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Get Insights Into How E-commerce Works

Read time: 11 minutes

Buying and selling online is what is termed as electronic commerce or e-commerce, as we call it nowadays. The most related examples of e-commerce platforms are Amazon, Flipkart, Meesho among others. 

E-commerce sales are expected to reach 23% worldwide by the year 2027. It is estimated to reach $6.3 trillion in the current year of 2024. The E-commerce industry is highly competitive because almost anything can be bought today because of its availability on the internet. The e-commerce industry is so large that even small business owners are starting to use the platform to reach a wider audience and increase their sales. 

Cyber monday shopping sales

What is E-commerce?

E-commerce includes exchanging products, services, funds and data through the internet. See, what a wondrous thing the internet is, and we have started taking it for granted, have we? But every time you go online, be grateful for such a boon to exist in our lives. 

If you want to carry out your business through the internet you would be relying solely on digital platforms like social media apps, websites etc. for buying and selling of products. E-commerce uses various tools like mobile shopping and payment encryption. 

Businesses who solely run their entity through the internet use an online store or a platform where they conduct e-commerce marketing and sales activities that meet their goals. 

How E-commerce helps to grow a business?

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E-commerce is an effective industry because it has helped small and large businesses reach marketplaces beyond their reach. The obstacle of linguistic, cultural and geographical boundaries has been eliminated from the marketplace enhancing the profits of business by giving them a chance to expand themselves across the boundaries.  

Small businesses have gained the most advantages of electronic commerce because it has provided them with a wider market to sell their product and services with cost-efficient ways like cheaper and easily accessible distribution channels. 

Selling products online sounds cool but it is no less than the traditional way of conducting business. You would have to do vigorous research on the market, the audience, your competition and choose the channel wisely through which you will conduct your business online. 

You are required to fulfil the essentials of your online business just like you would do to carry out your business the traditional ways, like setting up legal structure, giving a name to your brand and company, establishing your brand. For online business you would have to develop your website that would be the face of your business and decide the payment methods. 

How did it all start?

Showing Cart Trolley Shopping Online Sign Graphic

Nykaa, Myntra, Amazon, and Flipkart are a few examples of the e-commerce websites that you have been using for years now. You can even buy groceries online because the internet has made it that easy. 

The dress that you ordered 3 days ago has been delivered to you within a few days, the books resting on your table were ordered from Amazon. Flipkart had sent the utensils in time and you forgot to buy the milk in the morning, so what, you have blinkit to make the purchase. But how did the purchase of such goods begin in the first place? 

The first thing to be ever sold online was a disc. Any guesses when it was? No, it wasn’t in 2010 or in 2005. It was around 24 years ago. Yes, the first online transaction of a product happened back in 1994. 

The online business industry has seen drastic changes, from fast delivery to exchange within 7-14 days, e-commerce has given people numerous benefits of buying and selling online. We have surely come a long way since 1994, that now even grocery is just a click away. 

All thanks to easy access to the technology and the internet that businesses are blooming out of their comfort zones and customers are getting access to things that are usually not available in their locality. 

Perks of E-commerce:

Selling and buying online can offer various benefits to both the seller and the buyer. Here are a few advantages of conducting business online:

Global reach:

Online business does not see any boundaries. There are no linguistic, cultural or geographical boundaries that would restrict your business to just one locality. As a business owner you would get a global market reach that would bring you customers from various localities and cultures to your doorstep to buy your products or services. 

For customers, you can buy that banarsi saree that you have been wishing to wear for years but couldn’t get your hands on because you live in Punjab. 

Cost-effective:

Establishing your business online does not require huge investment. All you need is to build an e-commerce website and you can start your online store just with the stock that you have. A business owner would not have to buy or rent tangible space that would add to their cost. They just have to maintain their website on which they are making sales. Even if businesses are just advertising online, it is still cost-effective to them because digital marketing and advertising is cheaper than advertising through traditional methods. 

With the free-shipping option and the elimination of intermediaries has made it cheaper for people to buy online than from the store. Many large businesses are thriving because they are providing online services and products that are selling their products on discounts because their own costs have been cut down. 

Convenient and flexible:

E-commerce websites provide convenience and flexibility to both their customers and owners because of the multiple benefits that it provides, one of them being having easy access to each other. 

Business owners can provide multiple options and customers can make round-the-clock purchases without visiting the store physically. Both the business owner and the customer don’t have to worry about the time zones or location to sell and buy the products. 

Challenges of E-commerce:

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Businesses are full of challenges be it at a tangible place or on an online platform. Here a a few challenges that both the party involved in e-commerce face:

Physical interaction:

The customer and the business owner do not physically interact as they have limited face-to-face interaction which also limits their relation as customer and seller. When you visit a store on your own, the owner and the customer build a relationship of reliability, and loyalty that serves both for a long period of time. 

But online business transactions do not allow you to build such connections and networks. Therefore, loyalty might not be something that both the parties will serve. 

Limited access to the product:

As a customer, you are not visiting the store so you can only access the product through pictures, videos, text and reviews by people you don’t even know. You cannot test the product like you could have if you would have visited the store. 

The limited access to the product leads the customers to have second thoughts if they should make a purchase online or not. Customers also find it difficult to use the product after buying it because no one instructed them on how to use it, all they have is a manual that they cannot decipher. 

Technical challenges:

Technology is the major element of online business. If a person finds it hard to use technology they would not be your potential customers. Apart from that a business has to work on their website. 

If your website is user-friendly where people can make easy purchases and easy payments, the chances are they would recommend your website to others as well, provided you have quality products that will benefit the customers. 

Glitches, website crash, security issues are some of the problems that you and your customers might face. You need to work on the website optimization to avoid such issues.  

Types of E-commerce:

E-commerce has four major types as discussed below:

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Business to Consumer (B2C):

This is the most popular model that involves business selling directly to the consumer.

Business to Business (B2B):

When one business sells to another business that model is called B2B. For example, a digital marketing agency providing its services to the business to handle the marketing of their business through digital platforms. 

Consumer to Consumer (C2C):

Have you ever listed a product on OLX? “OLX pe bechde”  is the tagline of the company as it allows one consumer to connect with another consumer to buy and sell the product. C2C works when a consumer sells their product to someone else. 

Consumer to business (C2B):

In this type of model, a consumer will sell their product or service to the business who will use it to further sell it to their customers. 

How E-commerce works:

Front view of online shopping concept

If you have not sold a product online you might have bought something. How does it work? You order the product in your cart, and you get its delivery at your address within days. You either make the payment after the order, or after receiving the order. But is that all? Actually, there are a few other steps involved in the process of ordering the product and receiving it. 

  1. Server lists the porduct.
  2. The customers browses the products and see if they like something
  3. They either add it to cart or simple click on “buy the product”
  4. The customer makes the payment choosing the convenient payment option available
  5. The business is notified of the order and approves it.
  6. Order manager authorises the dispatch of the product.
  7. The customer gets the shipping details and tracking information once the order is approved and dispatch is authorised. 
  8. The product is shipped by the business and the customer receive the product within days

Expertise of a professional:

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Sometimes a business has to hire someone with the right skills that can handle their online business. Companies hire e-commerce managers that handle their business and supervise all the activities related to the online platform on which they are selling their products and services. 

Companies hire ecommerce product managers that look after the analytics, operations and other related duties solely aligning with e-commerce. Here is what an e-commerce manager does in a company who sells their products or services online.

Analysis of the market:

The first thing an e-commerce manager would be looking at in the book of their duties is analysing the market by reviewing the latest news and trends in the market. They will also look at the activities of the competition so they can keep their business a step ahead or using strategies and tactics that will help them stand out from their competitors. 

Strategizing:

A business booms if they use effective strategies to expand themselves. Strategizing will involve researching the market and competition to develop strategies that would help business meet its goals. You will be working with other departments as well to ensure effective execution of the strategies that you have thought of. 

Collaborations:

You would be working with various departments of the companies like marketing and advertising, sales, customer support to get better insights of the business and its activities so far. Collaborating with other departments will help you develop strategies that would be effective for the business as a whole. 

You would get to know what about the customer feedback from customer support. You would get to know how advertising campaigns are doing with the help of the data provided by the advertising department. So, collaborating will help you brainstorm the ideas to promote your products and services in a better way and reach the customers with a strategic approach. 

Data analysis:

An ecommerce manager will have to analyse the data by regularly tapping into the ecommerce metrics like conversion rates, average order value, key performance indicators (KPIs) and customer acquisition costs. After that you as an ecommerce manager will work on reporting the numbers in a way that it is easy to understand by your colleagues from other departments and your superiors. 

Apart from the above-mentioned duties, the responsibility of an e-commerce manager will vary with the policies of the company they are working for, the size of the company, the chain of products the company offers and many other factors. 

Conclusion:

E-commerce is a platform to buy and sell products without measuring the horizons of geographic boundaries. From a small craftsperson to a huge company with turnover of millions can reach to the audience to sell their products. 

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