Basics of eCommerce
by Ron Kurtus (revised 31 March 2015)
eCommerce (or e-commerce) consists of buying and selling products and services over the Internet, as opposed to the standard commerce practices. It can be a subset of a company's e-business strategy, or it can be simply used to add revenue streams to a standard business.
Many companies purchase parts and supplies through business-to-business (B2B) e-commerce before selling finished products to customers with business-to-consumer (B2C) e-commerce. Individuals also often purchase goods and hire services online.
Selling goods online usually requires a website with a shopping cart function. To a degree, e-commerce is similar to catalog sales, where the customer only sees specifications and perhaps pictures before making an online purchase. The online seller must have a way to process credit cards and deliver the goods.
Many businesses have become extremely profitable through online sales. Dell Computers is a prime example. Small companies and even individuals can also market their products or services on a worldwide basis through e-commerce. Large companies can reduce sales and stocking costs by selling online.
Questions you may have include:
- How do companies and individuals buy online?
- How do companies and individuals sell online?
- How is the transaction completed?
This lesson will answer those questions.
Companies and individuals use e-commerce to make online purchases. This be especially convenient if the seller is at a great distance from the buyer. Also, prices are often lower when purchasing online, since the business does not need to maintain a physical store.
In e-commerce, companies can access the websites of suppliers to order parts or services. This is called business-to-business (B2B) e-commerce.
For example, a company making electrical fixtures may purchase quantities of wiring and switches from online vendors. This expedites the purchases and often reduces costs.
If the company has an account with the supplier, a bill may be sent at a later time, or the transaction can be completed electronically with a company credit card.
They will then make arrangements for the delivery of the goods.
Many companies purchase online advertising space as part of their marketing campaign. The purchase is a form of e-commerce, and the campaign may be part of the company's e-marketing strategy.
In purchasing Google Adwords, a company pays for clicks on ads being displayed on various websites. Adwords is an e-commerce service that the company purchases.
Individuals also use e-commerce to purchase items or services online.
Many people buy things through eBay or Amazon.com, as well as other companies. They may also hire a local plumber through his website.
Payment is done by credit card and delivery is usually by the Postal Service or shipping companies such as UPS or FedEx.
A business doing e-commerce sales must have a website that includes an online catalog or store. It must be the capability to receive payments. Finally, the business needs a way to deliver the product or service.
In order to sell products online, a company needs a website. They also need to perform e-marketing to drive people to their site.
You need to advertise and promote your business, so that the customers will either come to your store, read your catalog or view your Web site.
Online catalog or store
You need to have a store or catalog where customers can view and select goods or services. Customers need to be able to easily get around your catalog to find things. The customer should be able to easily browse the selection and mark products for later purchase. They also need to be able to information or see pictures of the items.
The Web site should be easy for customers to find what they want. The customer must know what is in the store, and the products must be organized in a logical manner.
The customer must be able to easily search for what he or she wants without the help of a sales clerk.
Selecting what to buy
Once the customer finds what he is looking for, he can put the selection in a "shopping cart" and search for other items. This make it easier for the customer to purchase multiple items, as well as to buy things he may not have been looking for.
Just as in a physical store, people often buy things they just happen to see. For example, stores place some "impulse items" at the checkout stand.
If the company is selling B2B, orders are often made via email. If the company is selling to individuals, their website usually includes a shopping cart feature.
After making an electronic transaction, they then deliver the good to the customer.
It should be easy for customers to purchase the items they want. You must have a way to receive online payments, either using credit cards or other means of payment. For example, business-to-business sales may simply involve a purchase order.
The purchase of the item can be complex, but it should be made as simple as possible for the customer.
- The customer must give certain information about himself. Usually this is name, address and e-mail
- A mutually acceptable payment method must be chosen. Credit card or billing information must be gathered.
- The merchant must process the customer's payment information.
- Finally, the customer must receive confirmation of the sale.
Security is a concern in credit card purchases and the ability to encrypt transfer of data
In both online buying and selling, there must be a way to send and receive payments, deliver the goods and provide any needed support.
Companies may pay for goods purchased through Electronic Funds Transfer (EFT) or similar method of electronic payment for online transactions, such as a form of Electronic Data Interchange (EDI).
Small companies and individuals typically send and receive payments with credit or debit cards, often through some service like PayPal.
You must have a good means of fulfilling the order and delivering the material to customers. Different means of delivery depends on the type of item purchased.
The product may be access to special information on the Web site, it may be downloadable software, or it may be items that must be physically delivered to the customer.
The customer needs a way to voice problems. You also need a customer service system, consisting of support to handle complaints or returns in the event of problems.
Online commerce is similar to the mail order business, except that it has potential for worldwide markets. You must not only promote your Web site, but you must also make it easy to find, select and purchase the items. Delivery and support issues are similar to that in mail order.
To set up your own online store, you can either purchase e-commerce software or have your capabilities custom programmed.
Remember that selling helps the customer satisfy needs
Resources and references
List of eCommerce material - A number of good resources from About.com
Business-to-Business eCommerce - Wikipedia
Questions and comments
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