How Does Ecommerce Work?: A Complete Guide

how does ecommerce work online store business model

Ecommerce is one of the most prominent driving forces of the Internet economy.

Today, it's unimaginable having the Internet without online shopping. In the early days of the World Wide Web, we would have hesitated to purchase anything online. Nowadays, many consumers will know the ins-and-outs of their favorite online shops more than their local mall.

Ecommerce is thriving and will continue to do so.

Have you ever wondered how does eCommerce works for the business owner? How exactly do you start an online shop and make a handsome profit from it?

In this comprehensive guide, read on to learn how eCommerce works from inception to execution.


How Does eCommerce Work, A Comprehensive Guide

If you've ever thought about opening your own eCommerce store and starting a successful online business, this guide will show you how to get started.

Here is how eCommerce works.


1. The Perfect Product

Every eCommerce entrepreneur starts with choosing the perfect product.

You should first do research on what is the ideal product to sell. You will have to consider what is popular. But you also want to consider what products do not have fierce competition.

For example, books are always a popular option for eCommerce. However, if you start an online bookstore, you are competing against the likes of Amazon. This may not be the best option. You'll likely want to find a product that is not cornered by one major retailer.


2. Acquiring Your Product

Once you have chosen your perfect product, you need to acquire it before you can sell it.

The traditional way is to purchase products from a wholesaler and then store them yourself. You can store these in your home, in a public storage facility, or in a fulfillment center. The latter is the preferred option for many eCommerce entrepreneurs.

Fulfillment centers are large storage centers for online retailers. If you wish to manage a large inventory, you should definitely learn more about these centers.

A final option is to go the dropshipping route. This option allows you to sell products without having to hold inventory. The inventory remains with the manufacturer and they handle the shipping. You are the middleman.


3. Who's Your Competition?

As mentioned, when choosing your product you want to choose a niche that is not competitive or cornered by a major retailer such as Amazon.

Regardless, you will still have some competition. We suggest you research your competition so that you can outsmart them. You want to design a website that is more appealing than theirs. You want to compete with their marketing strategy as well.

You want to offer better deals for your clients. For example, you may wish to offer products at a lower price. Or you may wish to increase your inventory and provide a greater variety of products.


4. Establish Your Business

While you can run your company as a sole proprietor, there are many benefits to legally incorporating a business.

This can protect you against any possible liability but also gives your online store a sense of professionalism. Once you have registered your business, the next steps are to purchase a domain name. You should also register the appropriate social media accounts, email addresses, and possibly a phone number for your clients to reach your store.

Once you come up with a catchy name for your business, you will also want to create a stylish logo to distinguish your brand from others.

Once your business has been established, you can set up your online store. You can either design a website from scratch or use an existing eCommerce service such as Shopify to sell your products.


5. Search Engine Optimization

Once your online store is up and running, the next step is to market it.

One of the first strategies to utilize is Search Engine Optimization (SEO). This means using your website's written content (copy, blog posts, and product descriptions) should be optimized to increase your website's ranking in search engines.

This is done through keyword research. Using a keyword research tool, you can determine what are the frequently searched for keywords in your niche. By implementing these keywords into your written content, you are improving your website's chances of being found in a search engine.

Once you have optimized your website using SEO, you can branch out to different branches of marketing such as social media marketing, email marketing, and, of course, word of mouth - which often is the best method.


6. Your Customer Service

Your customer service will make or break your business. It will likely be challenging to acquire your first customer.

Keep marketing your shop and you will surely acquire your first one. Once you do, you want to make sure they get the best treatment. This will retain them and encourage them to spread the word.

Your satisfied customers are often the best method for marketing your online store. You should be in regular contact with your customers, thanking them for placing the order, informing them when the product is shipped, and confirming delivery.

You should follow-up and ask them if they were satisfied with the product. You can also offer them discounts or free gifts to keep their loyalty. Encourage them to share their shopping experience with their friends.

If your customer is not satisfied, then you must also address their concerns. Assure them that their satisfaction is important to you and that you will do what is necessary to ensure they are satisfied in the future.


7. Analyze Your Successes and Failures

After your store has taken off, you can start analyzing your successes and failures.

Look at your sales report each month. Look at how many products were sold versus how many were returned and how many orders were canceled.

Look at how your profits increased, decreased, or remained stagnant with each passing month. Only when you analyze how your online store has been faring will you be able to decide on future strategies to ensure its success.


Ecommerce Open for Business

So how does ecommerce work? Ecommerce, like any other business model, works if you work it! Now that you know how does eCommerce works in boosting the Internet economy, you are ready to start your own online store.

Be sure to read more great content on finance, business, and entrepreneurship. All of our business blog posts will help you with your e-commerce store marketing and financing!