Are you thinking about starting a business where you sell your products online? If so, then you'll be joining the millions of entrepreneurs who have carved out a niche in the world of e-commerce.
At its core, e-commerce refers to the purchase and sale of goods and/or services via electronic channels such as the internet. E-commerce was first introduced in the 1960s via an electronic data interchange (EDI) on value-added networks (VANs). The medium grew with the increased availability of internet access and the advent of popular online sellers in the 1990s and early 2000s. Amazon began operating as a book-shipping business in
Jeff Bezos' garage in 1995. EBay, which enables consumers to sell to each other online, introduced online auctions in 1995 and exploded with the 1997 Beanie Babies frenzy.
Like any digital technology or consumer-based purchasing market, e-commerce has evolved over the years. As mobile devices became more popular, mobile commerce has become its own market. With the rise of such sites as Facebook and Pinterest, social media has become an important driver of e-commerce. As of 2014, Facebook drove 85 percent of social media-originating sales on e-commerce platform Shopify, per
Paymill.
The changing market represents a vast opportunity for businesses to improve their relevance and expand their market in the online world. Researchers predict e-commerce will be 17 percent of U.S. retail sales by 2022, according to
Digital Commerce 360. The U.S. will spend about $460 billion online in 2017. These figures will continue to climb as mobile and internet use expand both in the U.S. and in developing markets around the world.
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As with traditional commerce, there are four principal categories of e-commerce: B2B, B2C, C2B and C2C.
- B2B (business to business) – This involves companies doing business with each other. One example is manufacturers selling to distributors and wholesalers selling to retailers.
- B2C (business to consumer) – B2C consists of businesses selling to the public through shopping cart software, without needing any human interaction. This is what most people think of when they hear "e-commerce." An example of this is Amazon.
- C2B (consumer to business) – In C2B e-commerce, consumers post a project with a set budget online, and companies bid on the project. The consumer reviews the bids and selects the company. Elance is an example of this.
- C2C (consumer to consumer) – This takes place within online classified ads, forums or marketplaces where individuals can buy and sell their goods. Examples of this are Craigslist, eBay and Etsy.
Getting started
If you have a simple product to sell and a desire to expand your sales online, there are a few tools you can use to get started.
Websites such as Squarespace and WordPress offer mobile-friendly, ready-to-go e-commerce templates that help you get a store up and running quickly. As a shop owner, you will need a way to collect credit card payments from consumers online. PayPal, Square and Google Wallet are all popular ways of accepting and managing online payments. You can also sell your merchandise through online giants like Amazon.
If you are selling physical goods, you'll need to consider how you're going to ship them. PayPal and other processors have worked with shipping merchants, including USPS and UPS, to offer one-stop postage processing. You will also need to research your state laws to determine if you are required to obtain a permit for selling online, or if you need to collect sales tax for your state or municipality.
Dropshipping is a way to outsource your inventory and shipping. Dropship services store and ship the products you sell as a merchant, many times for wholesale prices. These companies act on your behalf, using your branding and packaging. The best of these services have integrations with Amazon, Shopify and other e-commerce platforms.
As your company grows, you may want to consider more advanced ways to process payments, such as using a merchant account and a service such as Authorize.Net. Services that integrate more fully with your bank frequently offer discounted transaction costs compared to processors such as PayPal