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The Basics of E-Commerce

Updated on March 17, 2013
drmiddlebrook profile image

Dr. Middlebrook is a self-publishing expert, author (pen name Beax Rivers), online course developer, and former university professor.

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Introduction to Conducting Business on the Internet

E-commerce, short for electronic commerce, describes--primarily, the conducting of business online. It involves all the ways to sell products and services electronically, thanks to the development of computer programs and systems enabling business to take place beyond the walls of a brick and mortar building.

With controls in place, e-commerce allows customers access to a company’s computer systems, enabling them, basically, to serve themselves. E-commerce business is possible because of servers and data lines that form an interconnected network, the Internet. A commerce server houses the software used in the conduct of e-business, and it works along with online payment systems that are used to process customer payments.

As a method of doing business, the two major forms of e-commerce are Business-to-Consumer (B2C) and Business-to-Business (B2B). The terms "e-business" and "e-tailing" are used synonymously with e-commerce. E-commerce is often differentiated from m-commerce. M-commerce requires use of a mobile phone to conduct business, and is therefore, portable. E-commerce can be conducted using a desktop, laptop, smart phone, or other computing device allowing access to buying and selling over the Internet.

Web sites such as Amazon.com, Priceline.com, and eBay are all e-commerce sites. Some e-commerce marketers, such as Amazon.com, market products/services primarily to consumers, while business-to-business marketers target other businesses, exclusively.

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Because it enables the creation and the launching of new business opportunities, e-commerce is a now a vital and integral part of the U S economy. There are millions of e-commerce Web sites in different business sectors, and just as many different tactics and techniques to attract customers, depending on the niche or market that is served.

E-commerce offers ways to do business, globally, that many believe are better than those used by brick and mortar businesses. Others find e-commerce advantageous simply because it allows them a cheaper, faster way to do business.

Some of the business activities that take place during e-commerce include:

  • "Paperless" exchange of business information.
  • Commercial online sales that are accomplished by accepting credit cards for purchases.
  • Product/service information is offered through a company website.
  • Market research is conducted in a variety of ways. Customer demographic data is gathered through tracking systems, customer contact via the Web, and social media.

Young Brazilian man checks out the new computer center in Cabrália, Brazil. The center provides broadband access, 3G mobile Internet, and custom applications for managing fishing businesses, equipment, and training.
Young Brazilian man checks out the new computer center in Cabrália, Brazil. The center provides broadband access, 3G mobile Internet, and custom applications for managing fishing businesses, equipment, and training. | Source
  • Advertising revenue is generated online.
  • E-mail and fax are used as media to communicate with customers, and prospects.
  • Stock is traded using an online brokerage account.
  • "Virtual storefronts," online catalogs, and even "virtual malls," offer chances to expand business activities beyond the sale of one item.
  • Manufacturing and distribution is driven through a value chain with partners using an "extranet," a computer network enabling controlled access for business or educational purposes.
  • Selling to consumers is possible on a pay-per-download basis.

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Selling Lemonade Online?

The challenges of selling products and services over the Internet are huge, as opposed to selling through a retail outlet. Let's take a quick look at some of the major differences.

Let's use, for example, a child's lemonade stand and how its proprietors communicate with people. Why a lemonade stand? Because it represents an ideal way to do business: Face to face. As a customer, you are in a situation that is essentially buyer and seller, and not much else. You're able to observe, closely, the seller's body language, tone of voice, and facial expressions.

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Standing face-to-face, you have everything you need to help you take in, process, and understand what the salespeople are saying to you. You can even ask for a taste if you want, to try before you buy.

Now. Think about that same lemonade stand in cyber space. Gone is the face-to-face interaction. You no longer have the opportunity to process body language, tone of voice, or facial expressions. Even on a hot summer day, the seller can't tempt you with a taste poured from an ice cold pitcher. A lingering bouquet hovering in the air--the tart pleasantness of ripe lemons mixed with a satisfying sweetness, the promise of sugar.

Selling lemonade online means a lot has been taken away (you "get it," right, that lemonade is being used as a metaphor for other products and services?). There can be no lingering bouquets, no tasting opportunities, or face-to-face interaction. It's all gone, but--as a customer, has something of value also been added? Aren't you now able to make your decision to buy, or not, based solely on your experience at the site that's selling the lemonade? Okay, so you can't try before you buy, but maybe the product is a name-brand lemonade that you've enjoyed many times before. You already know you love it, and now you're free to buy as much of it as you want (at a really good price), or not. You can also choose to walk away--with no cute, disappointed faces to contend with.

Print-your-own-books? 1,000,000 books inside, thanks to the Internet.
Print-your-own-books? 1,000,000 books inside, thanks to the Internet. | Source

The Internet: Simply Another Way to Communicate

The Internet, when all is said is done, is simply another way for people to communicate with each other. Although it comes to us as the end result of a lot of sophisticated technology, it essentially provides a way for people to interact for the purpose of accomplishing personal, business, and/or socialization goals. It is the use of advanced technology to deliver and receive information, and it encompasses the utility of the telephone, a fax machine, Federal Express, the U.S. Postal Service, and a messenger service--as well as that of print publications and broadcast media.

One thing that is always going to be a challenge, for brick and mortar commerce as well as for e-commerce, is finding ways to attract the right customers to your business. Having a website is one thing, but getting people to visit your site is something else altogether.

Major marketers/retailers that already spend millions on marketing and advertising in the mass media have the funds to develop Web strategies and effective Internet communications solutions, and they can also promote their web offering through offline marketing communications. But what about Internet-only businesses? The challenge of getting the word out about what you have to sell is much more difficult when you’re a business owner with only an online presence. In e-commerce, the place you have to conduct your business is your Web site.

The table below compares some of the basics of doing business for the brick-and-mortar retailer vs. an online "e-tailor."

Business Need
Brick-and-Mortar Retailer
Online "E-tailer"
Find a way to attract customers
Marketing strategy must include everything from advertising to word of mouth/ social media promotions.
Marketing strategy must include everything from advertising to word of mouth/ social media promotions.
A way to take orders
There are no orders. Customers come into the store, select what they want, and complet transactions in the store.
Orders are usually handled online using interactive forms.
A way for customers to pay for purchases
Customers pay in store, in person, by check, cash, or credit or debit cards.
Customers cannot pay by cash or in person, only through electronic means using credit or debit cards.
Handling issues related to payment security
Although there are security risks, payments made in stores generally thought of as secure.
Need for special online merchant accounts for accepting payment, equipped with security "firewalls."
Delivery of the product
Place purchased items in a bag and give the bag to the customer.
Must ship/transport items to customers, just as in catalog/mail order businesses.

The Hub's Author

Dr. Middlebrook is a former college professor of marketing and mass communications. She spent nearly twenty years behind the desk teaching courses in advertising, marketing, public relations, and journalism. In addition, she worked, for many years, as a consultant and as an employee in corporate marketing and communications.

© 2013 Sallie B Middlebrook PhD

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    • JohnMello profile image

      JohnMello 4 years ago from England

      Excellent Hub, dr. Puts the whole selling online thing into perspective. Nicely organized, easy to read and highly informative. Voted up and useful.

    • drmiddlebrook profile image
      Author

      Sallie B Middlebrook PhD 4 years ago from Texas, USA

      Thanks so much Amaryllis. You are so right, it is definitely not easy to sell online. It takes knowledge of online marketing to get people to your site, and that is an undertaking that is much easier said than done. It takes time to learn what you need to know, and more time to execute what you learn. But I have to say I do believe that once you learn what you need to know and can do what you need to do to bring in customers and sales, there is great potential and freedom in the e-commerce arena.

    • Amaryllis profile image

      Lesley Charalambides 4 years ago from New Hampshire

      At last an article about ecommerce which pointed out the challenges of selling online. I am so fed up of reading how easy it all is, and I loved your lemonade stand analogy. Thanks for an interesting hub.

    • drmiddlebrook profile image
      Author

      Sallie B Middlebrook PhD 4 years ago from Texas, USA

      You are so right, point2make. It can be difficult and intimidating getting into E-Commerce. It looks easy from the outside looking in, but the moment you think you're ready to "open shop," it finally dawns on you how much you have to learn to be successful. Thanks for reading, for your kind words and insight, and for the vote up!

    • point2make profile image

      point2make 4 years ago

      An excellent informative hub. Getting into E-Commerce can be an intimidating, and difficult, journey for many beginners who are unprepared for the task. Your hub offers an interesting and easy to understand explanation of how to begin that journey. Well done! voted up.

    • drmiddlebrook profile image
      Author

      Sallie B Middlebrook PhD 4 years ago from Texas, USA

      Thank you so much for visiting, and for the votes up, useful, and interesting. You made my day! Congratulations on your decision to go back to school. I know your E-Commerce class is going to delve deeper into things I've touched on here, and I hope you'll share some of what you learn with us here on Hub Pages. Good luck, and thanks again.

    • Hawaiian Scribe profile image

      Stephanie Launiu 4 years ago from Hawai'i

      Great hub as usual! Voted up, useful, interesting. I started back to school in September and am taking an E-Commerce class this semester. I think you just summarized the whole class in an article. Thanks and aloha, Stephanie