How does ecommerce work? E-commerce (online store) is an analogue of a store in a mall available online. The specificity of e commerce process consists in the absence of a trade pavilion, respectively, the costs of doing business using the e-commerce model will differ from the expenses of a traditional store – there is no need to pay for the premises, purchase equipment, hire cashiers, etc.
Two options for doing e-commerce business are common: the sale of goods from own warehouse and the so-called ‘drop shipping’, in which goods are stored and delivered from the supplier’s warehouse. Below, we analyze the advantages and disadvantages of each of them.
Advantages of e-commerce business model
How do ecommerce websites work? The main advantage of the online store is the ability to trade without geographical restrictions. You can organize the delivery of goods to other regions and even countries.
In addition, the e commerce business process allows you to receive conditionally free customers if the online store is popular, advanced in search results and has a database of regular customers.
How does a website work? For shoppers, online shopping is convenient for its availability. Finding the desired product in the store near the house or late in the evening is not easy, while buying online, you can go to the site and place your order without leaving your home.
In the e-commerce business, there is a lot of potential for brand development. This will help make the online store recognizable and give a competitive advantage. You can choose a domain name that matches the name of the company, create a website with a corporate identity, develop a logo. Every time, visiting the site or seeing the store advertising on the Internet, buyers will associate the brand with your e-commerce business.
Finally, the cost items of e-commerce businesses are different from the traditional offline store: you do not need to pay for the rental of premises and utilities, purchase commercial equipment, hire several cashiers and sales assistants. Often, the owners of e-commerce businesses ensure their work on their own without the involvement of hired employees. Therefore, an online store can start trading immediately and without significant investment.
Disadvantages of the e-commerce business model
The main difficulty in starting a business using the e-commerce model is the need for large marketing investments. In addition, it is necessary to optimize the sales funnel and constantly attract targeted traffic. If you don’t need to create a fully functional website at this stage – you can use ready-made software solutions, for example, templates and designers. But then you will have to promote the online store from scratch.
Marketing in e-commerce business is of particular importance since traffic is generated via the Internet and offline sales points are usually absent. To promote an online store, it is necessary to calculate the level of conversion, clearly identify the target audience (demographic characteristics and sales geography), as well as the channels through which users enter the site. It is advisable to entrust advertising campaigns to specialists but it is important to understand how to evaluate the effectiveness of marketing activities.
In addition, there is high competition in the field of e-commerce. If you do not run a niche business with unique products or services, you will have to make efforts so that the client chooses you. In addition to the quality of the product or services and increasing brand awareness, competent SEO-site optimization will help stand out among competitors. In this case, the site will rise in the search results and potential buyers will see it on key requests.
In e-commerce, there is a problem of customer confidence. They are filled with fraudsters so it will take time to establish themselves as a reliable counterparty. After the online store brand becomes recognizable and reviews appear, the number of customers will grow.