eCommerce vs Traditional Commerce

by Cassandra Moffitt on

What is eCommerce?

eCommerce is a catchy term for any commercial transaction that is conducted electronically on the internet, be it from a mobile device, tablet or desktop. Most commonly, eCommerce is used to refer to a consumer purchasing a product online and having it shipped to them directly, but can also include the consumer purchase of services, business to business transactions for goods or services, online auctions, or the purchase of digital goods, such as streaming movies or video games.

Before eCommerce became a part of our daily lives, most businesses were in competition within their industry and specific geographic location. For example, if you needed to purchase a new shirt, chances are you’d be selecting from the retail options available within a few miles of your home or work. These retail stores wouldn’t have considered themselves in competition with stores across state lines. Now, however, the internet is blurring those boundaries and introducing avenues of competition that previously did not exist.

Components of eCommerce

The lure of starting your own eCommerce business (or adding eCommerce on top of your traditional commerce foundation) can be incredibly attractive. Coupled with the hundreds of third party services providers that tout the “ease and simplicity” of building an eCommerce store on their platforms (such as Shopify and Wix), you may feel ready to jump in with both feet! But before you proceed, you should be aware of the components that go into not only setting up your online store, but processing payments, fulfilling orders, and providing customer support (just to name a few).

Product or Service

The most basic component to any eCommerce system is the product being offered. Your product (or products, a la Amazon) can be anything from televisions to filing cabinets, prom dresses to dinnerware – the opportunities are endless. As we mentioned before, eCommerce is not limited to physical goods, but can be extended to allowing customers to select and purchase your service plans online, purchase digital goods, such as pre-recorded webinars, or grant access to member-only features of your website.

When considering what you will offer for sale through your eCommerce system, you must determine how you will obtain the products that you are selling. Are you making your products by hand? Will you be purchasing your products in bulk from the manufacturer? Will you need to arrange an agreement with a distributor? Do you have blind drop ship arrangements with producers?

Depending on what you are selling and how you plan on procuring it, there may be additional considerations such as legal contracts, affiliate agreements, packaging needs, labelling requirements, UPC or barcode generation, federal or state level regulations, and even resell agreements.

If your eCommerce is a new business, you may also need to think about your inventory and product storage. Will your products be delivered on a truck requiring a loading dock for unloading? Are they particularly large or will they require certain temperature considerations during storage? Are they fragile, perishable or living? Will they have a shelf life? How will you track inventory you have in stock, versus what is in delivery? What are the turn around times for purchasing new product and having it available for sale through your eCommerce?

When it comes to product, packaging, inventory and storage, there are a wide variety of scenarios that may apply to your situation. Although we at Grid have experience in each of these situations, the nuances of each are too exhaustive to cover in this article. If you are preparing your eCommerce solution and need assistance in any of the topics being discussed in this article, we encourage you to reach out to us for more direct and specific support.

Website

Now that you’ve identified what you are (or will be) selling, and how you will receive and store it, the next step is to set up the place where you will connect with your customers and enable the transaction to happen – your website.

As we mentioned earlier, there are quite a few third party services that provide “out of the box” online eCommerce systems. These solutions can be great for simple eCommerce stores, such as those with only a few products, those with products that do not have many variants (such as size or color options), or those that don’t plan to process too many orders. The benefit to these platforms is they allow you to get up and running fairly quickly: you sign up for a monthly plan, choose a design template, connect it to your payment processor (which we will cover below), put up a few products and you are off and running!

But, as most of our clients who started with one of these solutions have found, most businesses that plan to really focus on their eCommerce business find themselves outgrowing the capabilities of the platform fairly quickly, and need to move on to a more robust, extendible, or even customizable solution. Just as every business is different from another, so, too, are their eCommerce needs.

Credit Card Processing

One of the most headache-inducing parts of eCommerce used to be navigating the waters of credit card processing, gateways, contracts and monthly fees. But as more businesses have pursued eCommerce solutions, the demand for an “easier” approach to accepting credit cards online has grown exponentially. Businesses were clamoring for a credit card acceptance system that did away with antiquated fee structures, contractual requirements, and penalties for accepting credit cards that weren’t “in hand” to be run through a swipe-style machine.

A number of new credit card processors have entered this field to respond to the demand, making accepting credit cards online easier, safer, and more cost efficient. At Grid, we regularly recommend Stripe to our clients (depending on their needs, of course) to accept payments or donations. If Stripe doesn’t meet your needs, you may also consider Square or Google Wallet.

On the other side of the spectrum, most eCommerce systems readily connect to Paypal for accepting payments. We, however, would strong advise against using Paypal for any business transactions since although they act like a bank they are not classified (and thus not regulated) as one. They are not required to maintain any of the security, customer service, or dispute resolution services that typical banks are held to, which can result in sudden and inexplicable freezing of your account with no actual recourse.

Marketing and Traffic

With your online store up and running, you may be inclined to kick back and wait for the orders to come rolling in. We hate to spoil your moment of zen, but an eCommerce website is not a “build it and they will come” scenario. Remember how we talked about the internet opening up new lines of competition for traditional commerce businesses? Every online business is in competition with every other online business offering the same or similar products or services – so the real work in your eCommerce website has just begun!

When it comes to marketing your eCommerce system, there is an almost infinite number of marketing strategies that could prove successful in driving traffic (and thus sales) to your website. The marketing campaign you embark on should be designed around informed decision-making about your product, demographics and messaging. But the important takeaway here is that you must be doing something to get the word out, whether that’s a loyalty program, social media campaign, email newsletters, deals of the day, free samples, etc.

If no one knows about your eCommerce website, you will not receive any orders.

Fulfillment

You’ve gotten the word out about what you’re selling, and the orders have started to come in. Great! Now, how do you plan on fulfilling those orders? Who will be responsible, and on what time table, for checking for any orders placed? Will you need packaging material and boxes? Are you shipping with US Postal, FedEx or UPS? Depending on your shipping provider, are you able to ship to post office boxes, internationally, or to a residential community? Will the package have to be signed for? Will you need insurance? What sort of shipping time have you guaranteed, and what is your return policy and process? How will you handle out of stock or backordered purchases?

There are many different questions that can arise about your fulfillment process. Take time to consider each step of the operation before you launch your eCommerce website, so that you don’t find yourself with an order in hand and no plan on how to fulfill it!

The Importance of Mobile

There is no doubt that the percentage of eCommerce purchases using a mobile device will continue to increase over the next few years. If you doubt the validity of that statement, you have only to look at the largest retailers in the world, such as Amazon, Google, and Facebook, to see the importance they are placing on their mobile experiences.

You should be considering the experience of a mobile user during every stage of building your eCommerce solution. Does the website not only function properly, but provide an enhanced experience specifically for customers on a mobile device? Do the images resize properly for the size of the device, and does your navigation tuck away nicely so as not to distract from browsing your products? Do you streamline the process of finding a specific product, adding it to the cart and checking out? Are you adding annoying obstacles that would prevent a mobile user from completing checkout, such as requiring account creation or breaking the checkout experience up into too many pages?

Regulations and Security

In addition to understanding the components that go into building an eCommerce solution, it’s also important that you understand at least the basics of law as it relates to online transactions. Businesses selling products or services online, particularly those selling to customers in different states or internationally, face different legal and financial considerations as they relate to privacy, security, copyright and taxation.

The Federal Trade Commission (FTC) regulates most online activity, including email campaigns, online advertisements and consumer privacy and protection. The Payment Card Industry (PCI) Security Standards Council develops standards and rules outlining the procedures for proper handling and storage of consumers’ financial data. During the course of your eCommerce business you will collect sensitive personal information about your customers, and you will be subject to state or federal privacy laws, FTC regulations, and PCI compliance standards. It is your responsibility to adhere to all rules and regulations to protect your customers’ information.

One of the most standard options for providing protection for your customers is the use of a Secure Sockets Layer (SSL) certificate assigned to your website that encrypts information that is passed into your website (such as email, password and credit card information). Most consumers have been “trained” to identify secure eCommerce websites using SSL by looking for a closed padlock icon on the status bar of their web browser.

Advantages

When compared to traditional commerce, eCommerce comes with its own set of advantages (and difficulties, which we cover below).

Difficulties

Conclusion

eCommerce, when implemented thoughtfully and purposefully, can open a lot of opportunities for a new or existing business. Whether you sell products or services, giving your customers a way to browse, select, and purchase at their own convenience opens doors that a physical location may never be able to afford.

If you are considering an eCommerce solution for your business, we highly encourage you to reach out to us to discuss the best implementation. We can walk you through each step of the process, from beginning to end, to help you identify obstacles and opportunities unique to your specific situation. If you already have an eCommerce solution up and running, but it isn’t performing to the level you want, we can evaluate your setup and help identify areas for improvement. At Grid, we have extensive experience with a variety of types of eCommerce solutions, from big to small, and are happy to lend that knowledge to you!