What is E-Commerce? (Almost) Everything You Need to Know

Gabriel Gheorghiu
Gabriel Gheorghiu  |  September 5, 2018

If you are reading this, you have internet access and you have probably already tried to buy something online. 

That’s what e-commerce is about, at least from a buyer perspective. When it comes to sellers, things can be a lot more complicated.

The truth is that buyers and consumers don’t really care what you have to do behind the computer screen—all they want is to be able to buy your products in a few seconds. If you can’t offer them that, you’ll lose customers.

The good news is that many strategies and e-commerce software tools can help you deliver a great experience, and attract potential buyers to your store. This guide will help you understand what you need to do to become a great e-commerce professional.

Short history of e-commerce

Even though the internet has only been around for less than half a century, we don’t really know when the first-ever online sale happened. Some tried to find out, and the best guess is that it happened in 1994 when someone bought a Sting album for $12.48. The same year, analysts predicted that “online shopping could explode into a $5 billion sales channel in a few years.” (It actually exploded into $55 billion in sales per month in 2018.) It is estimated that the total global revenue generated by e-commerce in 2021 will reach $4.8 trillion. 

ecommerce-trends
Find more statistics at Statista

What is e-commerce?

While anyone can sell almost anything on the internet, not all of it is considered e-commerce. If you sell your used furniture on Craigslist, you’re not in the e-commerce business. However, if you make cute toys and sell them on Etsy, that’s e-commerce.

In other words, e-commerce is 100% online. You sell online, someone buys your products online, pays online...and you don’t need to meet or even talk to your customers. For all this to happen efficiently, you’ll need to be able to import products and item information into your online store, integrate the store with an inventory management system to track availability for all products, use a payment gateway solution that customers use at checkout, and also provide some sort of customer service software when the users of your online store need help. Finally, you’ll need to export sales data to calculate the revenue and profit generated by your online business.

The challenge with e-commerce is that not all software solutions provide all the features mentioned above. (Actually, most of them don’t, but you may not always need all of them.) It is also worth mentioning what e-commerce isn't and to dispel some of the myths about it.

First, e-commerce isn't necessarily global. It is in theory, because anyone with an internet connection can buy your products online, but some barriers make things much more complicated.

  • Legislation can be so different from one country or region to another that only trying to figure it out may be a daunting task. Also, don’t be surprised if some rules and laws seem entirely illogical to you. For instance, Kinder Surprise eggs had been banned in the USA for 40 years until 2017.
  • Local culture matters more than we may think. It is true that globalization made specific products like cola or fast food available globally—but that doesn’t mean that any product will be successful anywhere, and it’s not only about quality or price. Something as apparently insignificant as the name of the product can make or break your online brand abroad.
  • Cost is probably the most significant deterrent to selling internationally. It can be almost impossible to compete with similar products offered at a much lower price.
  • Local competition isn’t only about costs. People are sometimes proud to buy local, and they may even be willing to pay a bit more for local products.

Second, you cannot use any e-commerce platform to sell anything to anyone. There are specialized solutions for B2B and B2C, for products and services, for all kinds of channels, and even marketplaces that you can use to allow your partners to sell on your online store.

Moreover, there are all kinds of payment software that you need if you want to get paid. I'll describe all these options in more detail in the e-commerce software section of this guide.


Benefits of e-commerce

This is obvious: Sales, sales, and more sales. That's the main benefit, but there are also other aspects of your business that e-commerce can help with.

First of all, it makes it easier for you to sell and for your customers to buy. Also, when people can efficiently use your online store, they are more likely to buy more—and to buy again.

Secondly, e-commerce saves you money. Even when you need to invest in technology and consultants or learn how to make a website, the costs are still lower than having physical stores with employees, or warehouses and a fleet of trucks for large companies.

Finally, e-commerce can help you quickly adapt to changes in your market. Okay, it may not always be easy, but all the data that you capture is extremely valuable to determine what products sell best, who is your typical customer, etc.


E-commerce objectives

Your e-commerce objectives are closely related to your business objectives. If you want to increase revenue, you need to sell more. That's common sense, but it's not the only way to make your business more profitable. You can also sell the same number of products at a higher price or keep the price and reduce costs.

Your e-commerce objectives depend on the stage of development of your e-commerce business. Keep in mind that this isn't necessarily related to the size of your company. Some small companies can be very good at selling online, while some large companies may be just starting.

Let's take a look at a few e-commerce objectives at each stage of your online business:

  • If you just started, you may want to focus on building an excellent reputation in your market. It is more important to set up your online business in the most efficient manner than to try to sell as much as you can without having everything sorted out first. Your reputation depends on it. Customers who are disappointed that it took minutes to find a product on your website, or because you shipped the wrong product, won't come back. They will also tell their friends, probably share their experience on social media, and give you a negative review. Be sure to leverage online reputation management software.
  • If you've been in the e-commerce business for a while, your most important objective is to improve your market presence. This is one the trickiest stages because you have to grow if you want your company to survive.
  • The most challenging stage for most online companies is when you have an established presence in your market, but there isn't much room left to grow. The only options you have are to diversify your offering or to enter new markets.
  • While no one wants to think about it, there's also the decline stage, which happens to all businesses sooner or later. At this point, you have two options: Try to save the company or try to limit your losses.

E-commerce strategy

E-commerce is here to stay, which is why you should have a long-term strategy for online sales. To implement a strategy, you’ll need a plan—but to plan, you have to understand your market.

The market you are in is made by customers and prospects, as well as competitors. It is critical that you start by understanding who they are, and try to have a good idea on how they behave in different circumstances.

Find your e-commerce audience

Remember when I told you that in theory you could sell to anyone online, but the reality is a bit different? (Just checking to see if you've been paying attention.) Well, even when there are no legislative or cost constraints, your online business will only become successful when you find a market segment made of people who are interested in your products, can be reached effectively, and can be persuaded to buy from you. The secret to any e-commerce business is to find these customers and keep them.

Where people buy

Except when your content goes viral, or you’re featured on a TV show watched by millions of people, buyers won’t come to you. You have to find them and convince them to buy your products. It is therefore essential to know where they spend their time online and where they are more likely to buy.

Your website

The traffic on your website can be beneficial to generate online sales. There are just a few things you need to consider to turn website visitors into buyers:

  • Find a mix of organic traffic and paid search. You’ll probably end up using both, but finding the right combination between them can be challenging. The best way to identify what works is to track the costs of each type of traffic and compare with the results. Remember that organic traffic isn’t free — you still need to pay people and buy tools to manage your website.
  • Make sure that your online store is easy to find and to use on your website. It helps to encourage your website visitors to visit your store and to make it available from any page on the website.
  • Keep visitors engaged with valuable content, videos, and visualizations. The more they stay on your website, the more likely they are to discover your store. Try to avoid using too many popups or anything on your website that may be annoying visitors.

There are lots of tools that you can use to create (website builder software), improve (web content management software), or promote (search marketing software) your website.

Email

No, email isn’t dead; it’s doing quite well, actually. The number of email users worldwide is expected to reach 2.9 billion in 2019, and 254 million by 2020 in the United States. All these people are sending 105 billion emails each day.

When you try to reach new prospects by email, you can benefit from using different types of solutions such as email tracking software, email marketing software, and email verification software.

Social media

Social media may seem easy when you used it just for fun, but it can be quite complicated for sales. As you know, several major social media platforms are used globally but some are very popular outside of the US. For instance, Xing is an alternative to LinkedIn that is used by almost 15 million people in German-speaking countries. LinkedIn only has 6 million users in the same region. If you want to target B2B customers in a certain region or country, make sure your business leverages the correct social media tools.

Besides the geographical location of social media users, you need to know other demographic details such as age, level of education, and so on. Some data sources can provide valuable information on who uses social media. Statista is a good example, as well as the Pew Research Center for US data. The chart below shows the percentage of US adults using social media, by age (click on the graph for details on education, race, gender, income, and community). 

% of U.S. adults who use at least one social media site, by age

The next step is to figure out the best times to post on social media. There is much research to help with you, some of it very detailed. This report by Sprout Social shows the best times to post on each platform, per industry sector. (Did you know that the best time to post on Instagram for tech companies is Wednesday mornings at 10 am?)

To better understand your social media audience, you can use solutions such as social media analytics software or social media monitoring software. There also are tools that can help you promote your business on social media, including social media marketing software and social media advertising software.

Mobile

You probably know that there are more mobile devices than people on the planet, so the importance of mobile e-commerce is pretty evident.

What's less obvious is how to approach mobile e-commerce. Here are a few things that you should consider:

  • Is your website mobile-friendly? To figure that out, all you need to do is try to buy from your online store from multiple devices (phones and tablets).
  • Is your target audience using mobile devices to buy online? (To help you find out, I listed a few research reports on who uses mobile devices and how at the end of the article.)

How people buy

There are major differences between how different people buy online. One of the most important variations in buyer behaviour is between generations of individuals. In case you’re not sure what boomers, millennials, gen X, and gen Z mean, here’s an overview:

Generation

Born between:

Boomers

1945-1968

Gen X

1969-1983

Millennials

1984-1993

Gen Z

1994-2002


At this point, all these generations are active online and on social media channels, which makes them potential e-commerce users. Besides the use of technology, there are also different approaches when it comes to how people buy. A recent report by Criteo on gen Z shows how its members approach shopping in general.  

What is noteworthy about these stats is that there isn’t a clear preference for online vs. in-store shopping anymore. It’s all a mix between where consumers find products, where they try them, and where they buy. Criteo identified five combinations that they describe as follows:

1. Webrooming: Research online, buy in-store
2. Click and Collect: Buy online, pick up at a store or kiosk
3. Scan and Scram: See in-store, purchase in-store from another retailer online
4. Click and Ship: See in-store, purchase in-store on retailer's mobile site/app
5. Showrooming: See it in-store, buy it online.

Why people don't buy online

It’s important to know what makes people avoid buying online so you either don’t try to target them or somehow convince them that their fears are unfounded. For instance, if someone is concerned about paying online, you can show them that the payment gateway software you use is secure, certified by reputable cybersecurity organizations, and complies with laws and regulations related to online security.

Other reasons why consumers may not buy online are more difficult to dispute. When it comes to clothing, many people prefer to try before buying. Even though there is technology to create virtual fitting rooms, it’s still in its early stages and may not make customers change their mind about their buying preferences.

Research your e-commerce competitors

Almost every time I attend a conference or webinar on e-commerce I hear about how eBay and Amazon became some of the largest companies in the world or how Walmart spends millions to catch up. While these are great stories, they aren’t very relevant for you.

Let’s face it, the times when you were able to start a business in a garage and turn it into a multinational company are gone. Not to mention that there are thousands, maybe tens of thousands of companies just like yours. Statistically speaking, the chances of your company becoming the next Walmart or Amazon are close to zero.

So what matters most for you is the direct competition. A direct competitor is “a company that produces a virtually identical good or service that is offered for sale within the same market as those produced by one or more other companies.”

This definition is a bit vague, so let’s take a look at other factors that make a company your direct competitor:

  • Pricing: While your competitors may sell the same products as you, are the prices also similar? It’s tough to compete with companies that can offer much lower prices than yours. 
  • Quality: When two companies offer identical products, it doesn’t necessarily mean that the quality of the products is the same. 

When you have many direct competitors, you can differentiate yourself by having a better strategy, which includes using better tools and outperforming other companies when it comes to promoting your business.


E-commerce plan

Before you even start thinking about a plan, try to understand how important online commerce is to your company. Also, what is your motivation for embracing e-commerce? Here are a few options:

  • Everyone does it; therefore, you have to do it.
  • It’s a multi-billion dollar market, and you want a piece of it.
  • You heard analysts saying that you’re dead without e-commerce.
  • Your customers are asking for it.
  • It’s free to start, so why not try it?
  • Your sales aren’t great, and you hope e-commerce will help.

In any decision-making process, we are influenced by people and by circumstances which may steer us away from what matters. It’s best to as stay objective as possible to clearly identify why you need e-commerce, what you need to succeed, and how to put the strategy into practice.  

Let’s take a look at how to answer these questions and how to use the answers to create a plan.

1. E-commerce assessment

Start by looking at where you are right now when it comes to e-commerce. We often think about the future without understanding the present, and we create unrealistic plans.

Here’s what you need to assess:

  • What you sell online or plan to sell in the future
  • What technology you have and what’s missing
  • The level of expertise of your employees when it comes to e-commerce

This will provide a good overview of your present situation and also give you an idea of what to plan for the future.

2. E-commerce goals

I already mentioned objectives above, but now you have to think about more specific and actionable goals. Here are a few examples:

  • Double online sales in six months
  • Increase traffic on web store by 50% in three months
  • Introduce a new product and aim to sell 1,000 pieces by the end of the year
  • Improve consumer loyalty by 20% in twelve months

It goes without saying that these goals are directly related to the assessment above. For instance, you’ll have a hard time doubling your sales without investing in technology and qualified personnel. You’ll also have to take into account that the investment required to increase sales should be deducted from your revenues to calculate the profit. In other words, doubling your sales doesn’t necessarily mean that you’ll double profits as well.

3. Strategy

Now that you know what to do and why, you’ll need to think about how to implement all your great ideas. You’ll realize that you may not be able to do everything you’d like, so you’ll have to prioritize.

Another critical step is to estimate a budget for short-term and long term e-commerce initiatives. This should include everything that will be used to sell online, from software and hardware to employee training or hiring new personnel, working with contractors and consultants, online advertising, website revamping and maintenance, and so on.

Since you already set specific goals for your online business, you can now compare estimated revenues with the cost of the investment required to achieve your objectives. As you implement your strategy, make sure to monitor actual costs and revenues regularly and compare with estimates.

Branding your online store

Merely creating an online store and waiting for people to find it won't work. Not to mention that there are probably dozens, if not hundreds, of other stores just like yours so you’ll have to find a way to differentiate yourself from the competition.

What helps with your online branding

A right mix of channels for communications and promotions is critical for any online business. As mentioned above, finding the right combination of channels should take into account the different types of users of each platform.

Content that makes a difference is critical because there is so much content out there; most of it covers more or less the same topics. While you may not be able to always come up with original content ideas, it helps to avoid being impersonal and use media such as videos, graphs, or animations to make content more attractive.

Engaging with customers and prospects is becoming more critical as new generations of consumers prefer direct communications to traditional content such as blogs and articles. An increasingly important form of engagement that can also help you promote your business is customer service.

Choosing a platform for e-commerce

There are three major types of e-commerce platforms that you can use to sell online:

  • Online marketplaces (eBay, Amazon, Etsy, etc.)
  • Comparison shopping engines (Shoppping.com, Find.com, etc.)
  • Software that you can use to build your cart or online store

The ideal would be to find the right mix between all three options, since you may find potential customers on any of them. It is preferable, however, to focus on one or a few platforms after you try them all and determine which option is best for you. That being said, it helps to follow industry trends and adapt to your market. When your customers switch from one platform to another, you want to make sure that you follow them, not the other way around.

Choosing a platform for e-commerce

As you can imagine, the multi-billion dollar e-commerce market is a great opportunity for software vendors that specialize on software for online sales. The e-commerce software market was valued at $3.8 billion in 2016 and is expected to reach $4.7 billion by 2021.

As the market grows, new types of e-commerce software are launched by vendors. The most important categories of e-commerce solutions are summarized below.

Shopping carts

Shopping cart software tools are the most basic type of e-commerce. This type of software allows you to create a simple online store that can be embedded on your website. While most shopping cart products integrate with solutions for payments or inventory management, these features are usually not provided out of the box.

The main benefit of shopping cart software is that it’s reasonably priced, sometimes even free. There are also many open-source options which can be used at no cost but require some effort to deploy and use. For instance, you may need to download the installation package, upload the files on a web server, run the installer, and then configure and use the product. There are also all kinds of tech requirements for the software to work correctly, such as Apache Server, PHP, MySQL database, and so on.

For those who don’t need to worry about servers and databases, the ideal option is to choose a cloud solution. Another useful option for small companies is to use a free website builder, which includes features to create online stores. (A few examples of website platforms that you can use to create online stores are Wordpress.com, Weebly, Wix, and Squarespace.) Please keep in mind that while creating websites on these platforms is free, adding an online store isn’t always included in the free version.

E-commerce platforms

This type of software usually provides all or most of the features you may need for e-commerce. That being said, there are significant differences between platforms, and they’re not always easy to identify.

Here’s how to compare e-commerce platforms so you can differentiate them:

  • Understand what’s included “out of the box” and what is delivered through integrations or partnerships. It’s also important to know if the solution is offered as a suite made of multiple products, or if it is one single solution.
  • Pricing isn’t always straightforward because there are different models that vendors use to charge you. For instance, vendors sometimes charge a percentage of the transaction for payments instead of a flat fee.
  • Sets of features and options are sold as plans, and each plan is usually priced differently. It is therefore critical to understand what you get when you choose a plan and how you can move to other plans.

Security solutions provided by the vendor should also be an early consideration when selecting a cloud provider. These tools can help improve user governance and help to better control data in transfer. Users should also be well aware of who has privileged access to their business critical applications. This should be done both in terms of internal employees and the vendor’s staff controlling your services.

Reviews software

According to research from CPC Strategy, an honest review is the fifth-most important reason why shoppers buy online. Reviews are more important than reward programs, recommendations by family and friends, or brand reputation.

As a result, some software vendors decided to specialize on product reviews, which helps companies collect reviews, moderate and respond to feedback, and use reviews for marketing purposes.

There are two main types of product reviews software:

  • Platforms that collect reviews from many users and brands. (For instance, Bazzarvoice is a network of 900 million users across 5,700 websites.)
  • Tools that collect reviews from your website only.

There are also alternatives such as Yelp, Google, or Facebook reviews, which are usually free and can be a good option when you don’t want to invest in reviews software.

Catalog management

If you’re old enough to remember the Sears Catalog, you’ll understand why catalog management software is so crucial for e-commerce. If not, imagine trying to review the offering of a company selling hundreds of products. A simple online store doesn’t include the features users need to look at many types of products quickly, sold together or separately, in different variations. Not to mention products that are seasonal, or only sold in specific geographical locations.

It is also critical for companies selling large numbers of products to be able to reuse product information when updating their catalogs. Most offerings do not change a lot during a short period, but there are enough changes to make the task of updating catalogs a real challenge for companies.

Product information management

When you sell hundreds or thousands of products that come in different sizes or colors, you’ll have a hard time managing the data about all products. Inaccurate product data may lead to all kinds of errors that could confuse customers and even make you lose money. For instance, the wrong description or price for a product may make customers buy a product they don’t need and pay too much for it.

That’s where product information software comes into play. PIM can store and manage large volumes of data on many products and their characteristics. Some types of product data managed by PIM include names, descriptions, and sometimes translations, physical attributes such as size, color, weight, and so on, as well as pricing or shipping instructions.

PIM also can help you manage product metadata such as product categories (e.g., women, men, kids), types (clothing, shoes, toys, etc.), collections for fashion and apparel, and any other options you may be used to group products. Metadata is particularly relevant to generate reports for each type, category, or group, as well as for any combination between them.

Payment gateway

If you want to get paid for the products you sell, you’ll need to either integrate your e-commerce software with payment gateway software or use e-commerce products that include payment functionality. From a consumer perspective, there are two possibilities when it comes to payments: They can either pay on your store without leaving the website, or they can be redirected to an external gateway.

As for payment methods, you’ll need to make sure that your online store accepts at least all major credit cards and one or more online payment platforms such as PayPal or Stripe. While you can add a PayPal button on your store without much difficulty, when your e-commerce business grows you’ll need a more sophisticated payment system. This type of software also offers secure processing of payments by encrypting sensitive data and can be used to connect your e-commerce website with bank accounts for direct transfer.

Payment gateway security

Unfortunately, the success of e-commerce has its dark side: fraud. It is therefore vital to make sure that you protect yourself and your customers from hackers and cyberattacks. The good news is that you can control the security of your online store or payment gateway by choosing the most secure options. The bad news is that you don’t have much control over the security of your buyers since they may use any device, which may or may not be protected against cyberattacks.

To give you an idea of the number of cyberattacks, new research by the ThreatMetrix Digital Identity Network estimates that in the first quarter of 2018, “210 million attacks were detected and stopped in real time; a 62% increase over the previous year.” Also, here’s a fascinating live map of fraud attempts prevented by the Digital Identity Network.

ThreatMetrix Cybercrime Threat Map

Fraud protection software can help you protect your customers at any stage of the buying process, from account creation to payment.

Your e-commerce adventure

If you made it to the end, I hope you learned something new about e-commerce. All this is just scratching the surface, though. I suggest you read more about the e-commerce market, and I included some suggestions below.

If I were to give you one piece of advice that would be to make sure that you always combine a business strategy with technology and a lot of market research. All these three factors are critical for your success but only when used together.

Next step in choosing an e-commerce software solution

With hundreds of e-commerce solutions on the market, it's difficult to make a decision. Equipped with the knowledge you have now, you can utilize G2 Crowd's e-commerce software categories to browse over a thousand different solutions and read thousands of real-user reviews.

Resources

Gabriel Gheorghiu
Author

Gabriel Gheorghiu

Gabriel’s background includes more than 15 years of experience in all aspects of business software selection and implementation. His research work has involved detailed functional analyses of software vendors from various areas such as ERP, CRM and HCM. Gheorghiu holds a bachelor's degree in business administration from the Academy of Economic Studies in Bucharest (Romania), and a master's degree in territorial project management from Université Paris XII Val de Marne (France).