What is eCommerce?
What might perhaps surprise you is that eCommerce actually first began in the 1960s and was the term used to describe the buying and selling of goods through the transmission of data.
But eCommerce, as we know it today, really started to take off with the dawn of the internet and the transition to conducting business online in the early 2000s.
Essentially, eCommerce is a broad term which describes the process of buying and selling products online and in recent times, as more and more people and businesses move online, the industry has seen rapid growth – by 2024, eCommerce sales are expected to grow to $599.2B!
The core reasons eCommerce has become so popular is that consumers love it because it typically offers lower prices, a wider variety of choices, and immediate access and convenience. This is perhaps best exemplified by the 25% growth of sales in eCommerce at the start of the COVID-19 global lockdown restrictions where consumers sought after all of the above.
But, there are of course fantastic benefits for businesses not just consumers and we will discuss these advantages next.
Business benefits to eCommerce
One of the core advantages to having an eCommerce business is that you can have larger profit margins since you avoid ongoing costs such as rent, heating, electricity and sometimes warehousing (depending on which type of eCommerce – more on this soon) being too high or even present at all.
Another key benefit is that eCommerce businesses will likely find scaling up their operations far easier than traditional brick and mortar businesses. This is because the latter is limited to how much product their store can hold, how many customers can physically enter the store during the day, the opening hours etc. eCommerce, on the other hand, provides access to a global market, at any time and you can increase your reach through digital marketing relatively easily.
A final incredibly powerful advantage eCommerce has over traditional businesses is that eCommerce organisations have easy access and typically an abundance of consumer data. This data can be used to tweak marketing messages, product descriptions, and even things such as website colours to optimise for conversions. This data is far harder to gather and utlise for an offline business.
Types of eCommerce and their benefits
There are three core eCommerce fulfillment models: Dropshipping, Traditional Order Fulfillment, and Outsourced Order Fulfillment.
Dropshipping: In this model, the eCommerce business never has physical possession of the goods they’re selling. Instead, they act as the middleman and order items directly from the manufacturer to the customer’s address. The key benefits to this model is that they never have leftover stock, they sell based purely on demand and so can change product lines instantly with no real backlash. The trickiest part of using this model, however, is that you have to be pretty good at marketing in order to justify your role as the middleman.
Traditional Order Fulfillment: In this model, the business buys wholesale products at discounted prices, sells them online, and delivers to the customer. The core benefit to this model is that you can often sell products for cheaper prices than your dropshipping competition since you have bought in bulk and have larger margins. You also have far more control over order fulfilment and can adequately respond to customer issues such as misorders and returns – this is a lot harder with dropshipping and returns can be a nightmare for these businesses.
Outsourced Order Fulfillment: This is where you order stock in bulk like in the traditional model, but you do not hold or deliver the products from your warehouse. Instead, you use a third party to carry out the holding of inventory and distribution. This can be expensive, however, but does provide more flexibility than the traditional method and might be the right choice for those just starting.