What Is Ecommerce? The Complete Guide To Online Selling (2024) - Shopify (2024)

On August 11, 1994, a compact disc exchanged hands during the first ever online sale. This transaction would mark an important shift in the way we shop and do business. It was the birth of ecommerce, the buying and selling of goods and services online.

Today, ecommerce is powered by a massive ecosystem of technologies and digital platforms from website builders to payment gateways to social media sales channels. It continues to grow, with global ecommerce sales projected to reach $8trillion and account for 23.6% of all retail activity by 2026. It’s no wonder that new technology emerges every day, enabling businesses and creators to more easily sell products to customers online.

Ahead, explore the ins and outs of ecommerce: how it works, types of ecommerce models, online shopping trends, and the benefits of selling online. Plus, learn how to start an ecommerce business and launch your own big idea.

What is ecommerce?

Ecommerce refers to when individuals or companies buy and sell goods or services online. Ecommerce can be carried out on a smartphone app or online store, on a social media platform, or through an online marketplace. You can participate in ecommerce anywhere you can establish an internet connection. Common examples of ecommerce include online shopping, electronic payments, online auctions, and internet banking. The goal of ecommerce for the seller is to drive online sales using digital marketing strategies.

The history of ecommerce

What counts as the first ecommerce transaction is up for debate, with some activity observed as early as the 1970s. But the first legal transaction that occurred entirely online was conducted in 1994, when one friend sold a CD to another, 300 miles away. From there, ecommerce exploded, with Amazon and eBay launching just a year later, and PayPal following in 1998.

Since then, technology moved fast to meet the demands of this new type of shopper. Ecommerce platforms like Shopify democratized the industry, allowing a small business to sell directly to consumers anywhere in the world. Social commerce, mobile wallets, and AI tools round out the ecommerce we know today.

How does ecommerce work?

What Is Ecommerce? The Complete Guide To Online Selling (2024) - Shopify (1)After a customer makes a purchase, the online retailer delivers the order via shipping, store pickup, or local delivery (in the case of physical products), or digitally (for digital products like PDFs, virtual courses, or online consultations).

Ecommerce transactions happen across a variety of devices and platforms, using a number of different payment methods. Other applications and businesses support this ecosystem, from ad platforms like Google Ads to third-party logistics companies to ecommerce store apps. Let’s explore a few of the technologies powering online sales.

Types of ecommerce platforms and online sales channels

What Is Ecommerce? The Complete Guide To Online Selling (2024) - Shopify (2)There are many ways to reach and sell to consumers online, including owned channels like an online store and through third-party platforms. There are pros and cons to each and many online sellers choose an omnichannel approach, selling through multiple channels.

Ecommerce platforms

An ecommerce platform is a service that allows you to make money online through your own website. Shopify is an example of an ecommerce company that enables individuals, creators, and businesses of all sizes to sell online and in person through a brick-and-mortar store.

Benefits: These ecommerce companies generally offer everything you need to build a website, create product listings, and accept payments online, making them an easy way to build a brand and start selling.

Challenges: Selling on your own website requires active marketing efforts to drive traffic and make sales.

Online marketplaces

Online marketplaces are ecommerce sales channels that allow you to sell products and services to an active audience. Online selling sites like Amazon or Etsy are also powerful search engines, as they are often the first point of discovery for consumers looking for products.

Benefits: You can sell on marketplaces in tandem with your Shopify online store using integrations to sync sales. Marketplaces often have discovery built in, meaning you benefit from traffic with less active marketing.

Challenges: Marketplaces make it difficult to build a brand versus a standalone ecommerce store. You often don’t own your customer lists and you have limited control over the look and feel of your store or brand.

Social selling channels

Many social media platforms offer in-platform buying and selling features, enabling small businesses or personal brands to sell directly to audiences without an online storefront. Facebook and Instagram both offer native shopping features. You can also sell to social audiences with a Shopify Starter plan, an economical alternative to a full ecommerce website.

Benefits: You can easily sell to existing audiences on channels you already manage without building an ecommerce website.

Challenges: The audiences you build on social media sites areoften not owned. If you lose your account or the platform shuts down, you will need to rebuild from scratch.

Reach customers everywhere they are with Shopify

Shopify comes with powerful tools that help you promote and sell products on Facebook, Instagram, TikTok, Google, and YouTube from one back office. Make sales on multiple channels and manage everything from Shopify.

Explore Shopify’s sales channels

Payment methods for ecommerce

What Is Ecommerce? The Complete Guide To Online Selling (2024) - Shopify (3)

Consumers can make online purchases in a number of ways from digital wallets to credit cards processed through a payment gateway in an online store. Ecommerce platforms usually include integrations with payment processing services and sometimes offer their own digital payment platforms. These services are the liaison for online transactions between a merchant and a customer’s bank. Payment options are often bundled in the checkout to offer the customer choice.

A few types of payment methods for ecommerce stores include:

  • Accepting credit cards and other popular payment methods through a payment processor like Shopify Payments
  • Redirects through a payment platform (e.g., PayPal)
  • Mobile wallets such as Apple Pay and Google Pay (includes accelerated checkout options like Shop Pay)
  • Buy now, pay later (BNPL) services
  • Recurring billing (as in the example of subscription models)
  • Order online, pay in-store on pickup with a point-of-sale system like Shopify POS

Boost sales with buy now, pay later

Shop Pay Installments gives customers flexibility at checkout by letting them pay in 4 interest-free payments or monthly installments up to 12 months. Increase average order values, reduce abandoned carts, and turn more browsers into buyers today.

Discover Shop Pay Installments

Types of ecommerce businesses explained

What Is Ecommerce? The Complete Guide To Online Selling (2024) - Shopify (4)There are many ecommerce types, defined by who you are and who you’re selling to. Some helpful ecommerce terms to know are as follows.

Business to consumer (B2C)

A business that sells goods or services to an individual consumer (e.g., An ecommerce footwear store sells individual pairs of shoes directly to its customers).

Business to business (B2B)

A B2B business that sells goods or services to another business (e.g., A software company sells licenses for its technology to a small business).

Consumer to consumer (C2C)

An individual who sells goods or services to another individual (e.g., A person sells a single used sofa to another person on a buy-and-sell marketplace). Note: Once a person begins selling multiple items in this way (a vintage reseller using channels like Depop), their business model could be considered B2C.

Consumer to business (C2B)

An individual sells their own products or services to a business or organization (e.g., A business pays an independent influencer to promote the brand on social media).

You may also encounter a few other terms to describe types of ecommerce businesses. Direct-to-consumer (DTC or D2C) brands are those that primarily sell directly to their customers, either online or in person, without a middleman (a retailer or distributor). A digitally native vertical brand (DNVB) refers to a DTC business that started entirely online. Popular examples of these ecommerce business models include mattress brand Casper and men’s grooming brand Harry’s.

5 ecommerce revenue models

In addition to deciding what type of ecommerce business you want to run, it’s important to decide how that business will make money. There are at least five different revenue models used by businesses selling online. They are:

  1. Sales model. This is the most common model used by online brands and physical stores alike. It involves selling products and services for profit.
  2. Subscription model. Growing in popularity among consumers and ecommerce DTC brands, this model relies on recurring revenue from subscriptions to products or services.
  3. Advertising model. This model is common among online creators and influencers who grow personal brands thanks to advertising deals (promoted content) with other businesses.
  4. Affiliate model. Affiliate programs are also popular among creators who have large followings and may or may not sell their own products. They earn commission when a customer buys a product using an affiliate link.
  5. Transaction fee model. This model applies to ecommerce companies that process financial transactions. They earn revenue by charging a fee on each sale.

🥩 How a Meat Business Thrives on a Subscription Model

In this episode of Shopify Masters, ButcherBox founder Mike Salguero explains how his meat and seafood business started as a side hustle and bloomed to a nine-figure brand using a subscription revenue model.

Hear his story

The benefits of ecommerce businesses

What Is Ecommerce? The Complete Guide To Online Selling (2024) - Shopify (5)Running an ecommerce business has its perks. Not only does this business model allow you to launch a business quickly, it also offers access to a global pool of potential customers looking for a convenient way to buy your product and interact with your brand.

1. A convenient way for consumers to shop

Ecommerce allows customers to shop from anywhere, on any device, at any time, without the need to physically visit a store. Potential customers can more easily discover your brand—even from another country—and compare products, features, and prices in minutes. With a multitude of payment options offered by ecommerce, shopping online is even more convenient.

2. Increased reach and access to new markets

An ecommerce business can reach a wider audience than a physical store alone. With an ecommerce store, businesses can sell their products to customers all over the world, without the need for a physical presence in every location. Shipping partners and logistics companies connect the dots, moving online orders across the globe.

🌍 This Grandmother Took Her Local Business Global

Nonna Nerina offered old world pasta making classes to tourists in her small village in Italy. Then the pandemic put a halt to travel. With the help of her granddaughter, she launched Nonna Live to a global market online.

Read her story

3. Personalization and data

While it’s difficult to replace the one-to-one touch of a retail experience, online stores have a leg up on personalization. Customer data can be used for ecommerce marketing personalization, with customized experiences tailored to each individual. This can include personalized product recommendations, targeted marketing campaigns, fit finder quizzes, and loyalty programs.

Online stores usually have the ability to offer more choices, like color variants or product customization. Personalized shopping experiences can help businesses build stronger relationships with their customers and increase customer loyalty.

4. Lower startup and operating costs

Ecommerce businesses often have lower overhead costs than traditional brick-and-mortar stores. An ecommerce business can be run from anywhere, including a home office. While new business owners are still on the hook for inventory and costs to set up a website and domain, they often don’t need to worry about rent, utilities, and other high startup costs. Certain ecommerce business models such as dropshipping or print on demand don’t require inventory, and can be fairly inexpensive to set up and run.

The challenges of ecommerce businesses

What Is Ecommerce? The Complete Guide To Online Selling (2024) - Shopify (6)While running an online business has its benefits, it also comes with a few challenges. If you’re looking to start an ecommerce business, plan for these potential pitfalls before you proceed.

Security concerns in ecommerce

One of the biggest challenges of ecommerce is security. Customers need to trust that their personal and financial information is safe when they make purchases online. Ecommerce businesses should invest in secure payment gateways, SSL certificates, and other security measures to protect their customers' data. Note: Plans on Shopify come with security features like SSL and a secure payment gateway.

Clearly outline these security measures for customers in your terms and conditions and on the checkout page.

Increased competition

Ecommerce is a highly competitive space, with many businesses vying for the same customers. Online businesses need to differentiate themselves from their competitors by offering unique products, competitive prices, and exceptional customer experiences.

Shipping and logistics challenges

Every successful ecommerce business owner knows that a customer’s experience with shipping can make or break a brand. Online stores need to have efficient and reliable shipping and logistics systems in place to ensure that products are delivered to customers on time and in good condition.

Returns and customer service demands

In order to be competitive, ecommerce brands need to have robust return policies and customer service systems in place to handle customer inquiries and complaints. This can be challenging, especially for businesses that sell complex or technical products, or for small businesses with little or no staff.

Top ecommerce trends and statistics

What Is Ecommerce? The Complete Guide To Online Selling (2024) - Shopify (7)

Staying on top of ecommerce shopping trends will help your business remain competitive and meet ever-changing customer needs. While trends are constantly evolving, there are a few that signal a more permanent shift in the way consumers discover, buy, and support businesses.

1. Social ecommerce is on the rise

Social commerce sales in the US are expected to exceed $56 billion in 2023. Effective social selling means engaging in actual conversations with potential customers online. As you build trust and establish relationships, you can eventually move the customer through the marketing funnel toward a successful sale.

Learn more about this trend and how to sell on social platforms with these selling guides:

2. Social platforms are the new search engines

More and more, product discovery is happening in places you might not expect. Alongside Google, consumers look to YouTube and Amazon to find brands and products. Google reported that Gen Z is using social media platforms like TikTok to research brands more often than they use search engines.

🧶 A Rug Making Hobby Became a Business, Thanks to TikTok

In this episode of Shopify Masters, Mush Studios founder Jacob WInter explains how his rug making content went viral on TikTok after users discovered his unique style. In response, Jacob launched his creations as an ecommerce brand.

Hear his story

3. Online shopping goes mobile

M-commerce, or mobile commerce, refers to ecommerce transactions that occur via mobile phone. M-commerce sales were expected to account for 43% of the total ecommerce sales in the US in 2023. This number has been on a steady climb for years, and doesn’t show signs of slowing. Brands should therefore pay attention to the user experience on mobile devices, focusing on an optimized and streamlined mobile commerce UI that converts, with special attention to mobile payments.

The future of ecommerce

In one 2023 study, 56% of consumers surveyed said they would become repeat customers after purchasing with a personalized experience, which is up from 49% in 2022. With the recent surge in interest in AI technology, ecommerce brands are taking advantage of new tools to personalize customer experience. They can learn more about their customers, deliver personalized recommendations, and send targeted advertising messages.

AI is also used by ecommerce brands to create efficiencies and automate processes. Several AI apps in the Shopify App Store can help businesses automate tasks like customer service chat, syncing between sales channels, and inventory management. And adoption of AI tools is growing in the general population, with the number of users expected to double by 2029.

Augmented reality-enhanced shopping experiences are an example of another technology-based evolution of ecommerce, while additional consumer trends shaping the near future include buy now, pay later (BNPL) adoption among sellers and consumers, demand for privacy and security features, and sustainable business practices.

Starting an ecommerce business: 8 steps to launching an online store

What Is Ecommerce? The Complete Guide To Online Selling (2024) - Shopify (8)If you’ve decided to start a business, congratulations, you’ve already completed the first step! Once you have an idea and the desire to get started, you’re well on your way to launching your own ecommerce store. Once you’ve decided on the details, you can sign up with an ecommerce platform like Shopify to help you execute your vision. Let’s do this!

  1. Find an idea: Look for product opportunities, untapped audiences, or a gap in the market.
  2. Do market research: Thoroughly research your competition.
  3. Write a business plan: If you plan to seek funding, this will come in handy.
  4. Develop a brand:Choose a logo and business name and create a set of brand guidelines including mission, values, and brand voice.
  5. Set up your online store: Choose an ecommerce platform and a plan that fits your business size. Customize your ecommerce site with your branding and add products.
  6. Choose your shipping strategy.
  7. Develop a marketing plan: Set sales and marketing goals and prioritize advertising channels
  8. Launch your ecommerce business!

💡 Learn more: Take an in-depth look at each of these steps with our complete guide on how to start an ecommerce business. Or sign up for Shopify’s free course, including video modules, templates, and playbooks to get you on your way to starting a business online.

Make the leap to ecommerce today

The ecommerce industry has lots of room for newcomers looking to bring innovative ideas to the global market. Retail ecommercesales continue to grow, making this business model an ideal first business for aspiring entrepreneurs.

If you’re ready to start an ecommerce business, bookmark this guide as a handy resource to revisit on your way to launching your dream job.

Read more

  • How To Sell Online: A Step-by-Step Guide
  • What Is Entrepreneurship? Definition and Guide for 2022
  • What Is Expedited Shipping and Is It Worth It for Ecommerce?
  • What Is Bootstrapping? Definition and Guide
  • What Is Telecommuting? Definition and Guide
  • What Is Leveraged Buyout (LBO)? Definition and Guide

Ecommerce FAQ

What is ecommerce?

Ecommerce, short for electronic commerce, refers to the buying and selling of goods and services over the internet. It involves a transaction between two parties, usually a business and a consumer, where the payment and delivery of products or services are conducted online.

Ecommerce can take many forms, such as online shopping, digital downloads, online subscriptions, and online ticketing. It has revolutionized the way people do business and has become an increasingly popular way to shop due to its convenience and accessibility.

What are the 3 types of ecommerce?

There are three main types of ecommerce business:

  • Business-to-consumer (B2C) refers to a business selling goods directly to an end consumer using ecommerce. Some B2C ecommerce brands also operate a physical store.
  • Business-to-business (B2B) is a company that sells products or services to another business. For example, an accounting firm could sell services and online consultations to small businesses.
  • Consumer-to-consumer (C2C) refers to individuals selling items to each other, as in the example of local buy-and-sell marketplaces. This is a popular method for individual creator brands, too.

What is an example of ecommerce?

An example of ecommerce is online shopping, where consumers purchase products or services online through a B2C website or online marketplace. Ecommerce allows consumers to browse a vast range of products, select and compare prices and features, and make purchases securely using various payment methods. Mobile commerce is also an example of ecommerce—customers shop online using a mobile phone to find products and pay online.

Ecommerce can take on a variety of forms involving different transactional relationships including:

  • Online retail sales of physical or digital goods
  • Wholesale transactions
  • Dropshipping
  • Crowdfunding
  • Subscription-based products and services
  • Services and software licencing
  • Transaction fees

What is an ecommerce website?

An ecommerce website is an online store that allows businesses to sell products or services over the internet to customers. Ecommerce websites can be designed to sell physical products, digital products, or services. They typically include features such as product catalogs, pricing information, customer reviews, order tracking, customer accounts, and payment processing systems.

Those looking to start an ecommerce business don’t necessarily need an ecommerce website. Online marketplaces and social selling platforms are alternatives to standalone websites. These may be ideal options for first-time founders looking to attract customers to a new business online. A Shopify Starter Plan is a great way to enter ecommerce without building out a full online store.

What Is Ecommerce? The Complete Guide To Online Selling (2024) - Shopify (2024)

FAQs

What is Shopify ecommerce? ›

Shopify is an example of an ecommerce company that enables individuals, creators, and businesses of all sizes to sell online and in person through a brick-and-mortar store.

What is the future of ecommerce in 2024? ›

In 2024, I see consumers gravitating toward platforms that prioritize their personal data security, and governments are likely to introduce more stringent regulations. Retailers must invest in advanced security technologies and adopt transparent practices to build trust with their customers.

Is ecommerce shopping legit? ›

Yes, ecommerce is legitimate, but safety can vary. Reputable online stores follow security measures, but scams exist. It's essential to verify websites, protect your data, and exercise caution, ensuring your online shopping experience is secure and enjoyable.

What are the disadvantages of Shopify? ›

Let's look at some of the cons of using Shopify and what they might mean for your online business.
  • Pricing. ...
  • Limited Design Customization Options. ...
  • Shopify Processing Fees. ...
  • No Email Hosting. ...
  • Difficult Exit.
Jan 9, 2024

Can I use Shopify without ecommerce? ›

Yes, Shopify supports service-based businesses, offering tools and apps tailored for services rather than physical products. Can Shopify be used for non-sales-focused websites? Absolutely. Shopify is adaptable for a variety of websites, not just for ecommerce.

How much does Shopify take per sale? ›

Shopify charges 2.9% + 30¢ per transaction. However, the Shopify transaction fees depend on the plan you're using. For example, when you are on the Shopify pricing plan subscription, you will be charged 2.5% + 30¢ per transaction.

Is ecommerce worth it in 2024? ›

With online sales reaching $5.7 trillion globally in 2022, and projected to exceed $8.1 trillion by 2026, a burning question arises: Is eCommerce still profitable in 2024? The answer is a resounding yes, but success depends on careful planning and making the right choices to stand out in a crowded marketplace.

Is e-commerce worth it in 2024? ›

E-commerce sales are expected to grow 8.8% in 2024

With nearly 9% growth projected for this year, there are plenty of opportunities to dive in. Help your business stand out from the competition by staying at the forefront of online payment technologies and creating a website that's easy to navigate and browse.

Does ecommerce work in 2024? ›

2024 will see ecommerce sales grow by 9.8%

Sure, the growth rate of the industry is stabilising after the global lockdown boom - but online retail sales are still currently projected to grow by 9.83% each year. That's only slightly down from last year's 10.4%.

Does ecommerce actually make you money? ›

According to a 2023 NYU Stern School of Business study, you can make around 42.78% in gross profit margins and 0.64% in net ecommerce profit margins from your online business. But bear in mind that these are ballpark figures. Your final profit will depend on the following: Kinds and prices of products you sell.

What is the most trusted e commerce? ›

Top 10 Ecommerce Sites in India
  1. Amazon India.
  2. Flipkart.
  3. Myntra.
  4. IndiaMART.
  5. BookMyShow.
  6. Meesho.
  7. JioMart.
  8. AJIO.
Jan 22, 2024

Why do so many Shopify stores fail? ›

However, despite its many advantages, some Shopify stores fail to attract customers and generate revenue. There are multiple reasons why these stores fail: low traffic footprint, unclear objectives, poor production quality, increased competition, or insufficient conversions.

What is the biggest problem with Shopify? ›

ERP Integration
  • Having lots of suppliers to manage.
  • Low employee productivity as a result of doing tasks manually.
  • Late shipping of products.
  • Wrong shipping of products due to high volume.
  • Having to manage more than one B2B customer relationship.

Is it better to sell on Amazon or Shopify? ›

Shopify is suitable for small businesses that are selling exclusive products or building their brands as it allows users to build an online store and website. Amazon has a lower barrier to entry: once users create an account, they can simply start selling products.

What is Shopify and how is different from Amazon? ›

The biggest difference between Shopify vs. Amazon is that Shopify is an ecommerce platform, while Amazon is an online marketplace. When you build a Shopify website, you're making a stand-alone ecommerce store. Shopify provides you with the tools you need to create your own store.

Can I make money with Shopify? ›

The most straightforward way to make money on Shopify is to set up your own ecommerce store. Shopify makes it super easy to start selling your products online. Even someone completely new to the world of ecommerce can do it. Shopify takes you through everything you need to do to set up your ecommerce store.

What is ecommerce and how does it work? ›

An ecommerce website is your digital storefront on the internet. It facilitates the transaction between a buyer and seller. It is the virtual space where you showcase products, and online customers make selections.

References

Top Articles
Latest Posts
Recommended Articles
Article information

Author: Margart Wisoky

Last Updated:

Views: 5599

Rating: 4.8 / 5 (58 voted)

Reviews: 89% of readers found this page helpful

Author information

Name: Margart Wisoky

Birthday: 1993-05-13

Address: 2113 Abernathy Knoll, New Tamerafurt, CT 66893-2169

Phone: +25815234346805

Job: Central Developer

Hobby: Machining, Pottery, Rafting, Cosplaying, Jogging, Taekwondo, Scouting

Introduction: My name is Margart Wisoky, I am a gorgeous, shiny, successful, beautiful, adventurous, excited, pleasant person who loves writing and wants to share my knowledge and understanding with you.