eCommerce Overview

Digital Marketing - Study Notes:

What is ecommerce?

Let’s begin with a definition. What exactly is ecommerce? Well, it relates to buying and selling goods and services via online marketplaces, or online transactions on websites and mobile apps.

Effective ecommerce involves:

• Getting a defined audience to your website or mobile app using targeted advertising
• Showing them the ideal product at a suitable price on an optimized site
• Offering them optimal service levels and securing payment

Ecommerce revenue models

Some of the most common ecommerce revenue models include the following:

• Individual sales by retailers and manufacturers selling physical products
• Sales of non-physical products, such as airline tickets or financial products
• Subscription-based products or services for software and entertainment
• Pay-per-view access to content, such as market research and business insights

Ecommerce components

We’ll now look at three other key components of any ecommerce strategy. These are:

• The business model
• The order management system (OMS)
• The payment provider

We’ll explore each of these in turn.

Ecommerce business model

It’s important to remember that ecommerce isn’t just about setting up a website or app, and then watching the sales roll in! As you saw, first you have to decide on your revenue model – in other words, how you’ll make money. Then you need to decide on your ecommerce business model – in other words, how you’ll run the business.

For example, if you are selling a product, you’ll need to store it somewhere. In this case, your logistics and warehousing will play an important role in the success of your business.

People selling physical products can avail of various warehousing solutions, depending on their needs and business model. Here are some common examples:

• Self-managed warehousing: You own or rent space, and you manage the fulfilment yourself. Although this option offers maximum control, it may also overstretch your capabilities.
• Outsourced warehousing: You rent warehouse space in a managed facility, and then the rest of the process is handled by that facility, usually at a price per fulfilment. This option allows you to use the experience of experts. Bear in mind, though, that you’re surrendering a certain level of control over your fulfilment and stock.
• Drop-shipping: The product is shipped directly from the manufacturers’ warehouses. The advantage of this option is that it allows you to completely dispense with stock handling. The obvious disadvantage, on the other hand, is that you surrender almost all control of the process. Be aware that drop-shipping can get complicated if moving multiple products in one order.

Ecommerce order management system (OMS)

Another key component of your ecommerce strategy is your order management system (OMS).

An OMS combines:

• Inventory (what products you have in stock), and…
• Your ecommerce order data to allow you to fulfil those orders effectively

Ecommerce payment provider

A third key component is deciding on a payment provider. This is a third party that securely processes the credit card payment details that your users provide. Payment providers also often perform fraud checks for you. 

Headless ecommerce

Another option for your ecommerce strategy is headless ecommerce. This involves a separation of the front-end operations from the back-end operations. Let’s first take a moment to consider what those two terms mean.

• Front-end is more to do with the visual aspects of a website, the part that users see and interact with
• Back-end is more to do with a website structure, system, data, and logic

The advantage of this approach is that it allows more freedom to make ongoing improvements to the front-end without having to also make changes to the back-end. The disadvantage is the added time and cost involved in the initial website build.

Ecommerce logistics

Now we’ll shift our attention to two important aspects of ecommerce logistics:

• Your ecommerce store
• Product delivery

Ecommerce store

Your ecommerce store is your website or mobile app. This is where people can buy your products. Decisions on how you set up your ecommerce store will largely depend on your business model. However, they’ll also depend on your value proposition.

The value proposition

So, what is your value proposition? It’s a simple statement that communicates the clearest benefit that customers receive by giving you their business. In short, why should a customer choose your product or service?

The value proposition is about more than having a high-quality product that functions well, however. It encapsulates what values are important to your brand. For example:

• Patagonia is eco-friendly.
• Apple is stylish.
• Amazon is fast and reliable.

Bear in mind, though, that the value proposition even goes beyond your brand and product. It also considers the user experience. How easy and engaging is it for people to buy products from your store? Is your website or app intuitive to navigate? Remember, if your customer has a bad experience on your website or doesn’t receive the product they expect, that will seriously undermine your value proposition!

So, you can think of your value proposition as being the point where your brand values, your products, and your customer experience meet in a way that makes our ecommerce business unique.

Product delivery

The whole area of delivery is very important in ecommerce. If you cannot deliver the goods to your customers, they’ll soon switch to another business!

It’s important to set honest expectations with your customers. Don’t promise delivery turnaround times that you won’t be able to meet.

Also, be aware of what the market expects. Here, competitor analysis becomes crucial. What are the minimum delivery requirements to compete in the market? Is it next-day delivery? What about free returns? Or maybe after comparing your shipping promises against to your competitors, you’ll realize that offering delivery in three days is more than sufficient to get the sale, and that you don’t actually need to offer next-day delivery.