E-Commerce Basics for Entrepreneurs

Posted by on May 7, 2009 in Web Design [ 1 Comment ]

It’s not a huge secret that a good portion of today’s big businesses are making much of their profits online. Wal-Mart’s website generates more sales per month than any of its actual stores. Buying and selling goods online has become, for many consumers in the U.S. and around the world, as common as going to the local grocery store.

But what is e-commerce, exactly? The Census Bureau defines e-commerce as “any business transaction whose price or essential terms were negotiated over an online system such as an Internet, Extranet, Electronic Data Interchange network, or electronic mail system.”  Offline businesses use e-commerce sales to complement store profits. Online-only enterprises such as Amazon.com or e-Bay allows for people all over the world with the same interests to connect and do business. The user-powered model of e-Bay empowered entrepreneurs to create their own private businesses and sell online. More than just selling stuff online, a good online business employs email, customer service chat, video, social networking such as a blog, community forum or thread and more to do business better.

Today, successful websites understand how to employ e-communications technology to build a consumer base and provide efficient, customer-focused services online. The internet economy has evolved since its beginnings in the mid-1990s. New innovations have created a more interactive, social World Wide Web, as well as jobs and opportunities for profit that did not exist before.

The Changing Internet Economy

A SmartEcon.com study describes the current internet economy as being made up of four different layers: infrastructure, applications, intermediaries and commerce.

  • Infrastructure involves creating and maintaining the online network itself.  This means the ISPs, network hardware and software programs manufacturers, PC and server makers and security vendors.
  • The applications layer involves all the programs and processes that provide products and services that make e-commerce possible. Multimedia applications, web development software, consultants, search engines, and online databases are all part of this category.
  • The intermediary’s layer involves facilitating online business transactions. Online brokers, travel agents, content aggregators, ad brokers and portals are all examples.
  • Commerce is the actual selling and buying of goods and services. This is the layer that involves business and consumers connecting online to conduct business. Online entertainment as well as the purchasing of goods and services falls under this layer.

Online shopping as a social activity

When the web first made the internet accessible to consumers in the 1990s, online shopping was something that a minority of internet users engaged in. Websites were single-page one dimensional spaces that companies used to provide information. It was a one-sided conversation, with sites providing information (usually in the form of text or photographs) and visitors taking it in. But the ability of internet users to comment on articles or write product reviews was not yet available.

Today, according to a 2008 global online survey, over 85% of the world’s internet users have made a purchase online, with the most popular buys being books, clothing, videos, DVDs, games, plane tickets and electronics.

What brought about this change?

In the early days of e-commerce web development, online shopping played a secondary role to a company’s actual store sales. It was a way for people who knew what they wanted to buy but didn’t have the time to go the store to make purchases conveniently.

Today, online shopping is a social activity. The internet is user-powered. People go online to see what other buyers have to say about a certain product. Research and communications between online buyers is just as much a part of e-commerce as the actual purchase transactions. Amazon’s user reviews, as well as websites like Consumer Reports, Bizrate, Shopping.com, and PriceGrabber.com offer information that is essential in the decision-making process of consumers.

But the social aspect of e-commerce goes beyond price comparisons and the simple product review. There are elements of community involved as well. Specialized consumer blogs where people can go to discuss special offers, upcoming products and shopping strategies have revolutionized the way people think about online shopping. Websites like Kaboodle, iliketotallyloveit.com and gosnopping.com are places where people can share their shopping experiences and rant about their experiences with the new iPhone or GPS system.

The fact of the matter is that e-commerce is growing and showing no signs of slowing down. As people become more and more comfortable with doing business online and networking with others via social networking sites, online identities will become an even more essential part of people’s lives.

Online businesses that wish to succeed must learn to use the social aspect of online shopping to their advantage. Providing a good infrastructure is not enough. Allowing consumers to feel like active participants is the key to generating traffic and differentiating your site from others.

One thought on “E-Commerce Basics for Entrepreneurs

  1. avatarJared O'Toole

    I like how you said Allowing consumers to feel like active participants is the key –this is true. However looking at things like craigslist its just so simple. I think moving forward it is important to make people really feel involved with the experience but don’t forget simple can work to!

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