Ecommerce

What is ecommerce?

Ecommerce refers to commercial transactions conducted online. This means that whenever you buy and sell something using the Internet, you’re involved in ecommerce.

It was August 11, and the year was 1994. Around noon that day, Phil Brandenberger of Philadelphia logged into his computer and used his credit card to buy Sting’s “Ten Summoners’ Tales” for $12.48 plus shipping.

That story may not sound too exciting today, but at that time, this particular transaction made history. Why? Because it was the first time that encryption technology was used to enable an internet purchase. Many consider that moment as the first “true” ecommerce transaction.

Needless to say, ecommerce has grown by leaps and bounds since then. BigCommerce cites that ecommerce is growing 23% year-over-year, and according to eMarkerter, global ecommerce sales are expected to top $27 trillion in 2020 — and that’s just statistics for the retail sector.

Types of ecommerce merchants

There are many ways to classify ecommerce websites. You can categorize them according to the products or services that they sell, the parties that they transact with, or even the platforms on which they operate.

1. Stores that sell physical goods

These are your typical online retailers. They can include apparel stores, homeware businesses, and gift shops, just to name a few. Stores that sell physical goods showcase the items online and enable shoppers to add the things they like in their virtual shopping carts. Once the transaction is complete, the store typically ships the orders to the shopper, though a growing number of retailers are implementing initiatives such as in-store pickup.

2. Service-based e-tailers

Services can also be bought and sold online. Online consultants & educators are usually the ones engaging in ecommerce.

The buying process for services depends on the merchant. Some may allow you to purchase their services straightaway from their website or platform.

 

3. Digital products

Ecommerce is, by nature, highly digital, so it’s no surprise that many merchants sell “e-goods” online. Common types of digital products include ebooks, online courses, software, graphics, and virtual goods.

Ecommerce examples: success stories and flops

Ecommerce success stories

Amazon

It’s one of the most successful ecommerce businesses in the world. Aside from a thriving marketplace featuring third-party sellers, Amazon also has massive revenue coming in from its Prime membership, as well as subsidiaries such as Amazon Web Services and Zappos.com.

What makes Amazon successful?

Bestselling author and speaker Bryan Eisenberg, who recently published the book Be Like Amazon: Even a Lemonade Stand Can Do It (co-authored by Jeffrey Eisenberg and Roy H. Williams) often talks about the 4 Pillars of Amazon’s Success.

These pillars are:

1. Be Customer Centric – “Amazon is not trying to force customers to fit the way they want to sell them,” he says. “Amazon would rather fit themselves into how customers buy today and will change their buying behavior in the future.”

2. Be Creative – Amazon is always conducting experiments and coming up with ways to improve the shopping experience.
3. Be Focused on Customer Experience – According to Bryan, “Amazon will do everything possible to have people talking about what an amazing experience it was to shop or return items through their store. Every tiny detail in the store is designed to have customers engaged and excited to be there.”
4. Continuously Improve & Optimize – Amazon makes good use of its data. The company is always crunching the numbers, and it uses data in just about every aspect of the business, including customer experience, warehousing, operations, finance, and marketing.

Birchbox

Birchbox has a two-pronged business: it offers a subscription in which the company charges members $10 a month to receive “personalized mix of 5 hair, makeup, skincare, and fragrance samples.” Birchbox also has an online shop that allows customers to purchase full-sized products.  As of 2015, Birchbox had more than 800 brand partners and more than a million subscribers.

What makes Birchbox successful

Several factors contribute to Birchbox’s success, but one of the most important ones is data. The company’s co-founder, Katia , told Forbes that data became their best friend.

Here’s one example of how the company uses data. Birchbox asks subscribers to review each item and uses that information to match customers with the best products. Birchbox also sends the data to their partners so they can determine what works and what doesn’t.

Wayfair

Wayfair is a home furnishings e-tailer that offers a wide selection of more than 7 million items. Forbes reports that “Wayfair netted an estimated $18 million on $915 million in 2013, up 55% from the year before.” And as of May 2017, the site had over 36 million total visits.

What makes Wayfair successful

Wayfair is a drop-shipper, and it hardly carries any inventory. That said, the company does a tremendous job managing suppliers, orders, and fulfillment. “They figured out how to manage 7,000 vendors and the drop-ship process so the vendors go directly to the consumer,” says Battery Ventures’ Neeraj Agrawal in an interview with Forbes.

It works like this. Vendors upload their inventory data into Wayfair servers, and the company’s algorithm crunches the numbers and uses that information to determine shipping time and processes.

“Once an order is placed, software kicks in to notify the supplier. The system then decides how to ship the item–a lamp might mean a small package via UPS or FedEx; an area rug requires a delivery company Wayfair contracts with.”

In addition to efficient supplier and order management, Wayfair also strives to get to know its customers. The company encourages each shopper to create an account, and it observes user behavior, so Wayfair personalizes the shopping experience accordingly.

Ecommerce flops

You’ve seen the success stories; now let’s look at some of the biggest flops in the industry. Pay attention, and learn from these companies’ mistakes.

Boo.com

Boo.com was a UK-based clothing and cosmetics e-tailer that failed just two years after its launch. It was just one of the many Internet companies that shut down during the dot-com bubble in the year 2000.

Why Boo.com failed

Bad user experience, a faulty growth plan, and a high burn rate all contributed to the failure of Boo.com. For starters, the site needed JavaScript and Flash as well as many large files to run. This resulted in slow load times and ultimately, a bad user experience.

 

Boo.com also tried to expand way too fast, and its operating expenses were too high. And because of the crash of tech stocks at the time, the company wasn’t able to raise enough funds to stay afloat.

eToys.com

As its name suggests, eToys.com was an online toy retailer. It launched in 1997 and then filed for bankruptcy in 2001.

Why eToys.com failed

Like Boo.com, eToys had tried to expand too fast and also incurred high operating expenses. Because of the market conditions following the dot-com bubble, eToys failed to obtain capital that would allow it to continue operations.

At one point, the company sued Etoy, a Swiss art site. eToys tried to obtain the etoy.com domain saying that it was too similar to eToys.com. The move was met with widespread backlash, and eToys.com backed off.