce? Definition, types, advantages, and disadvantages

Ecommerce or electronic commerce is the trading of goods and services on the internet. It is your bustling city center or brick-and-mortar shop translated into zeroes and ones on the internet superhighway. This year, an estimated 2.14 billion people worldwide will buy goods and services online, and the number of Prime members shopping Amazon stores now tops 150 million.

Ecommerce one way among many that people buy and sell things in retail. Some companies sell products online only, but for many, ecommerce is a distribution channel that’s part of a broader strategy that includes physical stores and other revenue streams. Either way, ecommerce allows startups, small businesses, and large companies to sell their products at scale and reach customers across the world.

As a business grows, most ecommerce brand owners reach a crossroads: Should you scale up in-house operations and find a way to store, manage, and ship more inventory, or enlist a fulfillment service? Here are three potential solutions:

All of these points offer strong incentives to participate in ecommerce. Let’s explore each in detail.

In the 12 months ending May 31, 2020, small- and medium-sized businesses in the U.S. sold more than 3.4 billion products in Amazon stores, up from 2.7 billion year-over-year. Overall, ecommerce sales surged by over 30% in 2020. While much of the recent uptick in online spending is due to the COVID-19 pandemic, experts predict this trend will continue.

In the past, a business’s reach was limited by the number of people able to physically enter through a store’s front doors. Today, ecommerce allows you to reach customers across the world. The rise in internet usage and the growth of social media have made it easier for ecommerce business owners to reach a diverse new mix of customers.

With all the different types of ecommerce, customers can browse options and make purchases from anywhere with just a few clicks. Amazon makes it easy to sort and compare products by price or features. Online payment innovations like Amazon Pay further streamline the checkout process.

Creating and maintaining a website is less expensive than running a traditional brick-and-mortar store. You can start an ecommerce business channel without leasing retail space, hiring a team of employees, or having a large warehouse.

All of these advantages add up to low overhead. You don’t need to pay rent or worry about building maintenance. Once online, your store is open 24 hours a day—without the need to be monitored or staffed like a physical store.

You can use website building tools and services to establish your own ecommerce store quickly, or you can forgo building a website and launch your brand on social media or a store like Amazon. Many businesses sell on numerous online channels.

Technical challenges beyond your control can negatively impact sales. Just as a hiccup in your supply chain can prevent timely delivery of products, internet issues, or a hard drive failure can cost you time and money.

Remember, for every technical issue that may arise, there’s likely a solution or a preventative measure you can take. Be sure to backup your data regularly. Using a store like Amazon can help mitigate these risks with an established, trusted technical infrastructure.

Customers are increasingly wary of how their information is stored and shared. Build customer trust by giving details on your privacy policy. Doing so demonstrates transparency and reassures customers that you will safeguard their personally identifiable information.

Amazon has worked for decades to create a secure shopping experience, and businesses that sell on Amazon benefit from long-standing customer trust. When you host an ecommerce store on your own domain, you need to find a secure payment processing service to avoid putting customer data at risk.

It may be easy to pack and ship orders from your garage or spare room when you’re starting out in ecommerce. But as your business grows, order fulfillment becomes a much more time-consuming process. Sudden increases in orders can leave you scrambling to fulfill orders. Using a service like Fulfillment by Amazon can help reduce the strain on your business and keep customers satisfied.

Learn how to choose the right ecommerce fulfillment service to grow your business.

A few key ingredients go into every high-performing ecommerce business. To set yourself up for success, focus on your products, first and foremost. Also, consider your brand messaging, your target audience, and your store’s user experience. You should also consider your fulfillment process, ensuring the timely delivery of products for maximum customer satisfaction. Let’s explore each of these critical components in detail.

High-quality, reliable products, and services are at the heart of every successful ecommerce brand. Your product should solve an unmet customer need or challenge. You must also offer it at a compelling price point.

Your products’ quality and pricing will make or break your ecommerce business. Do some market research to get a sense of what types of products your competitors are selling, as well as the market value of similar items.

Unique brands stand out, but a great brand takes more than a great product. To catch a customer’s attention, convey your business’s purpose and vision.

Ask yourself, why does your business need to exist? How will your products make your customers’ lives better? Your branding should convey the answers to these questions.

Spend time thinking about the look and feel of your brand. Dig deep and find a simple, powerful way to convey the origin and mission of your business.

Define your target audience to help attract loyal and enthusiastic customers. Who do you want to serve with your products? Aim your marketing efforts at that group.

Once your business gains steam, keep the momentum going by considering who will be moved by your brand story. Instead of chasing after buyers who don’t need your product, focus your efforts on an audience that will appreciate your brand.

Online stores should be user friendly. When the online experience of a store is well-designed, making a purchase feels effortless. If customers have to jump through too many hoops, they will abandon their carts before completing the transaction, and your sales will suffer.

Successful ecommerce stores keep the spotlight on their products by streamlining the checkout process. Remove any unnecessary steps, make your user experience intuitive and straightforward, and bask in the glow of happy customers.

Customers want speed and efficiency, especially when shopping online. No matter what you sell, customers want their purchases delivered intact and on time.

Fulfillment includes every step in the customer journey from the moment a customer presses the “buy” button to the moment they unbox the item. Successful ecommerce shops pay careful attention to the fulfillment process and make sure they have enough product on hand to fulfill their orders, even during their busiest seasons.

The tidal wave of online retail sales in recent years shows no sign of receding, and are projected to grow to $6.54 trillion in 2022.

During the 2020 holiday season—including Black Friday to Cyber Monday—independent businesses selling on Amazon gained over 50% year-over-year growth in worldwide sales.

Amazon designed Prime Day 2020 to provide buyers with impressive savings and support small businesses by helping them connect with more customers and grow sales.