The daily grind is tiring.

You commute to work, clock in, put in your hours, and head home right when the sun is starting to set. 

Then you rinse and repeat until you can finally have a breather over the weekend. But all too quickly it's Monday again.

Enough is enough. 

You want something better for yourself. You want to start a Business and be your own boss. 

So you search online for how to make money online.

You learn that there are many ways that you can build a viable income online — freelancing, affiliate marketing, tutoring, consulting, etc.

What about eCommerce?

eCommerce is appealing for many reasons. More people are shopping online than ever before with no signs of slowing down. 

It’s a trend that has massive income potential, and the good news is that starting an eCommerce business has never been easier.

So what is it and how can you start making money doing it?

This resource will give you a comprehensive overview of everything you need to know about starting a successful eCommerce business — from what it is and how it works to getting your business up and running, getting that first sale, and the tools to help you do it all.

It can feel rather overwhelming if you’re just getting started. But with this in-depth guide, you’ll be able to launch an eCommerce business and start generating profit in no time.

What You’ll Learn in This In-Depth eCommerce Guide

Click the links below to navigate:

• What is eCommerce?
• How Does eCommerce Work?
• Types of eCommerce Business Models
• Impact of eCommerce
• The Evolution of eCommerce
• Anatomy of an eCommerce Business
• How to Market Your eCommerce Store
• Which eCommerce Business Should You Start?
• Tools and Resources to Help You Grow Your eCommerce Business
• Create Your Online Business Today
  

It’s a lot to cover, so let’s dive in.

What is eCommerce?

eCommerce (or electronic commerce) is the buying and selling of goods using the internet. Since the first transaction in 1994, eCommerce has grown to become a multi-trillion dollar industry.

eCommerce is estimated to reach a staggering $6.54 trillion in sales by 2022.

(Source)

Those figures are projected to continue growing as consumers shift even more of their spending online. 

That’s good news for you, as it means it’s not too late to get into eCommerce and build a profitable business.

eCommerce Examples

Here are some examples of eCommerce:

eCommerce Example #1: Online Stores

Best Buy is a multinational retailer that sells a range of electronics, appliances, and other items from its physical locations. 

They also sell products directly from their online store: 

(Source)

Visitors can browse their product catalog and order directly from their website.

Amazon is another example of an online store that most people are familiar with. The company initially sold books, but has since expanded to include a wide range of products. A large majority of their product sales are conducted through their website.

eCommerce Example #2: Online Auctions

eBay is an example of an online site that works like an auction house. Sellers can list their products for sale and consumers and bid on them.

(Source)

Fun fact: 

A broken laser pointer was the first item sold on eBay for $14.83 to a collector. The founder personally emailed the buy to make sure he knew what he was buying.

Other items sold just a week after that purchase include Marky Mark underwear, a Superman metal lunchbox, and a Toyota Tercel. The company now has yearly revenues of over $10 billion.

Not bad for something that started off as an idea.

eCommerce Example #3: Payment Gateways

PayPal is an example of a payment gateway. Users can connect their account to a debit or credit card to send money and accept payments.

(Source)

eBay purchased PayPal back in 2002 for $1.5 billion and phased out its own competing payment service.

eCommerce Example #4: Classified Websites

Craigslist is a classified advertisement website where users can post items for sale and even offer services. Other users can reach out and either meet in person or transact online.

(Source)

Craig Newmark started Craigslist as an email distribution list of events in the San Francisco Bay Area that he sent to his friends. It eventually became a web-based service and has since expanded to include other categories.

The company now does yearly revenues of over $1 billion.

eCommerce Example #5: Online Banking

Bank of America offers online banking. This allows users to conduct financial transactions online from paying bills to transferring funds.

(Source)

Consumers don’t need to visit a branch in person for basic tasks. They can simply log in to their accounts and send money online to others or a business. 

These are just some examples of eCommerce. While many of these companies now do billions of dollars in revenue a year, they all started with a simple idea and have grown to become household names. 

Of all the different types of eCommerce businesses, online stores are one of the easiest to get started with. It’s also the business model that I’ll primarily be covering in this article.

eCommerce Trends

The eCommerce industry is constantly changing how people shop. 

Here are some eCommerce trends that are worth paying attention to:

eCommerce Trend #1: More Consumers Shop From Mobile Devices

Shopping from a mobile device wasn’t always so easy.

Mobile phones in the past didn’t have the same capabilities they do now and websites weren’t designed for small screens.

But new advances in mobile devices, particularly touchscreen capabilities and faster connection speeds, made it easy for consumers to shop right from their smartphones.

This has led to more consumers shopping from their smartphones. 72.9% of all eCommerce sales are now expected to take place on a mobile device by 2021.

(Source)

These figures simply can’t be ignored. As you build your online store, it’s important to think about optimizing for mobile devices right from the start.

Otherwise, you risk users bouncing out because your site wasn’t designed for mobile devices.

eCommerce Trend #2: Consumers Use Social Media For Product Research

There are an estimated 3.81 billion social media users. 

Those figures are HUGE. They represent nearly half the world’s population!

Social networks like Facebook and Twitter are still widely used to connect with friends. But more people are using these platforms to inform their purchasing decisions. 

40% of consumers use social media channels to research products. Facebook is by far the most popular:

(Source)

The implications are clear:

A social media presence is a must.

More importantly, you’ll need to monitor your brand mentions and stay on top of what other people are saying about your business.

eCommerce Trend #3: Personalization is Key to Driving Sales

Walk into any local retail store and it will likely be the same the next day. Retail stores can’t personalize the shopping experience for individual customers.

Online stores don’t have the same kind of limitations as brick-and-mortars. Many use cookies to track previously visited pages and use that information to display product recommendations.

Just how effective is this?

Very.

59% of online shoppers find it easier to shop for interesting products on personalized online stores and 56% are more likely to return to a site that offers product recommendations.

(Source)

Online shoppers want a more personalized shopping experience. One way to build customer loyalty and drive more sales is to utilize a product recommendation engine. 

Visit Amazon and there’s a good chance your homepage looks different from mine:

(Source)

Amazon utilizes algorithms to recommend products based on a user’s browsing and purchase history.

eCommerce Trend #4: Rise of Voice Shopping

“Hey Alexa, order milk.”

Shopping with just your voice may sound like a foreign concept. But more consumers are doing exactly that with smart speakers.

Amazon Echo is the most popular smart speaker, but Google Home is expected to surpass it in market share by 2025.

(Source)

Virtual assistants have certainly come a long way since Siri made its debut on the iPhone 4S. 

Voice shopping is growing in popularity. Spend on voice shopping in the US is expected to reach $40 billion by 2022, up from $2 billion in 2017.

eCommerce Trend #5: Shopping With Augmented Reality

Nothing beats the convenience of shopping online — there are no crowds to deal with and you can easily compare prices.

But there are also major drawbacks. You can’t physically hold a product in your hand or try it out before you buy it.

Augmented reality or AR aims to bridge this gap. Consumers can use smartphones with AR capabilities to “test out” a product before placing an order. 

IKEA built IKEA Place to allow its users to virtually place furniture in their homes and visualize how it would look.

(Source)

The AR market is projected to reach $72.7 billion by 2024. Other retailers, including Converse and Gap, have begun experimenting with this innovative way of shopping. 

As you plan your entry into eCommerce, paying attention to emerging trends will be important to effectively compete.

How Does eCommerce Work?

eCommerce businesses work on the same principle as brick-and-mortar stores — you place an order and receive the product you purchased. 

The difference with online shopping is you don’t get to physically handle the product. The entire transaction is done through a computer or mobile device via the internet. 

Then, it’s just a matter of waiting for your order to arrive at your doorstep. It sounds straightforward enough for buyers. But there are also many things happening behind the scenes.

Here’s a basic illustration of how eCommerce works:

eCommerce consists of complex systems that work together to facilitate a transaction. These systems include:

• Webserver
• Shopping cart software
• Payment processor
• Inventory management system
• Dispatch system
  

A web server hosts your website and delivers pages to users via a browser. Think of it as a virtual storefront that you can “stock” with products.

Shopping cart software is software that enables users to browse products on your site. It displays a list of the added products and automatically tallies up the total.

A payment processor allows users to enter in their credit card information and send money securely to complete their purchase. PayPal is an example of a payment processor.

Customers can use PayPal to pay for a product and businesses can accept those payments. However, PayPal takes a small percentage of each sale.

Inventory management systems allow businesses to keep track of inventory. Many also send alerts on when to resupply stock.

Finally, dispatch systems automatically send orders to a warehouse where they are packaged and shipped to the customer.

Companies with complex supply chains, like Apple and Best Buy, employ all these systems together to maximize efficiency. 

However, only a web server, a payment process, and a shopping cart are necessary to build an online store. The rest like inventory management and dispatch can be handled in more traditional ways like using spreadsheets.

Let’s look at the different types of eCommerce business models you can consider:

B2B: Business to Business eCommerce

B2B eCommerce refers to online transactions between businesses. An example might be a manufacturer selling its products or software to other businesses.

Dropbox Business is an example of B2B eCommerce. Dropbox offers cloud-based storage directly to companies.

(Source)

B2B eCommerce business can be wildly profitable, but they also typically require more startup cash.

B2C: Business to Consumer eCommerce

B2C eCommerce refers to online transactions between a business and a consumer. This follows a traditional retail model but is conducted entirely online. 

Zappos is an example of a B2C eCommerce business:

(Source)

Zappos is strictly an online retailer — they only sell products through their website. Other examples of businesses that sell exclusively online include Newegg and Overstock.

C2C: Consumer to Consumer eCommerce

C2C eCommerce has gained tons of traction in recent years. These types of sites allow consumers to buy and sell products to other consumers. 

Etsy offers an example of C2C eCommerce.

(Source)

Shoppers can buy crafted items directly from independent sellers or even start their own shop if they so choose.

C2B: Consumer to Business eCommerce

C2B eCommerce is when consumers sell goods or services to businesses. 

Upwork offers an example, as individuals can sell their services to other companies.

(Source)

Companies can post a job listing and individuals can bid on them as a way to supplement their income. You may even consider using this platform as you grow and scale your online store.

It’s easy to fall into the hype of starting an online store. But like with any business model, there are advantages and disadvantages of eCommerce to consider.

Let’s explore these in more detail:

Advantages of eCommerce

• Low startup costs: Opening a physical store can easily cost tens of hundreds of thousands of dollars once you factor in costs like rent and inventory. In contrast, starting a dropshipping store can set you back a modest $418. 
• Sell products internationally: eCommerce doesn’t have the same physical limitations of brick-and-mortar stores. You can choose to sell locally or ship products to a worldwide audience. 
• Showcase product recommendations: eCommerce allows you to create a personalized shopping experience. For example, you can showcase products to individual customers based on items they’ve viewed or purchased.
• Easy to retarget: With eCommerce stores, you can view data about your visitors and use tracking pixels with retargeting ads to bring them back. 
• Ability to scale: It’s easier to scale an eCommerce business. There’s no need to worry about shelf space as you can add more products. You can also increase your ad spend and bring on new team members without being weighed down by overhead costs.
• Clear insight into buyer behavior: With online analytics, you get a clearer understanding of your business' return on investment than you can get from brick-and-mortar marketing strategies. Details like traffic sources can be used to form your marketing campaigns.
  

Disadvantages of eCommerce

• Shoppers are often wary of new sites: Starting a business can be difficult in the beginning as your name barely carries any weight. 89% of buyers are more likely to buy from Amazon than other sites because it’s a name that people know and trust.
• eCommerce is highly competitive: Heavyweights like Amazon and Wal-Mart can afford to sell items cheaply, making it difficult to compete against them online. The low cost of entry also means that eCommerce has grown more competitive over the years.
• Shoppers expect fast responses: 62% of shoppers expect an immediate response to sales inquiries. If you’re not available, you could lose that sale. One option is to hire customer representatives, but that incurs extra costs. 

• Shoppers are impatient: What makes shopping from Amazon highly attractive is their same-day shipping option with Amazon Prime. If customers have to wait a long time, they may not shop again from your store. Worse, they may post a negative review about your business which could hurt future sales.
• Fraud is a major concern: Consumers run the risk of having their identities stolen when they purchase from a new site. Businesses also run the risk of being targets for phishing attacks.
• Regulations and taxes: With an online store, you need to apply for a business license and complete all the necessary paperwork. You’ll also need to collect sales tax and file returns according to your state’s requirements.
  

It’s a lot to take in, but understanding the advantages and disadvantages of eCommerce can prepare you for some of the challenges that lie ahead.

Here are some of the different types of eCommerce business models you can start.

Types of eCommerce Business Models

There are different types of eCommerce businesses you can start. But before you do, you’ll need to think about inventory management and product sourcing. 

Let’s take a look at each one in more detail:

Dropshipping

Dropshipping is one of the easiest ways to start an online business.

It’s a fulfillment method in which products are shipped directly to the consumer. What makes this business model appealing is you don’t need to stock any products.

That’s right.

With dropshipping, you won’t need to pay huge overhead costs for a warehouse. Once you receive an order, simply send it to your supplier and they’ll take care of the rest.

Dropshipping is a great way to get your feet wet in the entrepreneurial world. 

Startup costs are low and suppliers are often happy to work with business owners — sales you send over ultimately mean more revenue for them.

This is a business you can potentially start today. However, no business venture is without its downsides. 

Because dropshipping is so easy to get started with, stores can sell products at a competitive price to attract customers. This results in lower profit margins.

Inventory management is another issue. If your products are out of stock, your customers have to wait which can lead to frustration with your business or even order cancellations.

Reselling Products

Reselling products is a more traditional retail model. 

It takes more work than dropshipping, but has higher profit potential. This involves working directly with manufacturers and negotiating prices for their products.

If you’re just starting out, you may not be able to get good rates. But once you scale and establish your business, you can ask for bulk discounts and increase your profits.

With this eCommerce model, you’ll need to think about inventory management. You have several options:

• Store products in a spare room
• Rent a local warehouse
• Have another company handle fulfillment
  

An example of the latter is Fulfillment By Amazon or FBA, a service that enables third-party sellers to ship their products to a fulfillment center and have Amazon handle the shipment.

You can wholesale products (B2B) or sell directly to consumers (B2C) on sites like eBay or Amazon. You can also sell products from your own online store.

White Labeling

Developing and manufacturing your own products can easily cost thousands of dollars or even much more.

White labeling (also private labeling) is one option you can consider if you have an idea for a product, but don’t have enough capital. 

White labeling is when you purchase products directly from a manufacturer and put your branding on them. You can even work with a manufacturer and have them produce a product based on your specifications. 

For example, Costco sells a wide selection of products under its Kirkland Signature brand. But they don’t actually manufacture many of these products.

Instead, other manufacturers make their products and Costco slaps on their label. Kirkland Signature now accounts for almost a third of all Costco sales

However, there are also several downsides to white labeling.

Most manufacturers require a minimum production quantity to make it worthwhile. You could be stuck with a ton of products if you can’t sell them. 

Selling Your Own Products

Another option you can consider is to sell your own products. 

For example, maybe you have an idea to sell high quality handcrafted jewelry. You can sell your items on a site like Etsy or on your own online store.

This is the approach that Steve Chou’s wife from MyWifeQuitHerJob.com took. She was able to grow Bumblebee Linens to 7 figures with this business model! 

This approach isn’t as easy as dropshipping or reselling products. But it does offer a high profit potential as we’ve seen with the example above and you have more control over product quality. 

However, you’ll need to source materials and either make the products yourself or work directly with a manufacturer. This means you can expect higher startup costs as a result.

You’ll also need to manage inventory and track customer orders. Alternatively, you can turn to FBA to handle the logistics.

Subscriptions

The eCommerce subscription model is another business model that has become popular in recent years. 15% of online shoppers have signed up for these subscriptions.

(Source)

The way it works is straightforward — customers pay a monthly fee and you ship out products on a recurring basis.

These could be products that you create or rebrand.

Dollar Shave Club follows a subscription model with its personal grooming products. The company sells Dorco razors, but rebrands them with their own label.

Another approach is to put products together from different suppliers and sell them as a sort of care package. 

This is the model that SnackCrate follows. 

SnackCrate doesn’t make any of its products. Instead, they source snacks from countries around the world and put them together into a neat package for a monthly fee.

The subscription model certainly sounds appealing. You get predictable recurring revenue once you build up a customer base.

But one of the downsides of this business model is churn rates — the percentage of subscribers who cancel. Churn rates are around 5.6%, but can vary from industry to industry.

Let’s look at the impact eCommerce has had.

Impact of eCommerce

eCommerce has radically changed retail.

Just look at the following chart:

(Source)

In 2017, eCommerce sales accounted for 10.4% of total retail sales. That figure continues to steadily rise as more consumers shift their spending online.

eCommerce sales are expected to account for 22% of total retail sales by 2023. That’s a whopping 111% increase!

Let’s look at the impact of eCommerce on consumers and business:

More Choices for Consumers

It happens:

You’re looking to buy a pair of shoes. So you drive down to the store, but the ones you want aren’t available in your size.

At this point, you have a few options — buy a different pair, visit another store to see if they have your size, or forego your purchase entirely.

Either option can lead to a frustrating shopping experience. 

The above example is how Zappos was founded. Nick Swinmurn, the company founder, had the idea to sell shoes online after he was unable to find a pair of Airwalk Desert Chuka boots.

One of the largest impacts that eCommerce has had is giving consumers a seemingly endless number of products to choose from.

If one store doesn’t have what you’re looking for, you can simply load up another site.

Rise in Comparison Shopping

It wasn’t easy to compare prices before the internet.

If you were looking to save on a camera, you would have to visit multiple stores to compare prices until you found one with the best deal. The whole ordeal could take an entire afternoon.

In contrast, eCommerce has made it effortless to compare prices. You could easily compare prices on just about anything in a matter of minutes.

If this sounds familiar, you’re not alone. 36% of online shoppers spend time finding the site that has what they want at the lowest price.

(Source)

This is great for the average consumer. But it often means that business owners have to operate on thinner profit margins to compete on price.

Offline Research, Online Purchases

eCommerce has led to another rise in consumer behavior: offline research, online purchasing.

Have you ever gone to a store to test out a product only to purchase it online because you knew you could get it cheaper?

Don’t worry, I’ve done it too.

It's called showrooming.

Because online stores have lower overhead costs, many can offer lower prices on the same products available in a brick-and-mortar.

This has led to consumers visiting retail stores and then making their purchases online. We even do it while in the retail store (59% of shoppers admit to using their devices while in-store to compare prices).

Showrooming has had major effects on retailers. 

Just look at this chart comparing eCommerce sales and department store sales:

(Source)

It’s clear that department store sales are steadily declining. One reason is the continued dominance of eCommerce and the desire to find great deals.

Low Startup Costs

Starting a retail store isn’t cheap. 

One business owner spent over $30,000 to open a consignment store in Texas. Costs start to add up once you factor in rent, licensing fees, store fixtures, inventory, etc.

That kind of capital isn’t exactly easy to come by. But it’s a completely different story with eCommerce.

You don’t need a storefront, which significantly reduces overhead costs. And you don’t even need to stock products as you can get started with dropshipping.

eCommerce has such a low barrier to entry that anyone with a little capital can build a profitable online business.

The Evolution of eCommerce

eCommerce is a multi-trillion dollar industry.

It didn’t start like that, of course. Let’s look at some of the major milestones that led to this explosive growth:

1972: First Online Deal

The first online transaction wasn’t for a book or a household item. It was so some students could get their hands on marijuana.

Students at the Stanford Artificial Intelligence Lab used the ARPANET (predecessor to the internet) in the early 70s to arrange the sale of marijuana with students at MIT. 

Money was handed over in person, so it technically wasn’t an eCommerce sale. But it’s still a noteworthy inclusion as it’s the first deal that the internet facilitated.

1989: World Wide Web

You’re reading this page thanks to Tim Berners Lee, a British computer scientist who invented the World Wide Web in 1989.

Lee developed three technologies: HTML (HyperText Markup Language), URI (Uniform Resource Identifier), and HTTP (Hypertext Transfer Protocol) — all of which make it possible for users to browse and follow links across the web. 

The first webpage is still published. It’s nothing fancy, but it laid the foundation for enabling people to access information and eventually make purchases online.

1994: First Online Purchase

The first legitimate online purchase can be traced back to August 11th, 1994.

Dan Kohn created a site called NetMarket and sold a CD of Sting’s “Ten Summer’s Tales” to Phil Brandenberger in Philadelphia for $12.48 plus shipping.

It’s the first time that encryption was used to make the transaction secure. A secret code was used which enabled Kohn to securely send his card Visa information.

1994: Amazon Was Founded

Jeff Bezos founded Amazon, a name which was settled on because it sounded “exotic and different,” in his garage in Washington.

The company sold books and was generating a staggering $20,000 in sales a week within just two months.

Here’s what the original homepage looked like:

(Source)

Amazon is now one of the most valuable companies in the world with a market cap of over a trillion dollars.

1998: PayPal Was Founded

PayPal was one of the first companies to deal with secure online transfers.

Anyone could sign up and send money electronically by linking their email address to their bank account. 

Its ease of use made it a popular way to send payments, especially on sites like eBay. PayPal was eventually sold to eBay for $1.5 billion back in 2002.

2004: Facebook Was Founded

Facebook was founded by Mark Zuckerberg. 

The platform was initially limited to Harvard students but has since expanded to include anyone with a valid email address. The network now has 2.5 billion active monthly users.

(Source