“What is ecommerce?” might be the first question that pops in your head when someone mentions it to you. As it’s growing in popularity, you might be hearing more people talking about the topic of ecommerce and online stores on a regular basis as a way to make money or to shop online. If you’re looking for an answer to the question ‘what is ecommerce’ we’ll answer all your burning questions on this topic and more. You’ll also learn how to start an ecommerce business, how to run an ecommerce website, and a lot more.
What is Ecommerce?
Ecommerce is a shortened version of the phrase “electronic commerce” which essentially describes any type of exchange of currency for goods or services online.
Ecommerce is an umbrella term that covers everything there is to do with buying or selling online, and can sometimes be otherwise written as “E Commerce,” “e-commerce,” or “eCommerce.” Any variation of the spelling is correct, and it all describes the same act of performing business via the internet.
Since the definition of ecommerce is so open-ended (it literally includes any type of buying or selling of goods or services online) there are so many different types of ecommerce businesses that exist. In this article, we dive deeper into the different types of ecommerce businesses that ecommerce business owners can run.
What is an ecommerce store?
An ecommerce store is a website that accepts payment for selling goods online. An example of an ecommerce store is Amazon, which allows you to buy products ranging from books to clothing using your credit card or other payment methods.
What is the difference between ecommerce and ebusiness?
The difference between ecommerce and ebusiness is that ecommerce is one type of ebusiness. Ecommerce focuses on online sales only, whereas ebusinesses generate revenue in multiple ways including ecommerce but also through offline transactions.
The Types of Ecommerce Business Models
First things first, when you ask yourself, “What is ecommerce?” the best way to begin to describe different ecommerce businesses, and the different types of ecommerce businesses, is to break them down into the types of ecommerce business models that exist.
Ecommerce business models can be differentiated into three main categories:
- What types of products are sold
- Who the products are sold to
- Where the products are sold on
Let’s look into these three identifiers further:
What Types of Products Are Sold?
Every ecommerce business can be differentiated by the types of products that it sells. There are four types of products that any ecommerce business can sell and they are:
- Physical Products: clothing, dinnerware, picture frames, etc.
- Digital Products: ebooks, music, online courses, etc.
- Services: coaching, cleaning, tutoring, etc.
- Affiliates: digital products, physical products, services, etc.
Every single ecommerce business online can fit into one or more of these categories, and this basically just tells you what type of products they sell to their customers.
Some ecommerce businesses sell physical products which means that the business has actual tangible products that they ship to their customers, and when their customers open the shipping package there will be a physical product they can touch, feel and see.
Conversely, digital products are a type of product that ecommerce businesses can sell online without shipping a product physically but digitally. Digital products can be instantly downloaded by customers so there’s a sense of immediacy with this type of product. It also helps to satisfy impulse shoppers since they get to dig into their new purchase right away rather than wait for their item to ship for a couple weeks.
Businesses can also provide digital or in-person services that their customers can purchase online. These services can include anything from design services or streaming services (both are digital services) to home improvement services or dog-walking services (which are in-person services). Any business that provides a service, rather than a physical or digital product, can be included in this category.
Finally, ecommerce businesses can also earn commissions via affiliate links which pay them a portion of the revenue for facilitating a sale. Ecommerce businesses that earn affiliate commissions could be blogs, influencer websites, or even websites like Canopy that curate products sold online for consumers. If you’re interested in creating your own affiliate ecommerce store, check out our Beginner’s Guide to Creating an Affiliate Ecommerce Store article.
Who the Products Are Sold To
Ecommerce businesses differ from each other based on who their target market is or who they sell to. A customer can be a person, a business, or a government. Let’s take a look at the three types of groups of that ecommerce businesses sell to:
These are the three main categories that ecommerce businesses sell their products or services to:
- B2B: This stands for Business-to-Business. Ecommerce businesses that sell physical or digital products or services to other businesses fall under this category. For example, this could include manufacturers or suppliers that provide materials or products for other businesses. Shopify is a B2B business as it sells ecommerce subscription services to other businesses.
- B2C: This stands for Business-to-Consumer. Ecommerce businesses that sell physical or digital products or services to consumers fall under this category. This includes retailers or ecommerce retailers that sell products to the end consumer. Amazon is a B2C business that sells various physical and digital products to consumers.
- B2G: This stands for Business-to-Government. Ecommerce businesses that sell physical or digital products or services to government institutions or agencies fall under this category. For example, this could include businesses that create specialized software, office furniture, uniforms, etc. Mark 43 is B2G business that specializes in providing technology for police.
While most businesses generally sell their products to one of these categories, it’s entirely possible for ecommerce businesses to sell to more than one category of consumers. It’s important for ecommerce businesses to understand who exactly they sell their products to because it impacts important decisions such as their marketing, their branding, their shipping procedures, their markup, etc.
Where the Products Are Sold On
Finally, ecommerce businesses can also be differentiated based on the way they sell their products to their customers. These options are:
- Branded Ecommerce Stores: These are ecommerce stores that are owned and operated by the founder(s) or creator(s) of the store, and they sell their own products on their own terms to their customer base. These types of stores are generally built on ecommerce platforms such as Shopify or BigCommerce.
- Ecommerce Marketplaces: Ecommerce businesses can also sell through online marketplaces such as Amazon, eBay or Etsy. Each platform will have its own terms and conditions you’ll need to abide by to prevent being kicked off the platform. Certain products may be prohibited from different platforms. You might also need to keep a merchant review score to maintain your ability to sell on the platform. Also, some ecommerce marketplaces compete with their sellers, which might make it harder to sell your products on their website. Ultimately, you give up a bit of control when selling on ecommerce marketplaces.
- Conversational Commerce: With social media being a major part of consumers’ daily routines, social media platforms are making it easy for consumers to shop through the posts on their newsfeed. Instagram Shop, Facebook Marketplace, Pinterest Shopping, and TikTok all have conversational commerce options that ecommerce brands can sell their products through.
The Different Ecommerce Platforms
Every ecommerce business needs an ecommerce store, which is essentially just a website where their customers can come to browse, learn about, and purchase their products.
Ecommerce businesses have different options when it comes to the ecommerce platforms they use to sell their products online, as we discussed in our Ecommerce Platforms: The Best Software, Reviews & Comparisons article. No matter whether a store wants to sell on marketplaces like Amazon, eBay, or Etsy they should also have an ecommerce store set up so they aren’t selling all their products through a middleman. Creating a self-branded store on an ecommerce platform is the only way to get full control over your ecommerce business, and it’s the best way to get full say on branding, marketing, customer experience, and revenue.
We discussed the Top 10 Ecommerce Platforms in great detail in this article, so for anyone interested in becoming an ecommerce business owner, that’s the most in-depth guide on ecommerce platforms we can recommend. For those who just want to get started on the best ecommerce platform in the industry, we recommend building on Shopify. We’ve discussed why they’re the most highly recommended ecommerce platform in our Shopify Review, so if you’re interested to learn more about the features and services they offer, check that out. We update it regularly as they come out with new features and services.
If you require specific features from your ecommerce platform or just want to get a personalized recommendation based on your unique situation and circumstances, check out our Personalized Ecommerce Platform Recommendation Tool. No matter where you are in the process of building, launching, or growing your ecommerce business, this tool can recommend the best ecommerce platform for you.
Who Can Start Their Own Ecommerce Business?
Anyone can start their own ecommerce business. Anyone can go from asking themselves, “What is ecommerce?” to building their very own ecommerce business in the span of weeks by dedicating time to learning and testing out ecommerce platforms to get the hang of it. Some commerce businesses are easier to start than others. Some ecommerce business owners can learn quickly even if they’re beginners. Anyone can build, launch, and grow their own ecommerce business if they have some time, energy, and resources and they’re ready to put in the work.
Some benefits for new ecommerce business owners is this:
- There’s a Low Barrier to Entry: To start a brick-and-mortar business in the past when online business wasn’t an option, entrepreneurs had to get a bank loan to rent out a store and purchase inventory and equipment upfront before they could even get started selling to customers. They had one shot to succeed and if they failed, they would be out a huge sum of money and they’d repel any other bank they approached in the future. Today, you can start your own business without carrying inventory, or you can run your business online for less than your monthly cell phone bill. Signing up to start your own ecommerce business only takes a few minutes and there are no prerequisites needed to get started. So, after you finish reading ‘what is ecommerce’ you can start experimenting by building your own ecommerce store today.
- Unlimited Audience Reach: New ecommerce entrepreneurs can sell to anyone in the world, whereas brick-and-mortar businesses can only sell to those who live locally. The main benefit of being able to sell anywhere in the world is that it opens up your chances of generating sales. The more people you can reach, the more likely you are to land sales. As a result, it makes it easier for anyone exploring ‘what is ecommerce’ to actually build their first ecommerce business.
We truly believe that with the right resources, everyone and anyone can become an ecommerce business owner. You don’t have to quit your day job if you don’t want to, we just highly recommend that you start something. Building an ecommerce business teaches so many valuable lessons and even if you’re not quite ready to start your own fully-fledged ecommerce business yet there are still steps you can take to get something on the go! Check out our How to Start an Ecommerce Business When You’re Not Ready to Start an Ecommerce Business article to learn more.
It’s common for those starting their first ecommerce business to struggle with Imposter Syndrome, the feeling of not being good enough to start your own business. Push past those feelings and to start your own ecommerce business anyways. Starting your own ecommerce business is about so much more than just being successful or earning lots of money. It’s about the journey from turning nothing into something and turning ideas, resources, and inspiration into something tangible.
In our manifesto, we discuss the 7 traits of successful entrepreneurs, so if you’re just getting started in ecommerce we recommend having a look over that article. You may not have all the industry knowledge or the time and money to get your ecommerce business started but if you have any of those 7 traits, you can still be successful.
The Pros and Cons of Starting Your Own Ecommerce Business
Taking the first step to in learning how to start an ecommerce business, you’ll begin to think about what the advantages and disadvantages of ecommerce are. In the early stages, you asked yourself “what is ecommerce?” whereas now you might be wondering “is ecommerce worth it?” or “what are the advantages of ecommerce?” So, let’s dig into the pros and cons of starting an ecommerce business to help you decide if this is the right path for you.
Pros of Starting Your Own Ecommerce Business
- Building Something from Nothing: With ecommerce, you have the ability to take ideas, knowledge, and inspiration and use them to build your own business from scratch.
- Earning Money At Any Time: There’s no set 9 to 5 business hours when it comes to ecommerce business. You can earn money at any time, day or night.
- Connecting with Your Audience All Over the World: You’re not limited to one area or region when it comes to the customers you can sell to; you can sell to customers all over the world.
- Lower Overall Costs: Compared to a brick-and-mortar business, there might be no rent, storage, or even employee costs in the early stages of your ecommerce business depending on the business model you choose.
- Being Your Own Boss: When you build your own business you can be your own boss and have the autonomy to bring the vision of your business to life.
- Selling Everywhere: You’re not restricted to where you can sell. You can have a brick-and-mortar business and an online business, you can sell at pop-ups, festivals, markets, shows, conferences, online marketplaces, etc.
- Working from Anywhere: As long as you have a wifi connection and some of your systems and processes automated, you have the freedom to work from anywhere at any time.
- Making it Your Full-Time Job or Part-Time Hobby: You don’t have to go all-in on your ecommerce business if you don’t want to; it can be your side hustle. But, you make the rules so if you want to make it your full-time job and get out of the rat race you can do that, too!
Cons of Starting Your Own Ecommerce Business
- No Physical Storefront: You can get a ton of foot traffic from having a physical location from people who live locally. Most people are more likely to shop in-person than online, despite ecommerce’s growing popularity.
- No Face-to-Face Time with Your Customers: You can build meaningful relationships with customers when they visit your brick and mortar store. While it’s possible to build relationships online, the path to doing so takes a bit longer and more effort.
- Competition & Standing Out from the Crowd: There’s a lot of competition online, and differentiating your ecommerce businesses from others can be a challenge. To stand out from the crowd your ecommerce business needs to offer something that other ones don’t, whether that’s based on service, selection, price, variety, brand, or something else.
- The Learning Curve: Starting a business, making a website, creating a brand, building a customer-based, etc. takes time and effort to learn how to do properly so at first, it can definitely be a bit of a learning curve. We suggest looking to reputable sources of information online such as our blog, the Shopify blog, and Skillshare to get started learning about “What is ecommerce?”
How to Start Your Own Ecommerce Business
Starting your own ecommerce business has never been easier, which is good news if you’re asking yourself, “What is ecommerce?” and want to get started with building your own ecommerce business as soon as possible.
There are so many resources out there to help you learn what is ecommerce and to start your own ecommerce business. These are a few places we recommend checking out first to get you started:
- Find a Product Idea: As you learn what is ecommerce, you’ll quickly realize you need something to sell to start an ecommerce business. You can sell physical or digital products, services, or even other brands products through affiliate marketing. To get started, you might want to check out our trending products post to discover the popular products people are buying right now. You can also download our guide on 500 Niches to help you determine which category to start a business in.
- Plan Your Business: The next step is to start formulating a plan. When you’re new to ecommerce, there might be some aspects of building your ecommerce business that you may not know to consider, so this One Page Ecommerce Business Plan has been specifically created to help budding ecommerce entrepreneurs identify any advantages or disadvantages they may face when building their business, plus other aspects of building an ecommerce business that are important to consider.
- Sign Up to an Ecommerce Platform: Once you’ve found a product to sell and planned your business out thoughtfully, your next step is to sign up to an ecommerce platform so you can start working on the website you’re going to call your online store. When you sign up to an ecommerce platform like Shopify you’ll be able to pick your business name right away and your domain name, then you can start customizing your website with a theme, fonts, and colors to make it personal to your brand. It’s super easy, and it’s fun to see your website start to take shape!
Then when it comes to learning about how to actually design your ecommerce business’ website, such as your theme and branding, we recommend checking out these resources:
- Ecommerce Branding Guide: Build a great brand from the beginning so you can connect with your customers and get them engaged with your ecommerce business.
- 50 Beautiful Ecommerce Website Designs: Check out what other ecommerce businesses do to not only make their website beautiful but also functional for their visitors.
- How to Come Up With a Business Name: Your business name is likely going to be the first thing people hear about your brand, so you want it to be representative of what they can expect from you. Come up with a killer business name thanks to the tips and advice in this guide.
- Create a Beautiful Company Logo: Your logo is the face of your brand, so make sure you make the right impression with a beautiful company logo. This guide will help you get the best logo created for your business that you possibly can, no matter what your budget is (even if you don’t have one!).
- The Best Shopify Themes: In today’s online world a website is judged by its cover, so you have to make sure your store’s theme reflects your brand’s personality and values while still being functional and easy to navigate. With an ecommerce platform such as Shopify, however, creating a beautiful and functional online store is as easy as browsing through all the available Shopify themes and we’ve rounded up the top ones in this article.
What Kind of Ecommerce Business Can You Start?
It’s time to move on from asking yourself, “What is ecommerce?” and to start asking yourself, “What kind of ecommerce business can I start?” Since you’ve read this article up to this point you already know that anyone can start their own ecommerce business and that anyone can be you.
When it comes down to it, you can start any kind of ecommerce business you want as long as you:
- Have something you can sell to consumers whether it’s a physical product, digital product, service, or affiliate link. If you don’t have a product to sell yet, you can browse the Shopify App Store for dropshipping apps and wholesale apps so you can find products to sell for your ecommerce business.
- Have somewhere online you can sell your product from, like the ecommerce platforms we’ve discussed earlier in this article. You can build your ecommerce business on Shopify, BigCommerce, WooCommerce, or any other popular ecommerce website builder.
As long as you have a product to sell and somewhere to sell it you can start your own ecommerce business.
To get started, check out these articles to get step-by-step instruction on ecommerce businesses you can start from scratch:
- How to Start a T-Shirt Business: Learn to start an ecommerce business in the most popular niche: fashion. With print on demand, dropshipping, and wholesale, you’ll quickly learn there are many ways to start a t-shirt business.
- How to Start a Clothing Line: Take your business to the next level by starting an entire clothing line. You can sell all types of apparel, such as leggings, dresses, ties, suits, and much more.
- How to Start a Phone Case Business: Phone cases are a great business to start due to the low wholesale cost and good markup for retail prices. Since it’s a small item to ship, it’s easy to start an ecommerce business selling phone cases.
- 31 Ecommerce Products You Can Make Yourself: If you’re passionate about product creation, you can choose to make your own ecommerce products. As a maker, you’ll be able to sell original products for your ecommerce business giving you a competitive advantage.
- How to Start 11 Different Types of Ecommerce Businesses: Discover the types of ecommerce businesses you can start and pick the type that suits you best.
Then, check out these ecommerce business case studies to learn how other ecommerce business owners have built, launched, and grown their own ecommerce businesses:
Finally, if you just want some more general knowledge that takes your what is ecommerce query to the next level, such as what product markets are trending at the moment or ways to find great product ideas, check out these resources:
Where to Source Products for Your Ecommerce Business
Sourcing products for your ecommerce business is going to be the next most important step when starting your own ecommerce business, and it depends largely on which ecommerce business model you choose to sell through.
There are 4 main ecommerce business models and each one dictates the way you’ll source your products. You can:
- Make your products
- Manufacture your products
- Wholesale your products
- Dropship your products
Make Your Products
If you choose to make your products, you’ll be in charge of sourcing all your materials so you can bring your products to life. The main challenge with making products for your ecommerce store is the time it takes to make your products, the cost, and difficulty incurred with sourcing materials to make your products, and how difficult it may be to scale your business should demand for your products increase. Another challenge with making your own products is that there’s no proof of concept that it’ll sell well. However, if the hard work pays off, you’ll be the exclusive owner of that product giving your ecommerce business a competitive advantage.
Manufacture Your Products
If you choose to get your products manufactured, you’ll need to source a manufacturer that can make your products. To do this, you could consult online directories such as our Manufacturer Directory to find a curated list of reputable manufacturers capable of making a range of different products, you could use a third-party manufacturer sourcing service such as Sourcify to help you find the perfect supplier for your products (the founder of Sourcify wrote two articles for our blog, check them out here: How to Source Products from Chinese Manufacturers and The Untold Secrets to Cutting Manufacturing Costs & Lead Times) and you could also find a manufacturer via an online manufacturer marketplace such as Alibaba or Maker’s Row. If you’re interested in sourcing your products from Alibaba, we highly recommend checking out our Guide to Sourcing Products from Alibaba so you can source your products as safely and securely as possible.
The main advantage of working with manufacturers to create your products is that you can custom-build products, you can get your products created exactly how you want them and you can keep your costs to a minimum. The biggest disadvantage of working with a manufacturer, however, is that you’ll very likely have to meet the minimum order quantities of your manufacturer which can be a major upfront cost.
Wholesale Your Products
When sourcing your products from wholesalers, you’ll be able to purchase your products in bulk without having to manufacture them yourself. Check out online wholesale directories (like our Wholesale Suppliers Directory!) to find wholesalers that sell products you’re interested in selling on your online store, or you could even source products in wholesale via AliExpress or these AliExpress Alternatives. You can also check out Handshake, a wholesale platform created by Shopify.
Dropship Your Products
If meeting upfront minimum order quantities sounds daunting or you just want the flexibility of not having to store inventory or ship products, then dropshipping may be the ideal business model for you. To source your products from dropshippers, your best bet is to check out an online dropshipping directory or even a roundup of the best Dropshipping Apps to Acquire Inventory for Your Business that integrates directly with Shopify stores, should you choose to start one. One of the advantages of dropshipping businesses is that you can sell best-selling items, quickly and at their peak. The downside is that other businesses might be selling the exact same product as you making it a more competitive space.
How Much Does It Cost to Start An Ecommerce Business?
Ecommerce businesses can be built on any budget. As we discussed in the “What is Ecommerce?” section of this article, ecommerce businesses are so vast and varied, they’re nearly impossible to define by any other identifiers rather than simply, “ecommerce.”
Since each ecommerce business is solely up to the entrepreneur(s) starting it, ecommerce businesses can truly be built on any budget. If your an entrepreneur building your first-ever ecommerce business and you only have a small budget to work with, start a dropshipping business, and pay attention to money-saving resources such as blogs dedicated to helping ecommerce businesses save money such as Bootstrapping Ecommerce, and keep your eye out for discounts on services to help you build, launch and grow your business such as our own Exclusive Offers page or AppSumo.
In any other case, your budget is entirely dependent on what you have to work with and how you want to allocate your finances. Work with an accountant or a bookkeeping team like Bench to keep your finances in check and use handy resources such as a Business Loan Calculator or a Profit Margin Calculator and even our PayPal Fee Calculator & Stripe Fee Calculator to make sure you’re keeping an eye on your budget in the places that matter most.
How to Buy & Sell Ecommerce Businesses
If you’re not completely interested in starting your own ecommerce business from scratch, it is possible to purchase ecommerce businesses that ecommerce entrepreneurs have already put time, effort, and money into growing to where they are today.
The best place to look for ecommerce businesses to buy online is Shopify’s Exchange Marketplace. Exchange Marketplace is a marketplace where Shopify store owners can go to list their businesses for sale or to purchase existing Shopify businesses, and the businesses available there are listed at a variety of prices depending on their traffic, customer base, revenue, etc.
If you’re interested in starting an ecommerce business and the idea of not having to completely start it from scratch is appealing to you, then check out Exchange Marketplace and see what’s on the market!
No matter when you’re starting your ecommerce business, though, it’s imperative to have an exit strategy sorted out so that if and when the time comes to sell your business or shut it down, you and any of your potential partners or investors know what the procedure is. Having an exit strategy in place can also help you make better decisions for your business throughout the years of its existence and it can help make investors keener to jump on board with your business. Learn more about crafting an exit strategy in our How to Sell a Business: Why Ecommerce Entrepreneurs Need to Have an Exit Strategy article.
How to Grow Your Ecommerce Business
Once you’ve gotten past the “What is ecommerce?” stage and you move onto building your ecommerce business, the final step and the step that’s going to take up the majority of your time as your business ages and scales, is how to grow your ecommerce business.
There are many ways to grow an ecommerce business but two of the main ways are through traffic and conversions. The more traffic you get coming to your ecommerce store the more conversions you’re likely to make which means more revenue and thus, more profit.
Traffic + Conversions = Revenue & Profit!
There are an endless amount of ways you can increase your store’s traffic, which we discuss some of in our How to Increase Website Traffic article, but one of the most successful ways is to treat your customers like people, not just numbers. If you focus too much on the numbers and how much revenue you’re making, you can lose sight of the most important aspect of your ecommerce business that makes everything worthwhile, and that’s your customers.
Obviously getting traffic to your store quickly helps keep you afloat when you’re new and just finding your footing and for that, we recommend checking out an article like our How to Get Your First 100 Sales article, but beyond that, take into serious consideration how you can add value to your customer’s lives so they’re more likely to purchase from your site again and spread the word about your company with their peers and social following.
To quickly bring traffic to your ecommerce store and generate buzz about your products or your store launch is to partner with influencers on platforms like TikTok. Partnering with the right influencer will allow your products to be positioned in an exciting way that helps generate tons of sales. You can also run paid ads on any social platform. Video ads tend to convert better as they have a loopable replay value that keeps people hooked.
Finally, if you’re looking for more in-depth ways to grow your traffic and conversions, we’ve created a 52 Week Marketing Plan to guide you through the process of growing your new business step by step. We created this guide because we noticed that growing a new business was such a daunting prospect for so many new merchants and we constantly receive questions from entrepreneurs asking us for our advice and recommendations. So, we put everything we know into one guide with the intention of helping as many new entrepreneurs as possible.
Once you start bringing more traffic to your ecommerce store then your conversion rate should grow organically from there but if you want to try out some other methods to get more visitors purchasing your products, check out our guide to Conversion Rate Optimization and this article on Conversion Rate Optimization for 1st Year Stores.
While you may have come to this article wondering “What is ecommerce?” we hope all the information provided in this comprehensive post has given you a thorough insight into what ecommerce is and what options are available to you to start your own ecommerce business.
Starting an ecommerce business really is accessible for anyone, so take the information, knowledge, resources, and guides provided throughout this article and start something for yourself. Now that you know “What is ecommerce?” you’re well equipped to build, launch, and grow your own ecommerce business and start the entrepreneurial journey for yourself.