What is an eCommerce Business? Pros, Cons, and Top Tips for Beginners

eCommerce, or electronic commerce, is the process of buying and selling stuff that involves using any online platform. 

Considering that it brings immense convenience to consumers and a more budget-friendly business model to entrepreneurs, it’s unsurprising that the eCommerce industry is currently worth $6.3 trillion and has 14 million merchants in the U.S. alone.  

This article covers everything you must know about eCommerce businesses, including their benefits, challenges, and the top tips to succeed. 

How does eCommerce work?

eCommerce is an umbrella term that covers any transaction that involves an electronic channel. Hence, there’s actually more than just one way for eCommerce to function. 

The simplest form of this transaction model, perhaps, is the “online-exclusive” version, where sellers list their products online, buyers purchase online, and the seller ships goods directly to the customer’s address.

In this scenario, almost all interactions between the buyer and seller are made online. 

However, as mentioned, eCommerce can take on different forms, so even the scenarios below still fall under the eCommerce umbrella: 

• Seller lists secondhand items online, then the exchange happens in person 
• Buyers purchase the product online but pay for the item upon receiving it (COD)
• Buyers purchase online but pick up the product from the seller’s warehouse
• The service provider collects the payment online but completes the service in person 

The general rule of thumb is that if any part of the buying and selling transactions is done online, it can be considered an eCommerce transaction. 

Benefits of eCommerce businesses 

Wondering why there are millions of merchants hopping into eCommerce? Let’s cover a few of the dozens of benefits selling online brings to businesses. 

Global reach 

With a brick-and-mortar store, you can’t exactly expect customers from a different city to spend the time and energy just to purchase from your business. Your customer base is mostly going to be limited to locals, and every now and then, possibly tourists passing through.

However, through eCommerce, you can easily allow your business to reach far beyond your local area. Specifically, reach the entire world. 

With just a few clicks, anyone from anywhere can instantly become your customer, and as the seller, you just have to process the orders and ship the products. 

In fact, in some cases, you may simply need to wait for 3PL companies to fulfill each order. 

More convenient for buyers

What’s more convenient for you: personally buying from a restaurant down the street or just ordering food through Uber Eats? 

Most people would choose the latter for obvious reasons, and this also applies not just to ordering food but pretty much all types of items one may want to purchase. 

It’s scientifically proven that convenience has a significant effect on consumers’ purchasing decisions. So, if you can offer a more convenient buying process through eCommerce, the chances of people purchasing from your business will also likely increase.

Lower startup costs

Unlike traditional retail models, eCommerce opens up the opportunity for businesses to sell products without a physical store location. In fact, If you dive into dropshipping, print-on-demand, or affiliate marketing, you might not even need to hold inventory at all!

The startup and overhead costs in eCommerce are significantly lower compared to brick-and-mortar stores, allowing entrepreneurs, even those on the tightest budget, to shoot their shot in the business world. 

Challenges of eCommerce businesses 

Like all businesses, eCommerce isn’t all about the perks and benefits. It also comes with its own set of challenges, which we’ll cover below. 

Very high competition

Yes, selling online means you can reach almost everyone in the world, but on the flip side, this also means almost every eCommerce seller worldwide can become your competitor. 

There are over 26 million merchants selling online currently, and this number is only projected to increase from here.

If you want your store to stand out, you’ll want to put lots of work into marketing your business, including learning about what’s in and out in the ever-changing flow of the latest trends in the market.

Logistics issues 

If you’re selling in person, the customer pays you, you give the product, and the transaction is complete. 

However, in eCommerce, the process usually starts with the customer paying for the product but doesn’t end until they receive the actual order. 

You guess it– there’s usually days to weeks of waiting in between.

And unfortunately, during this period, logistics issues can arise, whether or not you’ve done your part correctly. 

Logistics can be tricky in eCommerce. Its learning curve isn’t too steep, but getting used to shipping numerous packages simultaneously or handling returns efficiently aren’t exactly the easiest processes either. 

Moreover, even if you’ve done everything properly on your end, there can still be unexpected hiccups along the way that’ll cost your business time, energy, and money. For example, shipping companies sometimes mess up the schedules, and the weather won’t always be on your parcel’s side. 

Because of the complexity of logistics, you might end up with some very unhappy buyers.

Returns and refunds 

Having clear returns and refund policies is now almost mandatory if you want to be a successful online seller. 

However, this procedure can be very challenging, especially for online sellers with limited staff, inventory, or resources. After all, the financial and operational burden almost always falls fully on the store, not the buyer.

Where you can sell in eCommerce

All eCommerce transactions involve using an online selling/buying platform. Let’s cover the most popular eCommerce platforms you can use for your business. 

eCommerce websites 

Selling on an eCommerce website means creating your own online store. You’re basically crafting a virtual storefront that’s exclusively yours, giving you complete control of what and what isn’t included in your online platform. 

Do you need coding experience to create eCommerce websites? 

Luckily, not at all. 

eCommerce website builders like Shopify, Wix, and Ecwid allow you to build an online store through pre-built templates, making the website-building process as easy as dragging and customizing each element. 

Pros:

• Plenty of customization options
• Your store will appear professional and exclusive 
• It’s easier to connect eCommerce tools to eCommerce platforms 

Cons

• No existing traffic from merchants 
• It can take more time to build websites from scratch 

Related topic: Shopify Competitors A-Z: Which Is The Best for You 

Online marketplaces 

Online marketplaces are existing sales channels that accommodate thousands or millions of sellers who want to sell to their target market. 

You can pretty much think of them as the virtual version of malls or flea markets where you can find a bunch of different stalls/stores from various sellers in the same location.

The most common examples of online marketplaces are Amazon, eBay and Etsy. As you may know, these platforms are so popular that they need little to no introduction.

Pros: 

• Quick and easy setup
• Gain access to a large and diverse existing customer base
• Usually more affordable than creating eCommerce websites

Cons:

• Limited control over branding
• High level of competition within the platform

Social media selling channels 

Social media platforms like TikTok and Instagram now also allow businesses to sell directly to their customers within their platforms. 

So, while you’re marketing or chatting with potential customers inside a social media app, you can show them a clickable button or two that they can use to buy your products within seconds. 

Pros: 

• Easier to get insights into customer behavior
• Fastest way to actively promote your brand and products
• Have a very high traffic day in and out 

Cons:

• It’s not easy to gain views or to get viral
• Very few eCommerce tools that can help your store

Top eCommerce business models  

Ready to start your eCommerce journey? You may want to consider these business models as they prove to be some of the easiest yet most profitable eCommerce ventures to start.

Wholesaling and warehousing 

Wholesaling and warehousing means you handle inventory yourself, but instead of selling your products in a physical store, you simply opt to sell them online. 

Once you have products you’ve created or sourced from manufacturers, list them on your online platform and then ship them out directly to customers as orders start to roll in. 

In this business model, you’ll need a totally hands-on approach. That’s because, similar to traditional brick-and-mortar stores, you’ll be responsible for quality control, inventory management, shipping, and providing customer support.

This business model is ideal if you want to have full control over your operations, but keep in mind that this also means you need to invest a lot of time, money, and effort in every aspect of your business. 

Dropshipping 

Dropshipping is the complete opposite of wholesaling. As the store owner, you won’t need to keep any of the products you sell in stock. Instead, when someone buys from you, you just need to inform your wholesalers or suppliers, who will ship the products straight to your customers. 

Simply put, you’ll only act as a middleman and sell products inventory-free!

Because of its very low risk and lack of huge upfront capital, dropshipping has unsurprisingly become one of the most popular business models for aspiring eCommerce entrepreneurs. 

In fact, it has blown so much that the dropshipping market is estimated to grow to 372 billion in 2025. 

However, like any business model, dropshipping also has a few downsides. To name some, you’ll have less control over the product quality, longer shipping times, and competition can be fierce, which may result in lower profits. 

Recommended read: Dropshipping Agent: What Is It & Should You Find One?

White labeling

White labeling is kinda like dropshipping’s “more creative” cousin. Instead of just selling whatever products suppliers have, you’d be incorporating your own designs to items that would otherwise be “plain and boring” to make them stand out from the crowd.

Here’s the gist of how the white-labeling process usually works: 

1. Suppliers give you a peak at their catalog of “plain, generic items” they have
2. Suppliers provide you with editing software to virtually customize the “plain items”
3. You list the customized products you virtually designed in your online store
4. Wait for orders to come in
5. Relay order information to the supplier manually or automatically 
6. The supplier customizes the products per your design and ships them directly to your customers 

On the upside, white labeling lets you put your own brand on products without having to manufacture them yourself. Plus, it gives you more control over the design and the branding process. 

The downside, however, is that you’ll need to participate actively in the product design process, yet you won’t have much control over the quality of your finished products.

Selling digital products 

Compared to the others I’ve mentioned, selling digital products is not as popular with small businesses. But it is still, hands down, one of my favorite parts of eCommerce.

Digital products might sound unfamiliar at first, but believe me–you’ve likely already bought plenty of them without even realizing it. 

The most common examples of digital products include eBooks, online courses, printable planners, and even everyone’s favorite Netflix monthly subscription. 

eCommerce is the only avenue for selling digital products. The best thing about this business model is that a single digital product design, such as an eBook or a template, can be sold an unlimited number of times without ever running out of stock.

This means that the return on investment (ROI) on every digital product you create can easily reach the thousands mark. 

5 tips to succeed in eCommerce 

Hundreds of people try to enter the eCommerce market every day, but only very few stick around long-term. If you want to be part of the group that lasts, succeeds, and grows in the eCommerce industry, you must keep these 6 tips in mind. 

Know your target market

Don’t try to win over everyone online. There’s just no way you can impress billions of people with the resources of a single business.  

It’s much better to pick a specific demographic of people and tailor your strategies, products, and marketing to lure them in. 

For instance, you may want to target environmentally-conscious individuals who need plastic alternatives or pet parents who need safe-to-chew toys for their furbabies. 

Trust me, you can only build a loyal customer base if you choose a niche. 

Read next: Secrets on Target Audience: How to Know and Keep Them in Your Business

Leverage social media marketing 

With billions of people scrolling through their feeds every single day, social media marketing has made it so clear that it can give any business a serious boost. 

You can create compelling and relatable content from platforms like Facebook, Instagram, YouTube, and X and develop targeted ads to reach and engage with your customers.

By taking advantage of social media, you can boost your brand awareness, drive traffic to your website, and ultimately increase your sales. 

Editor’s pick: Top 5 Digital Marketing Tips in E-commerce

Make the buying process as easy as possible

Don’t make your store confusing. Keep it simple, user-friendly, and accessible so even first-time buyers can seamlessly purchase from you. 

No one loves a tedious sign-in process and annoying pop-ups, so keep those away from your store. 

Now, when it comes to store design, less is usually always more. 

Don’t overwhelm your customers with a bunch of unnecessary designs. Make sure they can reach your products or informational pages in seconds, saving them time and energy. 

Excel in customer support

Customer support can often make or break a business. Personally, I’d rather purchase from a store that isn’t too popular but has great customer service than from a store that cannot provide assistance to customers.

That said, always go above and beyond with your store’s customer support. Be responsive and show your customers that you care for them. This way, you can build a strong relationship that gives people a reason to keep coming back for more.

Receive help from professionals when needed

It’s totally fine to “suck” at the beginning of your eCommerce career. 

In fact, this is to be expected, as selling online is usually a lot more complex than what many expect. 

It involves juggling various responsibilities, such as shipping products, managing inventory levels, and marketing the business simultaneously, which can quickly become very overwhelming. 

That said, if you have the resources, don’t shy away from contacting professionals within your eCommerce industry for assistance. 

Aspiring dropshippers, for example, can contact dropshipping agents from companies like Sup Dropshipping to get expert insights on the best products to sell on the market. 

Similarly, you might want to try joining paid or free online courses about social marketing if that’s an area you’re still lacking in. 

Receiving help is not a sign of incapability. It’s a huge leap forward to becoming a better eCommerce entrepreneur. 

Should you create an eCommerce store? 

An eCommerce business is just like any other business, which means while it’ll work for many entrepreneurs, it won’t necessarily be for everyone. 

The best way to determine whether you should create an online store is to consider the pros and cons of this venture and figure out which eCommerce business models suit your preferences and resources best.

If you want a smooth sailing journey into eCommerce, consider contacting Sup Dropshipping. We help aspiring entrepreneurs kickstart their dropshipping or print-on-demand businesses from scratch.