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Ecommerce 101: The 6 Fundamentals of Ecommerce

Isaac Hayward
Isaac Hayward
HK Digital Co-Founder
8th November 2022

Ecommerce is a business model that allows consumers to purchase products and services online, and it has been growing rapidly over the past few years, as more and more people are becoming online shoppers.

There are a number of different ecommerce platforms and business models at your disposal, each with its unique features and advantages. This ecommerce 101 article will discuss what the different models of ecommerce are, their benefits and drawbacks, and will even touch on how to get started with your own ecommerce business.

What is Ecommerce?

Ecommerce is the process of buying and selling products or services online. It has become a major part of the global economy, and is growing rapidly.

Ecommerce can be broken down into three main categories: direct sales, indirect sales, and virtual sales. Direct sales involve selling products or services directly to consumers. Indirect sales involve selling products or services through a third party, such as an online retailer. Virtual sales involve selling products or services through the internet without ever meeting a customer in person.

The main drivers of ecommerce growth are increasing consumer wealth, the growth of online social networking, and expanding ecommerce opportunities. Online social networking has played a major role in facilitating ecommerce transactions by helping buyers and sellers to connect with one another. It has also provided a fast new array of channels that businesses can use to connect with their dream customers. These days, one can turn to Pinterest, Meta, TikTok, and even Spotify to create campaigns to attract customers.

The market for ecommerce has drastically expanded. In today's article, we are going to tackle ecommerce 101.

Ecommerce 101: What are the Ecommerce Business Models?

There are many different ecommerce business options available to anyone seeking to establish themselves on the market. Below we have outlined the basics for each ecommerce business option alongside tips on how you can choose the right one for yourself. 

The three main types of ecommerce businesses are online stores, marketplaces, and auction sites. Each of these businesses has its own benefits and drawbacks, so it is important to choose the right option for your business based on your goals and needs.

Online Stores:

The most common type of ecommerce business is an online store. An online store is a website that sells products directly to customers. Online stores typically have a much larger customer base than marketplaces or auction sites, and they also can reach a wider range of customers.

One downside of online stores is that they tend to be more expensive to set up than marketplaces or auction sites and require more time and effort to maintain. However, online stores are usually very profitable and can easily scale up if you decide to expand your operation.

Marketplaces:

On online e-commerce marketplaces, a seller has the ability to sell directly to consumers without dealing with stock. This process is typically referred to as dropshipping, where the manufacturer sells the product directly to the customer in order to avoid managing their own stocks, additionally they do not incur many of the costs that online stores, though - as their entire infrastructure is based on a platform of another provider. This model has proven to be incredibly successful on a huge variety of markets, with giants like Amazon, Alibaba, and others establishing themselves as industry leaders.

Auction Sites:

Online ecommerce auctions sites are a huge $739.2 billion industry in just the United States. These auction sites have become a great place to sell and resell second hands goods, but have overtime also grown to become competitors to Marketplaces. These were traditionally more popular in the early 2000s with websites like ebay.com dominating the space. 

But eventually, these websites have often lost out to Marketplaces, but they still remain relevant. 

Ecommerce 101: Impact of ecommerce on shopping

Ecommerce has had a profound impact on shopping habits and consumer behavior. Ecommerce is now the primary shopping channel for many consumers.

Here are some of the key impacts of ecommerce on shopping:

1. Ecommerce has increased the number of shoppers. It accounts for over 60% of all retail sales in developed countries.

2. Ecommerce has increased the variety and availability of products. Today, shoppers can access a wide range of products from all over the world.

3. Ecommerce has made it easier for shoppers to buy products online. Shoppers no longer have to go to a physical store to buy products. They can also purchase products online using their smartphones.

4. Ecommerce has increased the speed and convenience of transactions. Transactions can now be completed in just seconds or minutes, which is great for busy shoppers who want to get their shopping done quickly.

5. Ecommerce has made it easier for sellers to reach a wider audience. Sellers can now sell their products to millions of consumers through online platforms like eBay and Amazon Prime.

6. Ecommerce has changed the way retailers market their products. Retailers now use digital marketing strategies to reach more

Ecommerce 101: Advantages of Ecommerce

Ecommerce is a huge industry that continues to grow at a rapid rate. It has brought with it a lot of innovation and new opportunities for businesses and consumers alike. In our article: how does ecommerce work we went into more detail about ecommerce in general, but we also listed the following advantages: 

1. More customers: the ability to reach thousands of new customers every day.

2. Always open: ability to purchase 24-hours a day.

3. Lower costs: due to lower overall variable costs the price of products can be lower.

4. Convenience: shoppers are able to place their orders and shop whenever they want.

5. Price and product comparison: it is easier than ever for consumers to compare products in terms of price and availability.

Ecommerce 101: Disadvantages of Ecommerce

Alternatively, though, there are also plenty of disadvantages to ecommerce. The counter to lower prices is that the main disadvantage of ecommerce is that it can be more expensive than traditional shopping. This is because you have to pay for shipping, storage, and other fees associated with online sales.

Other disadvantages include: 

  1. Ecommerce can be time-consuming and require a lot of research.
  2. Limited selection: Many items are only available through one specific website.
  3. Lack of customer service: insufficient personnel.
  4. Privacy concerns: finding out which stores you can trust and which ones you cannot is a difficult process.

However, ecommerce is still a viable way to purchase products and services. If you are careful about your selection and research, you can find affordable and reliable products.

Ecommerce 101: How to Start Your own Ecommerce Business

There are a lot of different ways you can start an ecommerce business today, so it can be difficult to know which one way is the right one for you. In our article "How to Start an Ecommerce Store in 5 Steps" we go into this in more detail but below you can find the key points. 

The first step in Ecommerce 101 is to decide what type of ecommerce business you want to run, and there are a lot of options. If we stick with the three examples from earlier you can simply choose between an online store, a marketplace, or an auction site. 

In this case, we will choose the online store to start your own ecommerce business, which means you will have to decide on a platform. The second step in Ecommerce 101 is choosing which platform you are going to build your store on. There are a ton of popular options with the most popular ones being Shopify, Bigcommerce, Magento, and WooCommerce (WordPress).

Finally, after that, you can also decide on what type of products you will be selling in your store. When you have completed all of the above processes and you are ready to start your ecommerce journey, you can utilize our powerful tools to increase your chances at success. 

Summary of Ecommerce 101

In basic ecommerce101 terms then ecommerce is, simply put, the process of selling products and services online. It has become a popular way to conduct business and has revolutionized the retail world leading to many new innovations. It has brought with it many advantages and disadvantages but overall it has made products ever more accessible to the average shopper. 

If you are looking to start your ecommerce journey I suggest you check out our resources page, to help you get started!

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