An Introduction to E-commerce (Part 1)

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E-commerce has transformed how and what we buy and sell. Online Internet sites provide a convenient way for people to make purchases without having to figure out what store sells what they want, and then having to travel to that store to make their purchase.

For those going into business an E-commerce site can reach customers anywhere in the world. Far beyond the local strip-center that many businesses just 10 years ago, considered the best location for their first retail attempt. Today many vendors have abandoned brick-n-mortar stores and sell only online.

While it was once very expensive to set-up an E-commerce operation with the cost of a website and shopping cart, today's top E-commerce sites have become much more economical than traditional storefronts. Most E-commerce platforms make it easy to operate, easy to use, and easy to keep your customers happy.

While the boom in online sales has created an avenue for fraud and scams, E-commerce site builders offer top-of-the-line site protection and payment security to keep the online marketplace as safe as possible. Look for an E-commerce host that offers fraud protection and Secure Socket Layer (SSL) encryption which provides protection of you and your customers. SSL technology makes it possible for online payment information to pass securely through your E-commerce site.

E-commerce sites should be user-friendly, the best sites make it clear and easy to select desired products. A top-notch site builder will make it easy to build your online store including well-designed menus and sorting options that minimize the amount of time it takes to find a product and make purchases.

But E-commerce isn’t just about your E-commerce site, it is also about how you will do business as an E-commerce company.  Many businesses expand into E-commerce, and therefore choose to fulfill orders from their brick-n-mortar stores they already operate.  In other words these ‘Brick & Click’ operations, as they are sometimes called, use an expansion of the mechanism they may have used for years when customers ‘called-in’ for products, or perhaps sent ‘purchase orders’ by email. 

But as I mentioned above, many E-commerce businesses are choosing not to even have a storefront, even in these cases they may choose to do their own ‘warehousing’ of products, buying and selling in and out of this ‘warehouse’ environment.  Still others will choose to use third-party logistics (3PL) who house the seller’s inventory and manage the order fulfillment process on behalf of the seller.  Some E-commerce retailers will choose yet another logistics methodology, they will process orders via Drop Ship by making purchases only after they have an order to fulfill; and then they have that order shipped directly from either a distributor, preferred supplier, or wholesaler. In this scenario the E-commerce company never actually takes possession of the stock they are selling.

Here are a few 'definitions' for terms we have used in this article:

Brick & Click – A retail outlet or business with at least one physical location and at least one E-commerce enabled website.

Brick & Mortar – A retail outlet or business with at least one physical location.

Distributor – A manufacturer-approved or designated distributor allowed to sell larger quantity of products to commercial customers.

Drop Ship – Fulfilling product through a separate entity, either a distributor or manufacturer where you never own the inventory.

Fulfillment – Order fulfillment is the process of completing an order, shipping a product or products to the customer. The term may also be applied to logistics companies that inventory products and ship orders on behalf of an online store, but is often used as a type of company who fulfills from their own warehouses.

Inventory – The value or quantity of a business’s current stock of products.

Logistics – The management of products or other resources as they travel between a point of origin and a destination.

Preferred Supplier – A vendor who is chosen as most favorable due to reliability, costs, or deliver-ability time.

Retailer – A company that sells directly to the end consumer sometimes referred to as a Business to Consumer (B2C) Company.

Secure Sockets Layer (SSL) - A commonly-used protocol for managing the security of a message transmission on the Internet

Third Party Logistics (3PL) - A separate entity who will houses a seller’s inventory and manages the order fulfillment process on behalf of the seller.

Wholesaler – A manufacturer, distributor, or similar that sells to retailers

In future articles we will look at other aspects of E-commerce including principles of marketing, cost and pricing controls, inventory and supply chain management, and accounting options for your E-commerce operations.