The purpose of this guide is to provide a complete picture of e-commerce including its conception in the 90s.
The History of E-Commerce
A simple definition of E-commerce is a Commercial transaction conducted electronically on the Internet. Through the connection of a computer to a phone by Michael Aldrich in 1979, the simple program called teleshopping was born. Tired of having to walk to the grocery shop for their weekly shop he simply wanted a way to optimize a simple task. Teleshopping made it possible to purchase items without leaving the house. Little did he realize that digital technologies were emerging that would ultimately turn teleshopping into an entirely new way of business. Despite this breakthrough, it would take time for society to develop the digital infrastructure and implement the technology. Throughout the 80s an increasing level of public awareness of technology lead to the implementation of new technology. This would lead to the launching of the World wide web on the 6th of August 1991 under the control of the national science foundation. By 1993 the world was introduced to email which proliferated quickly due to its practical application and simple functional design. In conjunction with the spread of email other aspects of the internet soon became more popular. From there the foundation of e-commerce was built as third-party services began the online processing of credit card payments. It would be 1995 when Jeff Bezos would launch the widely known platform Amazon. The rest would be history and in 2019 global e-commerce sales are worth just over three trillion dollars. Find out more here
During the turn of the century, e-commerce would begin to come into its own. Amazon emerged as a leader during this time and retail sites such as eBay saw enormous growth in a short period of time. E-commerce demonstrated to people that purchases could be made more efficiently at cheaper prices and with an ease of access not seen before. With the acquisition of PayPal by eBay in 2002 e-commerce now had an increased level of financial security. Despite this, markets have since shifted and china has twice the digital retail sales volume of the united states of America and accounts for 40% of the total global digital retail sales. Boasting 4 of the top 10 internet companies in the world as ranked by market capitalization. Amazon.com in the U.S and JD in China are the two most popular platforms with the highest global net sales. Amazon is the largest online retailer in the world offers a wide variety of products with a general focus on electronics and media. Moreover, Amazon has recently expanded and runs other online stores and has exported its business around the world with a global net sale of Amazon was $77 bn in 2018.
Jd.com is also an online platform but focuses on national sales with almost all net sales generated across greater china. Selling everything from furniture to electronics jd.com was launched in 2004 and has reached a global sales net profit of $61 billion. The china E-Commerce research centre estimated that jd.com has roughly 30% of the Chinese business to consumer online market. By ensuring strict quality control the online business differentiates itself by avoiding counterfeit products.
Other major E-commerce platforms include apple which is well known across the world and generated over 26 billion in 2018 from markets across the world including the U.S, Japan, and China. Being a well-known electronics and media platform apple, it was reported to be worth well over 200 billion dollars.
With an array of very well established multi-billion-dollar e-commerce businesses the opportunities to sell a product online are becoming more competitive yet these platforms have allowed people great opportunities to innovate products and sell them online using these platforms. The success of these platforms can be attributed to several factors most notably being the ability to innovate. This was a considerable factor for Amazon which despite challenges continued to develop new products and sell an increasing number of different items. With a continued commitment to customer service complaints ensured quality control for consumers during the early 2000s when e-commerce was in its infancy. Ultimately the success of the platform can be attributed to numerous factors but ultimately its long-term vision and extended strategic objectives lead the company to become a global giant. While platforms such as yahoo failed in these critical areas’ companies such as jd.com and Amazon would ultimately thrive.
Internet censorship is taken very seriously in china with a list of blocked websites available here. Predominately blocking social media and video streaming services such as Facebook and YouTube china has managed to build an internet unto itself. Differing from other countries such as North Korea and Saudi Arabia which simply restrict levels of access to its civilian population china has implemented extreme measures to censor the population’s media availability. Extending further into sites such as WordPress and Facebook. Furthermore, while some websites might not be banned in china they still have to pass through the great firewall and international e-commerce platforms face numerous challenges. Amazon isn’t the first US e-commerce company to fail to adapt to China. Online auction platform eBay, which was the first major e-commerce company in China, failed for a similar reason. Many attributed eBay’s downfall in China to its reluctance to change at a time when Alibaba was proving more capable of providing a shopping experience better suited to Chinese consumers however Chinese e-commerce companies completely dominate the domestic market, with Alibaba and JD.com taking up more than 81% of it. Despite this, the domestic market does not necessarily favour 85% of respondents said they would prefer Google over the Chinese search engine Baidu. Other cases are Valve’s Steam. The online digital game store originating from the U.S has over 30 million users in China. While censorship has an undeniable role in e-commerce and the economy overall the reasons why many companies can fail is because of cultural differences and poor understanding of the current market.
find out more about internet censorship from forbes check this link out
Reoccurring limitations for e-commerce
Overcoming the limitations of e-commerce is fundamental to any business’s success. One of the early limitations of e-commerce was security. With people being hesitant to provide personal information and financial details it was a lack of understanding that stopped people from making online purchases. Check out below the top ten limitations for e-commerce from shiprocket.org
“1. Security: One of the main limitations of eCommerce is security. In most cases, people are hesitant to provide their personal and financial details in spite of advanced data encryption security systems in place. Moreover, some websites do not have the capability and features installed to authenticate transactions. As such, there are instances of fraudulent activities. The fear of providing financial information like credit card details hinders the growth of eCommerce.
- Lack of Privacy: To some extent, the privacy of a customer is compromised in eCommerce. You need to provide your details, such as an address, telephone number, and so on to the seller. There are still lots of sites that do not have advanced technology to protect sensitive information. Moreover, some sites illegally collect consumer statistics without permission. This is one reason why people get skeptical while using eCommerce.
- Tax Issue: In case of different geographical locations, sales tax becomes an issue. Many times sellers have faced problems in the computation of sales tax. Moreover, physical stores have a risk of losing business if online transactions are exempted from taxation.
- Fear: In spite of the popularity, there still resides an element of doubt in the mind of people when it comes to online shopping. This is because the customer cannot physically examine the product and is not sure about the features and attributes. This is why a lot of people prefer shopping from physical stores.
- Product Suitability: As already mentioned, it is not possible for people to physically examine the product in eCommerce. In many cases, the original product may not match with the picture or specifications in the eCommerce site. This absence of ‘touch and feel’ creates a discouraging effect.
- Cultural Obstacles: As the process of eCommerce encompasses customers across the globe, the habits, traditions, and culture differ. There may also be linguistic problems and all these may lead to issues between the seller and buyer.
- High Labour Cost: To get the whole eCommerce and delivery process right, a specialized workforce is required. To get all these in the right shape, companies have to shed a good amount of money and employ a talented pool of people.
- Legal Issues: A lot of legal compliances and cyber laws that need to be taken care of in an eCommerce business. These regulations may vary from country to country. All these reasons deter businesses from going electronic.
- Technical Limitations: eCommerce requires advanced technology platforms for better performance. Some limitations, such as lack of proper domain, network and software issues and so on can affect the seamless performance of an eCommerce site.
- Huge Technological Cost: Last but not the least; a lot of money needs to be invested to be built up the technical infrastructure needed to run an eCommerce business. Moreover, they need to be upgraded based to keep up with the changing technology.
To minimize these limitations, an eCommerce business should have a business plan and implement them strategically”
Challenges for smaller e-commerce businesses and marketing
With a failure rate of over 90% of Major challenges exists to Market small e-commerce businesses. Retailers need to rely on numerous channels to drive traffic to their online stores. In building your e-commerce platform business must effectively leverage SEO, PPC, social, email, display ads, retargeting, mobile, shopping engines and affiliates to help drive qualified traffic to the online store. They ensure that they will be visible where their audience is paying attention. Even though only a small percentage of a business’s email list will convert into paying customers it is essential to deliver value with email marketing efforts. Having a large email list is completely worthless if a business is not actively engaging with subscribers. Additionally, Online retailers put the focus on communicating product offerings as well as promotions, but prospecting customers require more than that. By using entertainment and demonstrating value to the customer a higher conversion rate will ultimately result. Furthermore, by driving quality traffic and nurturing leads a business can maximize its closing rate. At a certain point, the need to convert those leads to pay for your marketing campaigns and the funnel below accurately depicts the individual stages of an online purchase.
By developing a sales process built around each stage of a marketing funnel such as this one business can constantly optimize their efforts in converting both email leads as well as website visitors into customers. Conversion optimization is a continuous process. Moreover, attracting new customers is more expensive than retaining the current ones you already have. Retailers must implement tactics to help get the most out of their customer base and increase customer lifetime value and increase loyalty. Check out this article about the importance of a Marekting funnel
The challenges of optimizing E-commerce can often include internal factors such as finding ways to cut inventory costs, improve marketing efficiency, reduce shipping, reduce overhead costs and control order returns. Often technology can be limiting factor some software can go out of date or associating costs can cost too much however in choosing the right technology online retailers may face fewer growth challenges.
Retailers wanting to achieve growth must be built on a good technology foundation. They must choose the right shopping cart solution, inventory management software, email software, CRM systems, analytics and so much more.Besides, hiring the wrong partners or agencies to help you implement projects or oversee marketing campaigns may also limit your growth. Online retailers must choose carefully who to work with. Ultimately the ability to effectively overcome these issues will lead to a successful online business and while numerous e-commerce options exist an ideal strategy is fundamental to the success of any online business.
Selling on an existing platform
The obvious and quick cash solution when looking to sell a product online compared to building your platform is selling with a large platform such as Shopify or Amazon. With the size of Amazon’s addressable audience is likely the most obvious benefit to selling products on Amazon, you have access to a huge pool of already established customers.
Over 40 percent of all the products sold on Amazon are from independent sellers doing business through Amazon’s platform. sellers can reach hundreds of millions of online customers when they sell their products. Unfortunately colors, font, layouts are all more or less standardized on these marketplaces, however, eBay does give you more options than Amazon when you scroll down the product pages. The major benefit of selling on an existing platform is the volume of traffic and the proven sales figures. By ensuring a product is sold on an existing platform instead of creating your website long term problems can occur. The first of these issues is the inability to build a brand and perform any of the marketing and sales functions that might allow you to retarget customers. Creating great images is extremely important and the only thing you can do to differentiate a product. Amazon is very strict about this and restricts sellers from mentioning the company. A business cannot even include a business card or print a different website in the invoices included in the packaging. Other platforms often have very similar policies too. Overall the use of larger platforms is extremely profitable but also limits any branding opportunities for the seller and has a limited potential for long term sales growth.
Building a platform
While using a platform such as Amazon has numerous advantages by using your platform an element of control is ensured. Building a platform using WordPress, Wix or Squarespace can be considered a reasonable option however those capable of creating a website without using any of these paid platforms will benefit financially over
a longer period. Despite this, cultivating the knowledge and technical ability to operate and manage this might not be a viable option and adds a new set of challenges. Using your platform allows a level of customization that can help build a brand, offer promotional material and build a landing page that guides the customer through the marketing funnel. This is one aspect that differentiates itself from using an external platform and as anyone who’s visited Amazon or eBay knows, there are very few options for controlling how your product pages look. Depending on the product and strategic objectives it could be smarter to sell an individual product on Amazon or it could be smarter to build your own platform as the product will require a level of branding to maximize profitability. If possible using both platforms for a mix of short term and long term profitability would deliver the best possible financial results as recognized by numerous. Ultimately it will be at the discretion of a company to decide if building a platform and a brand is advantageous to the sale of products or if it is too much effort to sell a small volume of products.