Electronic commerce refers to the act of customers shopping online and processing their payments. Visitors to an eCommerce site can find their product(s), add them to a shopping cart, and securely enter their payment information to complete the purchase. eCommerce has permeated society and our daily lives since the advent of credit card processing on the internet. With Covid and recent events, eCommerce has grown by more than 44% in Q2 of 2020 alone.

Today, just about any product or service imaginable can be purchased online, whether via an eCommerce website or other means.

More and more people are buying online and enjoying the benefits that eCommerce offers, such as increased convenience, lower prices, and sales tax exemption.

Etymology of eCommerce

The term "eCommerce" is a blend of "Electronic Commerce," which seems vague in and of itself. An eCommerce store builder allows you to create websites for online transactions.

The term eCommerce has always been used to refer to any type of online commercial transaction.

Business models for e-commerce:

When you build custom eCommerce store it serves as a virtual storefront where transactions and commerce can take place. This can take many forms:

  • The business sells products directly to end-users without the involvement of intermediaries.

  • In wholesale, products are sold directly to consumers or to wholesalers/distributors in bulk.

  • Dropshipping: Products are sold online and shipped directly to the customer by a third-party vendor who manages inventory, order fulfillment, and other logistics.

  • Crowdfunding: In crowdfunding, consumers pool money ahead of a product's release to raise startup capital, leverage buying power, reduce product costs, etc.

  • Recurring purchases for products or services are automated until the subscriber cancels or changes their subscription level.

  • Several eCommerce transactions involve the sale of digital products, including music, movies, audio and video files, templates, software, etc.). Most people think of tangible products, but many eCommerce transactions involve digital products as well.

  • Skilled labor can be procured digitally, such as hiring an Uber driver or paying someone to run errands for you.

How does an eCommerce Website Work?

When you build eCommerce store you create a digital portal (i.e. virtual storefronts) that facilitate online shopping. eCommerce is a broad term that includes virtually any online transaction.

An eCommerce website is one that has eCommerce functionality and allows customers to purchase products or services.

Historically, the earliest eCommerce transactions were conducted via email and phone calls.

Even in the earliest stages of development, eCommerce websites must be designed to:

  • Facilitate revenue generation by:

    • Maximizing the number of transactions.

    • Maximizing the "average order value."

    • Directing shoppers to the most profitable products and categories.

    • Brand loyalty, repeat customers, and audience engagement.

    • Streamlining checkout and other crucial conversion funnels.

You can find everything from plug-and-play shopping carts to complex eCommerce websites that cost millions of dollars to build and maintain.

What is the process of creating an eCommerce website?

When you create eCommerce store, it is convenient for customers to make purchases. E-commerce websites utilize the code of the website, the database, and third-party applications such as payment processors and payment gateways.

SSL certificates ensure the security and encryption of all data transferred through e-commerce websites. If the website does not adhere to all mandated regulations, including PCI compliance, sensitive data, such as credit card information, should never be stored within the website's database.

Typically, eCommerce websites work like this:

  1. A potential customer navigates to an eCommerce website via search engines, paid advertisements, or referral traffic.

  2. The eCommerce website connects to a database containing a lot of information about the website's categories, products, dimensions, weight, articles, and images. The website requests this information to dynamically render web pages.

  3. A potential customer browses the eCommerce website, adds a product or service to their virtual shopping cart, and decides to check out.

  4. After completing the checkout process, the customer completes the transaction.

  5. To process credit cards securely and remotely, the shopper's credit card information is encrypted and sent to a Payment Gateway (Paypal, for example).

  6. Once an order is complete and the payment has been processed, the website will typically provide an estimated shipping time, a unique transaction number, a postal tracking number, etc. A good eCommerce website's core functionality includes most of these processes.

  7. Orders are stored in the website admin and sent to an order fulfillment team after transactions have been completed. Fulfillment of orders can be handled in-house or by a third-party drop shipper.

Comparing eCommerce websites to traditional brick-and-mortar storefronts, eCommerce websites offer both advantages and disadvantages.

eCommerce websites have the following advantages:

  • Market reach (global customer base) increased.

  • Costs for goods, services, shipping, etc., are reduced.

  • Secure and encrypted transactions.

  • Distribution chain shortened.

  • Order fulfillment is faster.

  • Data that is better and more precise for forecasting future sales.

  • Based on age, demographics, interests, etc., targeted markets can be razor-focused.

  • Anonymity is possible.

eCommerce websites have the following cons:

eCommerce websites have few and far between disadvantages and are easily mitigated if you work with a reputable eCommerce website development company. eCommerce websites have the following disadvantages:

  • The customer cannot always see and touch the product before purchasing it.

  • Market reach may be limited since customers must be somewhat tech-savvy.

  • Shopping experiences are less 'personal'.

  • Fraud, data privacy issues, etc.

Types of eCommerce Websites and Common eCommerce Business Models

Most eCommerce websites on the internet are B2C retailers. However, there are several types of eCommerce websites:

  • Business-to-business (B2B)

  • Business-to-consumer (B2C)

  • Consumer-to-consumer (C2C)

  • Consumer-to-business (C2B)

  • B2A (business to government)

  • C2A (consumer to government)

Comparing eCommerce and mobile commerce:

eCommerce that takes place on a mobile device is known as mobile commerce (mCommerce). Due to the ubiquitous nature of smartphones and tablets, a growing share of eCommerce transactions will be conducted on mobile devices. Learn more about mobile commerce statistics!

Author's Bio: 

Arnaldo is an American writer for various digital news publications. After being in the eCommerce industry for more than 15 years, Arnaldo has a good understanding of what it takes to make an eCommerce business successful. He also likes to cover newsworthy events related to business management software, customer relationship management (CRM), and Quoting software