by Ben Sweiry ·
Modified on 19 October, 2023
Put simply, an e-commerce business is any business that buys and sells goods or services over the internet.
Almost anything can be purchased through e-commerce today; for this reason, e-commerce is often highly competitive and can be a substitute or a compliment to brick-and-mortar stores.
E-commerce has evolved to make products easier to discover and purchase through online retailers and marketplaces. Businesses have benefited from e-commerce, which enables them to sell their goods and services at a scale that was not previously possible when e-commerce was a thing of the past.
E-Commerce Business: Facts and Stats
- The first recorded example of “e-commerce” came in 1994 in the form of the first ever online sale: on the August 11, 1994 a man sold a CD by the band Sting to his friend through his website NetMarket, an American retail platform.
- The e-commerce market size in the US is expected to pass the $1 trillion mark in 2022—two years earlier compared to pre-pandemic projections.
- According to the US sales retail statistics, e-commerce makes up 13% of total retail sales.
- In the US, major trends in e-commerce concern apparel, food and beverages, financial and health and beauty products.
What is E-Commerce?
E-commerce is the buying and selling of goods or services over the internet. E-commerce can also describe any kind of commercial transaction that is facilitated through the internet, but is more often than not involving payment in exchange for a good or service.
Independent freelancers, small businesses, and large corporations have all benefited from the development and growth of the e-commerce world, which enables them to sell their goods and services at a scale that was not possible with traditional offline retail.
E-commerce has lots of advantages over the traditional brick-and-mortar stores. For instance, e-commerce business transactions can occur 24 hours a day, seven days a week. Although e-commerce 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.
Additionally, 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.
What are the 4 Main Types of E-Commerce Businesses?
There are four main types of e-commerce models that can describe almost every transaction that takes place between consumers and businesses:
1. Business to Consumer (B2C): When a business sells a good or service to an individual consumer (e.g. You buy a pair of shoes from an online retailer).
2. Business to Business (B2B): When a business sells a good or service to another business (e.g. A business sells software-as-a-service for other businesses to use).
3. Consumer to Consumer (C2C): When a consumer sells a good or service to another consumer (e.g. You sell your old furniture on eBay to another consumer).
4. Consumer to Business (C2B): When a consumer sells their own products or services to a business or organization (e.g. An influencer offers exposure to their online audience in exchange for a fee, or a photographer licenses their photo for a business to use).
How to Start an E-Commerce Business: a Step-by-Step Guide
1. Identify a gap in the market and a product to sell.
The first step to building an e-commerce store is knowing what products you want to sell direct-to-consumer. You may find that the product you want to sell is already available, but you’ve figured out a way to sell it for cheaper or for a higher profit margin. Alternatively, you may find in your day-to-day life that there could be a use for a certain product which doesn’t exist on the market.
Regardless, after landing on a strong product idea, your next step is figuring out where and how you’re going to obtain your products.
2. Research your field and write a business plan.
Before you start to think about launching your product or service as a business, it is vitally important that you know your product and the market, as well as your target audience.
Typically, according to online shopping demographics, most shoppers belong to the age groups 16–24 and 25–54, and so it is important to bear this in mind before launching a product targeted at young kids who may not know how to use the internet, or older people who don’t use the internet to shop.
Researching your field is also vitally important. If similar products or services exist already, you should have an idea as to what price-point they’re selling for, the sort of numbers that are being sold and more.
3. Obtain any business permits and licenses you may need.
In some cases, you may want to apply for an EIN, or employer identification number, for your e-commerce business. Although not all business entity types are required to have an EIN, this nine-digit number can be useful to help you separate your personal and business finances. Plus, it’s free to do.
After you’ve applied for your EIN, you’ll now want to obtain any business licenses or permits needed to operate legally within your city and state.
Some types of business licenses and permits that you may need obtain are:
- Home occupation permit
- Professional and trade licenses for certain industries.
- Sales tax permits.
- Health, safety, and environmental permits.
4. Build a website and launch your business.
Whilst there are many other things to consider such as marketing strategy, how to fund your business, shipping and return methods and more, the last thing to do in order for you to launch your e-commerce business is to build your website.
In order to do this, you’ll need to create a logo, think of a name for your business and domain, and consider the design of your e-commerce store.
Like a physical storefront, this website will be the face of your business — it’s what your customers will see first and what they’ll use to browse and purchases your products or services. With this in mind, creating your website will be one of the most important parts of starting your e-commerce business.