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Jul 8 2023
6 ways to Grow Company : Strategies Unveiled

The 6 Ways to Grow a Company

The first step to generating real growth is to understand where it comes from. It can be boiled down to six simple categories: new processes, new experiences, new features, new customers, new offerings, and new models. Deciding which ways to grow needs to be intentional – not driven by luck. Innovation budgets are finite, so allocations of your scarce resources should reduce risk and focus on the best bets. It needs to be balanced for maximum return the same way a retirement fund needs to be balanced among high and low risks and rewards.

The term “innovation” is often associated with geniuses turning startups into gold mines – the next Google, Apple, or Amazon, with products no one even knew they needed. Private equity firms place hundreds of little bets on these startups, hoping one produces a windfall that covers the rest. These bets on the next growth engine often depend on luck more than insight.

Meanwhile, every company aspires to be as innovative as these startups. Many companies invest in or buy them, unsure what they’ll yield other than the halo effect they may overpay for, made worse by the fact that most don’t align with the company strategy or meet a market insight. The same is true of ideas: Knowing which to fund without making random bets is key. But according to a series of three surveys conducted over six years by Maddock Douglas, the consulting firm where I work, while 80% of executives know that their companies’ success depends on introducing new products and services, more than half agreed that their companies dedicate insufficient resources to support innovation. (For more, see Brand New: Solving the Innovation Paradox, by G. Michael Maddock, Luisa C. Uriarte, and Paul B. Brown.)

Innovation is a word that’s been attached to finding new ways to grow, and every corporation needs to grow year over year. But the first step to generating real growth is to understand where it comes from. We believe growth has been made unnecessarily complicated, so we’ve boiled it down to six simple categories with corresponding examples from Apple:

  • New processes. Sell the same stuff at higher margins: Cut production and delivery costs, automate for efficiencies, cut fat in the supply chain or manufacturing, and utilize robots.
  • New experiences. Sell more of the same stuff to the same people: Increase retention and share by powerfully connecting with customers. An example is the Apple Store experience, which many would argue is as compelling as the company’s products.
  • New features. Sell enhanced stuff to the same people: Add improvements that drive incremental purchases. An example of this is every new phone Apple releases, with better cameras and so on.
  • New customers. Sell more of the same stuff to new people: Introduce the product to new markets with needs similar to your core, or to markets where it might address a different need. For Apple, this goes back to reaching the mainstream rather than the design community.
  • New offerings. Make new stuff to sell: Develop a new product — not just enhancements. Find new needs to solve within existing markets, or invest in a new category. Think HomePod or the iPod.
  • New models. Sell stuff in a new way: Reimagine how to go to market by creating new revenue streams, channels, and ways of creating value. This can be as simple as moving to a subscription model, or as transformative as Apple’s creating iTunes.

Deciding which ways to grow needs to be intentional — not driven by luck. Innovation budgets are finite, so allocations of your scarce resources should reduce risk and focus on the best bets. It needs to be balanced for maximum return the same way a retirement fund needs to be balanced among high and low risks and rewards. For example, consider the following innovation budget allocation model:

How to Successfully Handle Your Company’s Finances

The model above shows the relationship among these six simple ways to grow, in the context of the four quadrants of the portfolio (evolutionary, differentiation, fast fail, and revolutionary), each of which gets a percentage allocation of the innovation budget. Note that:

  • New processes fall outside the innovation portfolio (no budget allocation).
  • New experiences and new features are in the evolutionary quadrant (about 40%–60% of the budget).
  • New customers are in the fast fail quadrant (about 10%–20% of the budget).
  • New offerings are in the differentiation quadrant (about 10%–20% of the budget).
  • The combination of both new customers and new offerings are in the revolutionary quadrant (about 5%–10% of the budget).
  • New models can fall anywhere in the portfolio.

This same allocation model applies to investments in growth. Some ways to grow are easier than others. Cutting costs with new processes to improve margins is low-hanging fruit. It isn’t on the level of startup innovation; it’s just a more innovative way to do things. We don’t consider it part of the innovation budget because it doesn’t create value in the market, only incremental growth and continuous improvement.

The easiest goal in the innovation pie is to maintain relevance to your core market through enhancements — with new features for your current offerings or the experiences that deliver them. It’s easy because it focuses on a market you already know and on products you already know how to deliver. A company will seldom question allocating the largest portion of its innovation budget to these activities (40%–60%).

A smaller portion (10%–20%) is allocated to reaching new customers with what you know how to deliver. This low-investment, fail-fast, test-the-waters approach is more akin to how a private equity investor might approach innovation, making many small bets and quickly abandoning those that fail to get traction. The key is fast experimentation through lean, agile approaches.

Another 10%–20% is likely to go toward differentiation – developing new offerings before the competition does. These are things you’re not sure how to deliver, but you know the market wants them, making it worth trying to figure out. Efforts like these carry greater risks but promise greater rewards if you’re first to market.

That leaves the smallest portion (5%–10%) for focused bets on revolutionary, high-risk opportunities with new offerings to new customers. In this quadrant, you focus on a big idea, using agile approaches to break it apart to see which elements drive value through continuous assessments of desirability, since you don’t know for sure what the market values (even the idea itself). If you continue to clear hurdles, you stand a chance to launch a game-changer that fills an unmet need. You just have to test and experiment quickly.

New models – new ways of delivering – can fall anywhere in the innovation portfolio, as do build, buy, or partner decisions. Knowing the type of growth that your initiatives represent and their place in the portfolio helps determine which to pursue and how, including acquiring a startup that may hold a key to the puzzle – intentionally identified by targeted criteria, which are de-risked by researching and identifying unmet needs in the market.

Knowing how growth happens, and the best ways to focus your organization’s efforts to grow, is as critical as allocating investments across the innovation risk-reward spectrum for maximum returns. Doing so works better than placing random bets on the latest startup in the hopes of getting lucky. Or worse, betting on one silver bullet that misfires.


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Kalinka Infotech 3 Comments
Jul 8 2023
What is Ecommerce? A Guide to Definition, Model and Examples

Comprehensive Guide to Ecommerce Definition, Model & Example

Today, ecommerce is powered by a massive ecosystem of technologies and digital platforms from website builders to payment gateways to social media sales channels. It continues to grow, with global ecommerce sales projected to reach $8 billion and account for 23.6% of all retail activity by 2026. It’s no wonder that new technology emerges every day, enabling businesses and creators to more easily sell products to customers online.

Ahead, explore the ins and outs of ecommerce: how it works, types of ecommerce models, online shopping trends, and the benefits of selling online. Plus, learn how to start an ecommerce business and launch your own big idea.

What is ecommerce?

Ecommerce (short for electronic commerce) is the process of buying and selling goods or services via the internet. Through websites, online marketplaces, and social media, individuals and businesses can sell goods and services using digital means to accept payment and collect customer data.

Ecommerce examples include B2C websites that sell goods and services to consumers.

How does ecommerce work?

After a customer makes a purchase, the online retailer delivers the order via shipping, store pickup, or local delivery (in the case of physical products), or digitally (for digital products like PDFs, virtual courses, or online consultations).

Ecommerce transactions happen across a variety of devices and platforms, using a number of different payment methods. Other applications and businesses support this ecosystem, from ad platforms like Google Ads to third-party logistics companies to ecommerce store apps. Let’s explore a few of the technologies powering online sales.

Types of ecommerce platforms and online sales channels

There are many ways to reach and sell to consumers online, including owned channels like an online store and through third-party platforms. There are pros and cons to each and many online sellers choose an omnichannel approach, selling through multiple channels.

Ecommerce platforms

An ecommerce platform is a service that allows you to make money online through your own website. Shopify is an example of an ecommerce company that enables individuals, creators, and businesses of all sizes to sell online and in person through a brick-and-mortar store.

Benefits: These ecommerce companies generally offer everything you need to build a website, create product listings, and accept payments online, making them an easy way to build a brand and start selling.

Challenges: Selling on your own website requires active marketing efforts to drive traffic and make sales.

Online marketplaces

Online marketplaces are ecommerce sales channels that allow you to sell products and services to an active audience. Marketplaces like Amazon or Etsy are also powerful search engines, as they are often the first point of discovery for consumers looking for products.

Benefits: You can sell on marketplaces in tandem with your Shopify online store using integrations to sync sales. Marketplaces often have discovery built in, meaning you benefit from traffic with less active marketing.

Challenges: Marketplaces make it difficult to build a brand versus a standalone ecommerce store. You often don’t own your customer lists and you have limited control over the look and feel of your store or brand.

Social selling channels

Many social media platforms offer in-platform buying and selling features, enabling small businesses or personal brands to sell directly to audiences without an online storefront. Facebook and Instagram both offer native shopping features. You can also sell to social audiences with a Shopify Starter plan, an economical alternative to a full ecommerce website.

Benefits: You can easily sell to existing audiences on channels you already manage without building an ecommerce website.

Challenges: The audiences you build on social media sites areoften not owned. If you lose your account or the platform shuts down, you will need to rebuild from scratch.

Reach customers everywhere they are with Shopify

Shopify comes with powerful tools that help you promote and sell products on Facebook, Instagram, TikTok, Google, and YouTube from one back office. Make sales on multiple channels and manage everything from Shopify. Explore Shopify’s sales channels

Payment methods for ecommerce

Shop Pay is an accelerated checkout option that consumers can use to buy products on Shopify ecommerce sites with a few clicks.

Consumers can make online purchases in a number of ways from digital wallets to credit cards processed through a payment gateway in an online store. Ecommerce platforms usually include integrations with payment processing services and sometimes offer their own digital payment platforms. These services are the liaison for online transactions between a merchant and a customer’s bank. Payment options are often bundled in the checkout to offer the customer choice.

A few types of payment methods for ecommerce stores include:

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Types of ecommerce businesses explained

There are many ecommerce types, defined by who you are and who you’re selling to. Some helpful ecommerce terms to know are as follows.

Business to consumer (B2C)

A business that sells goods or services to an individual consumer (e.g., An ecommerce footwear store sells individual pairs of shoes directly to its customers).

Business to business (B2B)

A business that sells goods or services to another business (e.g., A software company sells licenses for its technology to a small business).

Consumer to consumer (C2C)

An individual who sells goods or services to another individual (e.g., A person sells a single used sofa to another person on a buy-and-sell marketplace). Note: Once a person begins selling multiple items in this way (a vintage reseller using channels like Depop), their business model could be considered B2C.

Consumer to business (C2B)

An individual sells their own products or services to a business or organization (e.g., A business pays an independent influencer to promote the brand on social media).

You may also encounter a few other terms to describe types of ecommerce businesses. Direct-to-consumer (DTC or D2C) brands are those that primarily sell directly to their customers, either online or in person, without a middleman (a retailer or distributor). A digitally native vertical brand (DNVB) refers to a DTC business that started entirely online. Popular examples of these ecommerce business models include mattress brand Casper and men’s grooming brand Harry’s.

5 ecommerce revenue models

In addition to deciding what type of ecommerce business you want to run, it’s important to decide how that business will make money. There are at least five different revenue models used by businesses selling online. They are:

  1. Sales model. This is the most common model used by online brands and physical stores alike. It involves selling products and services for profit.
  2. Subscription model. Growing in popularity among consumers and ecommerce DTC brands, this model relies on recurring revenue from subscriptions to products or services.
  3. Advertising model. This model is common among online creators and influencers who grow personal brands thanks to advertising deals (promoted content) with other businesses.
  4. Affiliate model. Affiliate programs are also popular among creators who have large followings and may or may not sell their own products. They earn commission when a customer buys a product using an affiliate link.
  5. Transaction fee model. This model applies to ecommerce companies that process financial transactions. They earn revenue by charging a fee on each sale.

The benefits of ecommerce businesses

Running an ecommerce business has its perks. Not only does this business model allow you to launch a business quickly, it also offers access to a global pool of potential customers looking for a convenient way to buy your product and interact with your brand.

A convenient way for consumers to shop

Ecommerce allows customers to shop from anywhere, on any device, at any time, without the need to physically visit a store. Potential customers can more easily discover your brand—even from another country—and compare products, features, and prices in minutes. With a multitude of payment options offered by ecommerce, shopping online is even more convenient.

Increased reach and access to new markets

An ecommerce business can reach a wider audience than a physical store alone. With an ecommerce store, businesses can sell their products to customers all over the world, without the need for a physical presence in every location. Shipping partners and logistics companies connect the dots, moving online orders across the globe.

Personalization and data

While it’s difficult to replace the one-to-one touch of a retail experience, online stores have a leg up on personalization. Customer data can be used for ecommerce marketing personalization, with customized experiences tailored to each individual. This can include personalized product recommendations, targeted marketing campaigns, fit finder quizzes, and loyalty programs.

Online stores usually have the ability to offer more choices, like color variants or product customization. Personalized shopping experiences can help businesses build stronger relationships with their customers and increase customer loyalty.

Lower startup and operating costs

Ecommerce businesses often have lower overhead costs than traditional brick-and-mortar stores. An ecommerce business can be run from anywhere, including a home office. While new business owners are still on the hook for inventory and costs to set up a website and domain, they often don’t need to worry about rent, utilities, and other high startup costs. Certain ecommerce business models such as dropshipping or print on demand don’t require inventory, and can be fairly inexpensive to set up and run.

The challenges of ecommerce businesses

While running an online business has its benefits, it also comes with a few challenges. If you’re looking to start an ecommerce business, plan for these potential pitfalls before you proceed.

Security concerns in ecommerce

One of the biggest challenges of ecommerce is security. Customers need to trust that their personal and financial information is safe when they make purchases online. Ecommerce businesses should invest in secure payment gateways, SSL certificates, and other security measures to protect their customers’ data. Note: Plans on Shopify come with security features like SSL and a secure payment gateway.

Clearly outline these security measures for customers in your terms and conditions and on the checkout page.

Increased competition

Ecommerce is a highly competitive space, with many businesses vying for the same customers. Online businesses need to differentiate themselves from their competitors by offering unique products, competitive prices, and exceptional customer experiences.

Shipping and logistics challenges

Every successful ecommerce business owner knows that a customer’s experience with shipping can make or break a brand. Online stores need to have efficient and reliable shipping and logistics systems in place to ensure that products are delivered to customers on time and in good condition.

 

Returns and customer service demands

In order to be competitive, ecommerce brands need to have robust return policies and customer service systems in place to handle customer inquiries and complaints. This can be challenging, especially for businesses that sell complex or technical products, or for small businesses with little or no staff.

Top ecommerce trends and statistics

Ecommerce trends impact everything from how websites look and function to the most popular products types. Staying on top of ecommerce shopping trends will help your business remain competitive and meet ever-changing customer needs. While trends are constantly evolving, there are a few that signal a more permanent shift in the way consumers discover, buy, and support businesses.

1. Social ecommerce is on the rise

Social commerce sales in the US are expected to exceed $56 billion in 2023. Effective social selling means engaging in actual conversations with potential customers online. As you build trust and establish relationships, you can eventually move the customer through the marketing funnel toward a successful sale.

Learn more about this trend and how to sell on social platforms with these selling guides:

2. Social platforms are the new search engines

More and more, product discovery is happening in places you might not expect. Alongside Google, consumers look to YouTube and Amazon to find brands and products. Google reported that Gen Z is using social media platforms like TikTok to research brands more often than they use search engines.

🧶 A Rug Making Hobby Became a Business, Thanks to TikTok

In this episode of Shopify Masters, Mush Studios founder Jacob WInter explains how his rug making content went viral on TikTok after users discovered his unique style. In response, Jacob launched his creations as an ecommerce brand.

3. Online shopping goes mobile

M-commerce, or mobile commerce, refers to ecommerce transactions that occur via mobile phone. M-commerce sales were expected to account for 43% of the total ecommerce sales in the US in 2023. This number has been on a steady climb for years, and doesn’t show signs of slowing. Brands should therefore pay attention to the user experience on mobile devices, focusing on an optimized and streamlined mobile commerce UI that converts, with special attention to mobile payments.

4. AI aids in ecommerce personalization

In one 2022 study, 62% of consumers surveyed said a brand would lose their loyalty if it did not deliver a personalized experience, up 45% over the previous year. With the recent surge in interest in AI technology like ChatGPT and Midjourney, ecommerce brands are taking advantage of new tools to personalize customer experience. They can learn more about their customers, deliver personalized recommendations, and send targeted advertising messages.

AI is also used by ecommerce brands to create efficiencies and automate processes. Several AI apps in the Shopify App Store can help businesses automate tasks like customer service chat, syncing between sales channels, and inventory management.

Starting an ecommerce business: 8 steps to launching an online store

If you’ve decided to start a business, congratulations, you’ve already completed the first step! Once you have an idea and the desire to get started, you’re well on your way to launching your own ecommerce store. Once you’ve decided on the details, you can sign up with an ecommerce platform like Shopify to help you execute your vision. Let’s do this!

  1. Find an idea: Look for product opportunities, untapped audiences, or a gap in the market.
  2. Do market research: Thoroughly research your competition.
  3. Write a business plan: If you plan to seek funding, this will come in handy.
  4. Develop a brand: Choose a logo and business name and create a set of brand guidelines including mission, values, and brand voice.
  5. Set up your online store: Choose an ecommerce platform and a plan that fits your business size. Customize your ecommerce site with your branding and add products.
  6. Choose your shipping strategy.
  7. Develop a marketing plan: Set sales and marketing goals and prioritize advertising channels
  8. Launch your ecommerce business!

Make the leap to ecommerce today

The ecommerce industry has lots of room for newcomers looking to bring innovative ideas to the global market. Retail ecommerce sales continue to grow, making this business model an ideal first business for aspiring entrepreneurs.

If you’re ready to start an ecommerce business, bookmark this guide as a handy resource to revisit on your way to launching your dream job.

Ecommerce FAQ

What is ecommerce?

Ecommerce, short for electronic commerce, refers to the buying and selling of goods and services over the internet. It involves a transaction between two parties, usually a business and a consumer, where the payment and delivery of products or services are conducted online.

Ecommerce can take many forms, such as online shopping, digital downloads, online subscriptions, and online ticketing. It has revolutionized the way people do business and has become an increasingly popular way to shop due to its convenience and accessibility.

What are the 3 types of ecommerce?

There are three main types of ecommerce business:

  • Business-to-consumer (B2C) refers to a business selling goods directly to an end consumer using ecommerce. Some B2C ecommerce brands also operate a physical store.
  • Business-to-business (B2B) is a company that sells products or services to another business. For example, an accounting firm could sell services and online consultations to small businesses.
  • Consumer-to-consumer (C2C) refers to individuals selling items to each other, as in the example of local buy-and-sell marketplaces. This is a popular method for individual creator brands, too.

What is an example of ecommerce?

An example of ecommerce is online shopping, where consumers purchase products or services online through a B2C website or online marketplace. Ecommerce allows consumers to browse a vast range of products, select and compare prices and features, and make purchases securely using various payment methods. Mobile commerce is also an example of ecommerce—customers shop online using a mobile phone to find products and pay online.

Ecommerce can take on a variety of forms involving different transactional relationships including:

  • Online retail sales of physical or digital goods
  • Wholesale transactions
  • Dropshipping
  • Crowdfunding
  • Subscription-based products and services
  • Services and software licencing
  • Transaction fees

What is an ecommerce website?

An ecommerce website is an online store that allows businesses to sell products or services over the internet to customers. Ecommerce websites can be designed to sell physical products, digital products, or services. They typically include features such as product catalogs, pricing information, customer reviews, order tracking, customer accounts, and payment processing systems.

Those looking to start an ecommerce business don’t necessarily need an ecommerce website. Online marketplaces and social selling platforms are alternatives to standalone websites. These may be ideal options for first-time founders looking to attract customers to a new business online. A Shopify Starter Plan is a great way to enter ecommerce without building out a full online store.

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Kalinka Infotech 0 Comments
E-commerce
Jul 1 2023
Unveiling E-commerce: Exploring Types, its History & Example

Unveiling E-commerce: Exploring Types, Tracing its History, and Examples

What Is Electronic Commerce (E-commerce)?

Electronic commerce (e-commerce) refers to companies and individuals that buy and sell goods and services over the internet. E-commerce operates in different types of market segments and can be conducted over computers, tablets, smartphones, and other smart devices. Nearly every imaginable product and service is available through e-commerce transactions, including books, music, plane tickets, and financial services such as stock investing and online banking. As such, it is considered a very disruptive technology.

E-commerce

Key Takeaways

  • E-commerce is the buying and selling of goods and services over the internet.
  • It is conducted over computers, tablets, smartphones, and other smart devices.
  • Almost anything can be purchased through e-commerce today, which makes e-commerce highly competitive.
  • It can be a substitute for brick-and-mortar stores, though some businesses choose to maintain both.
  • E-commerce operates in several market segments including business-to-business, business-to-consumer, consumer-to-consumer, and consumer-to-business.

Understanding E-commerce

As noted above, e-commerce is the process of buying and selling tangible products and services online. It involves more than one party along with the exchange of data or currency to process a transaction. It is part of the greater industry that is known as electronic business (e-business), which involves all of the processes required to run a company online.

E-commerce has helped businesses (especially those with a narrow reach like small businesses) gain access to and establish a wider market presence by providing cheaper and more efficient distribution channels for their products or services. Target (TGT) supplemented its brick-and-mortar presence with an online store that allows customers to purchase everything from clothes and coffeemakers to toothpaste and action figures right from their homes.

Providing goods and services isn’t as easy as it may seem. It requires a lot of research about the products and services you wish to sell, the market, audience, competition, as well as expected business costs.

Once that’s determined, you need to come up with a name and set up a legal structure, such as a corporation. Next, set up an e-commerce site with a payment gateway. For instance, a small business owner who runs a dress shop can set up a website promoting their clothing and other related products online and allow customers to make payments with a credit card or through a payment processing service, such as PayPal.

E-commerce may be thought of as a digital version of mail-order catalog shopping. Also called online commerce, e-commerce is the transaction between a buyer and a seller that leverages technology.

The 6 Ways to Grow a Company

Special Considerations

E-commerce has changed the way people shop and consume products and services. More people are turning to their computers and smart devices to order goods, which can easily be delivered to their homes. As such, it has disrupted the retail landscape. Amazon and Alibaba have gained considerable popularity, forcing traditional retailers to make changes to the way they do business.

But that’s not all. Not to be outdone, individual sellers have increasingly engaged in e-commerce transactions via their own personal websites. And digital marketplaces such as eBay or Etsy serve as exchanges where multitudes of buyers and sellers come together to conduct business.

 

The U.S. Department of Commerce recognizes e-commerce businesses such as transactional sites, static content sites, online marketplaces, and auction sites.

History of E-commerce

Most of us have shopped online for something at some point, which means we’ve taken part in e-commerce. So it goes without saying that e-commerce is everywhere. But very few people may know that e-commerce has a history that goes back to before the internet began.

E-commerce actually goes back to the 1960s when companies used an electronic system called the Electronic Data Interchange to facilitate the transfer of documents. It wasn’t until 1994 that the very first transaction. took place. This involved the sale of a CD between friends through an online retail website called NetMarket.

The industry has gone through so many changes since then, resulting in a great deal of evolution. Traditional brick-and-mortar retailers were forced to embrace new technology in order to stay afloat as companies like Alibaba, Amazon, eBay, and Etsy became household names. These companies created a virtual marketplace for goods and services that consumers can easily access.

New technology continues to make it easier for people to do their online shopping. People can connect with businesses through smartphones and other devices and by downloading apps to make purchases. The introduction of free shipping, which reduces costs for consumers, has also helped increase the popularity of the e-commerce industry.

Advantages and Disadvantages of E-commerce

Advantages

E-commerce offers consumers the following advantages:

  • Convenience: E-commerce can occur 24 hours a day, seven days a week. Although eCommerce may take a lot of work, it is still possible to generate sales as you sleep or earn revenue while you are away from your store.
  • Increased Selection: Many stores offer a wider array of products online than they carry in their brick-and-mortar counterparts. And many stores that solely exist online may offer consumers exclusive inventory that is unavailable elsewhere.
  • Potentially Lower Start-up Cost: E-commerce companies may require a warehouse or manufacturing site, but they usually don’t need a physical storefront. The cost to operate digitally is often less expensive than needing to pay rent, insurance, building maintenance, and property taxes.
  • International Sales: As long as an e-commerce store can ship to the customer, an e-commerce company can sell to anyone in the world and isn’t limited by physical geography.
  • Easier to Retarget Customers: As customers browse a digital storefront, it is easier to entice their attention towards placed advertisements, directed marketing campaigns, or pop-ups specifically aimed at a purpose.

Disadvantages

There are certain drawbacks that come with e-commerce sites, too. The disadvantages include:

  • Limited Customer Service: If you shop online for a computer, you cannot simply ask an employee to demonstrate a particular model’s features in person. And although some websites let you chat online with a staff member, this is not a typical practice.
  • Lack of Instant Gratification: When you buy an item online, you must wait for it to be shipped to your home or office. However, e-tailers like Amazon make the waiting game a little bit less painful by offering same-day delivery as a premium option for select products.
  • Inability to Touch Products:Online images do not necessarily convey the whole story about an item, and so e-commerce purchases can be unsatisfying when the products received do not match consumer expectations. Case in point: an item of clothing may be made from shoddier fabric than its online image indicates.
  • Reliance on Technology: If your website crashes, garners an overwhelming amount of traffic, or must be temporarily taken down for any reason, your business is effectively closed until the e-commerce storefront is back.
  • Higher Competition: Although the low barrier to entry regarding low cost is an advantage, this means other competitors can easily enter the market. E-commerce companies must have mindful marketing strategies and remain diligent on SEO optimization to ensure they maintain a digital presence.

Pros

  • Owners can generate revenue semi-passively
  • Consumers can easily browse for specific products
  • Greater earning potential as there are no limitations on physical location as long you can ship there
  • Reduced costs assuming digital presence costs less than building, insurance, taxes, and repairs.
  • Greater marketing control, including data extraction from customers, targeted ads, and pop-up placement

Cons

  • Limited customer service opportunities as there is little to no face-to-face opportunities
  • Lacks instant gratification as customers must believe in a product before seeing it in person
  • Products can’t been seen or handled until delivered (can’t try before they buy)
  • Loss of revenue or income when websites go down
  • High reliance on shipping constraints
  • Higher competition due to lower barriers of entry and greater customer potential

Types of E-commerce

Depending on the goods, services, and organization of an ecommerce company, the business can opt to operate several different ways. Here are several of the popular business models.

Business-to-Consumer (B2C)

B2C e-commerce companies sell directly to the product end-user. Instead of distributing goods to an intermediary, a B2C company performs transactions with the consumer that will ultimately use the good.

This type of business model may be used to sell products (like your local sporting goods store’s website) or services (such as a lawn care mobile app to reserve landscaping services). This is the most common business model and is likely the concept most people think about when they hear the term e-commerce.

Business-to-Business (B2B)

Similar to B2C, an e-commerce business can directly sell goods to a user. However, instead of being a consumer, that user may be another company. B2B transactions often entail larger quantities, greater specifications, and longer lead times. The company placing the order may also have a need to set recurring goods if the purchase is for recurring manufacturing processes.

Business-to-Government (B2G)

Some entities specialize as government contractors providing goods or services to agencies or administrations. Similar to a B2B relationship, the business produces items of value and remits those items to an entity.

B2G e-commerce companies must often meet government requests for proposal requirements, solicit bids for projects, and meet very specific product or service criteria. In addition, there may be joint government endeavors to solicit a single contract through a government-wide acquisition contract.

Consumer-to-Consumer (C2C)

Established companies are the only entities that can sell things. E-commerce platforms such as digital marketplaces connect consumers with other consumers who can list their own products and execute their own sales.

These C2C platforms may be auction-style listings (i.e. eBay auctions) or may warrant further discussion regarding the item or service being provided (i.e. Craigslist postings). Enabled by technology, C2C e-commerce platforms empower consumers to both buy and sell without the need for companies.

Consumer-to-Business (C2B)

Modern platforms have allowed consumers to more easily engage with companies and offer their services, especially related to short-term contracts, gigs, or freelance opportunities. For example, consider listings on Upwork.

A consumer may solicit bids or interact with companies that need particular jobs done. In this way, the e-commerce platform connects businesses with freelancers to enable consumers greater power to achieve pricing, scheduling, and employment demands.

Consumer-to-Government (C2G)

Less of a traditional e-commerce relationship, consumers can interact with administrations, agencies, or governments through C2G partnerships. These partnerships are often not in the exchange of service but rather, the transaction of obligation.

For example, uploading your federal tax return to the Internal Revenue Service (IRS) digital website is an e-commerce transaction regarding an exchange of information. Alternatively, you may pay your tuition to your university online or remit property tax assessments to your county assessor.

 

The U.S. Census Bureau conducts estimates of retail e-commerce sales in the United States. In the first quarter of 2023, retail e-commerce accounted for 15.1% of total sales in the country, totaling roughly $272.6 billion. These figures are adjusted for seasonal variation.

Types of E-commerce Revenue Models

In addition to crafting what type of e-commerce company a business wants to be, the business must decide how it wants to make money. Due to the unique nature of e-commerce, the business has a few options on how it wants to process orders, carry inventory, and ship products.

Dropshipping

Often considered one of the easier forms of e-commerce, dropshipping allows a company to create a digital storefront, generate sales, then rely on a supplier to provide the good. When generating the sale, the e-commerce company collects payment via credit card, PayPal, cryptocurrency, or other means of digital currency.

Then, the e-commerce store passes the order to the dropship supplier. This supplier manages inventory, oversees the warehouse of goods, packages the goods, and delivers the product to the purchaser.

White Labeling

White-label e-commerce companies leverage already successful products sold by another company. After a customer places an order, the e-commerce company receives the existing product, repackages the product with its own package and label, and distributes the product to the customer. Although the e-commerce company has little to no say in the product they receive, the company usually faces little to no in-house manufacturing constraints.

Wholesaling

A more capital-intensive approach to e-commerce, wholesaling entails maintaining quantities of inventory, keeping track of customer orders, maintaining customer shipping information, and typically having ownership of the warehouse space to house products.

Wholesalers may charge bulk pricing to retailers or unit prices for consumers. However, the broad approach to wholesaling is to connect to buyers of large quantities or many smaller buyers of a similar, standardized product.

Private Labeling

Private labeling is a more appropriate e-commerce approach for companies that may not have large upfront capital or do not have their own factory space to manufacture goods. Private label e-commerce companies send plans to a contracted manufacturer who makes the product.

The manufacturer may also have the ability to ship directly to a customer or ship directly to the company receiving the order. This method of e-commerce is best suited for companies that may receive on-demand orders with short turnaround times but are unable to handle the capital expenditure requirements.

Subscription

E-commerce companies can also leverage repeating orders or loyal customers by implementing subscription services. For a fixed price, the e-commerce company will assemble a package, introduce new products, and incentivize locking to a long-term agreement at a lower monthly price.

The consumer only places an order once and receives their subscription order at a fixed cadence. Common subscription e-commerce products include meal prep services, agriculture boxes, fashion boxes, or health and grooming products.

Example of E-commerce

Amazon is a behemoth in the e-commerce space. In fact, it is the world’s largest online retailer and continues to grow. As such, it is a huge disrupter in the retail industry, forcing some major retailers to rethink their strategies and shift their focus.

The company launched its business with an e-commerce-based model of online sales and product delivery. It was founded by Jeff Bezos in 1994 as an online bookstore but has since expanded to include everything from clothing to housewares, power tools to food and drinks, and electronics.

Company sales increased by 9% in 2022 from the previous year, totaling $513.98 billion compared to $469.82 billion in 2021. Amazon’s operating income dropped from $24.88 billion in 2021 to $$12.25 billion in 2022. The company posted a net loss of $2.72 billion in 2022, compared to net income of $33.36 billion in 2021.

How Do You Start an E-commerce Business?

Make sure you do your research before you start your business. Figure out what products and services you’re going to sell and look into the market, target audience, competition, and expected costs.

Next, come up with a name, choose a business structure, and get the necessary documentation (taxpayer numbers, licenses, and permits if they apply).

Before you start selling, decide on a platform and design your website (or have someone do it for you).

Remember to keep everything simple at the beginning and make sure you use as many channels as you can to market your business so it can grow.

What Is an E-commerce Website?

An e-commerce website is any site that allows you to buy and sell products and services online. Companies like Amazon and Alibaba are examples of e-commerce websites.

What Is the Difference Between E-commerce and E-business?

E-commerce involves the purchase and sale of goods and services online and is actually just one part of e-business. An e-business involves the entire process of running a company online. Put simply, it’s all of the activity that takes place with an online business.

What Is an Example of E-commerce?

Dollar Shave Club offers customers personal grooming, health, and beauty products. Customers can opt for what product(s) they want shipped to them and can sign up for long-term memberships to have products sent to them on a recurring basis. Dollar Shave Club procures goods in bulk from other companies, then bundles those products, maintains membership subscriptions, and markets the products.

What Are the Types of E-commerce?

An e-commerce company can sell to customers, businesses, or agencies such as the government. E-commerce can also be performed by customers who sell to businesses, other customers, or governments.

The Bottom Line

E-commerce is just one part of running an e-business. While the latter involves the entire process of running a business online, e-commerce simply refers to the sale of goods and services via the internet. E-commerce companies like Amazon, Alibaba, and eBay have changed the way the retail industry works, forcing major, traditional retailers to change the way they do business.

If starting an e-commerce site is something you’re considering, make sure you do your research before you start. And make sure you start with a small, narrow focus to ensure that you have room to grow.

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Affordable Hosting Hostinger
Jun 24 2023
Affordable and Reliable Web Hosting Solutions by Hostinger

Affordable and Reliable Web Hosting Solutions by Hostinger

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