What Is an E-Commerce Business
E-commerce refers to the use of the internet to place an order or to negotiate the price and terms of a sale. Although people typically think of e-commerce as a way to sell goods and services to consumers, it is also used in business-to-business (B2B) transactions. The COVID-19 pandemic fueled an increase in online spending that has continued to grow. FTI Consulting projects that U.S. online retail sales will reach more than $1 trillion in 2022. This would be an increase of 11.7% over 2021.
Advantages and Disadvantages of E-Commerce Businesses
Many smaller consumer businesses rely on e-commerce completely to sell their products. It is more cost-efficient to operate completely online, and advanced digital advertising technology allows businesses to more effectively target potential customers. Understanding the advantages and disadvantages of operating an e-commerce business allows entrepreneurs to determine if it is right for them.
Pros Explained
Lower overhead expenses: Many small e-commerce businesses can be operated by a solo entrepreneur, which means you likely won’t need to hire employees until you have sufficient revenue and sales to justify hiring someone. You also won’t need to face the cost of operating a brick-and-mortar store. You won’t need to lease property or face any of the numerous costs that come with operating a physical store.24/7 selling opportunities: E-commerce businesses are open as long as the internet doesn’t crash, since you don’t need to be available every time someone makes a purchase.Larger customer base: Anyone your business can deliver to, who has access to the internet, is a potential customer.Customer data collection and customer targeting capabilities: You’ll have access to customer data. You should be able to track customer buying habits and send out automated and customized emails encouraging future purchases. Targeting previous customers with carefully selected marketing messages can increase sales.Preferred method of shopping: According to a 2022 Raydiant report, 55.6% of customers prefer shopping online.
Cons Explained
Is an E-Commerce Business Right for You?
The emergence of e-commerce created a means for numerous entrepreneurs to become hugely successful. As with any business endeavor, starting and operating an e-commerce business requires capital, although the upfront costs are typically lower than those of a brick-and-mortar business. You’ll either need the financial resources to quit your day job and pursue your e-commerce business full-time, or you’ll need to build up your business while also working a day job. Either way, you’ll need emotional and financial support as well as grit and determination. If you have had success selling goods on a consumer-to-consumer platform such as Etsy, it may make sense to create your own website and sell directly to customers, thereby avoiding the cut that a third-party platform takes. You can also continue to sell products on third-party platforms while operating your own e-commerce website. When you decide whether or not to launch an e-commerce business, weigh the pros and cons and honestly assess the strength of your business when compared with the competition.
