By Lisa Cedrone
E-commerce—which is commonly defined as the buying or selling of goods or services over the Internet or an electronic network—has vastly changed worldwide commerce trends for both goods and services since the 1990s. When pioneers including Amazon.com (1994) and eBay debuted their online marketplaces, they began a revolution that has resulted in drastic changes to the business landscape over the past 25 years.
Whether you are offering coaching services, workshops, holistic products or books, your business must consider and, most likely, include an online component. In this series of articles we will explore the e-commerce business channel and look at the actual implementation of a start-up online business for tee shirts with spiritual slogans, The BhankTee Life, from start to finish.
Let’s start with some of the notable e-commerce trends that we should consider today:
Through the computer, independent practitioners now have a way to reach vast audiences for services, such as coaching sessions, readings (Tarot, astrology, animal communication, mediumship, etc.), webinars, subscription services, training programs, and more. Communication tools such as Facebook Live video streaming and Skype video conferencing make this possible and affordable for those with limited budgets.
With the Internet, consumers can research products and services online and compare prices. Online shopping giants also have developed the capability to cross-sell by suggesting related items, creating a vast selection of inventory for potential customers to select from. These developments have greatly increased competition among online retailers and between the online and bricks-and-mortar (physical retail) segments.
Shopping has become a 24/7 experience through the Internet. This level of instant access has driven demand for quick shipping and created challenges in the supply chain that impact both large and small companies, including keeping shipping costs low while using expedited delivery, and managing inventory and warehousing outside of the traditional manufacturing-to-retail sales floor fulfillment model.
Using the Internet, small online sellers can reach customers all over the country and the world, greatly expanding the reach for their products. This is especially significant for smaller companies that otherwise would not have the resources to open physical retail locations. This, in turn, has enticed entrepreneurial people to become online retailers and given them the ability to open virtual stores with minimal investment. These smaller businesses also can eliminate “middlemen” in many cases, which streamlines the supply chain and increases profits, making it possible to be more cost competitive with large-volume companies that receive volume discounts when purchasing/manufacturing.
Online advertising and marketing channels have expanded alongside Internet selling channels, the latter of which now include independent websites, social media platforms like facebook, and hubs such as Amazon, eBay and Etsy. While this has made marketing plans more complex and diversified, it also has added more affordable online options for advertising and marketing.
On the technology frontend, demand for secure and easy online payment methods and user-friendly, fast-loading hosted shopping cart programs continues to grow. For large companies involved in selling online, this is driving large investments in software and computer infrastructure. For smaller companies, this demand is supporting third-party development of online application service providers (ASPs), which offer hosted shopping cart platforms under a mass customization model, a hybrid approach that allows a certain amount of customization within a larger set framework (in this case a software platform).
On the technology backend, Electronic Data Interchange (EDI) has evolved to provide a backbone for e-commerce communication. In existence for more than 30 years and initially used in the automotive industry, EDI allows parties to exchange data—i.e., purchase orders, invoices, shipping notices and other business documents—using standards including X12, EDIFACT and ODETTE. In 1996, the National Institute of Standards and Technology officially defined EDI, saying that it is “the computer-to-computer interchange of strictly formatted messages that represent documents other than monetary instruments…”
The Bottom Line
Overall, online sales in the United States are predicted to reach $523 billion annually by 2020, according to a report by the research firm Forrester released in early 2016.4 In 2015, online sales totaled $341.7 billion, or 10.5 percent of all retail sales, which totaled $4.71 trillion.1 And e-commerce continued its upward trend in 2016. According to the most recent data from the U.S. Department of Commerce, released on November 17, 2016, U.S. retail e-commerce sales for the third quarter of 2016 shot up an estimated 15.7 percent over the same quarter in 2015 to $101.3 billion, while total retail sales only increased 2.2 percent in the same period.
No doubt, this rise in e-commerce sales is being fueled by the proliferation of mobile devices now available with Internet access, including smart phones and tablets. Internet Retailer, for example, reported that e-commerce sales from mobile devices accounting for 30 percent of all online sales in the United States in 2015, a nearly 5 percent increase from 2014.2
B2B vs. B2C…and C2C
The business-to-business (B2B) e-business model connects businesses to their suppliers, distributors and other parts of the supply chain (but not end consumers). B2B websites use electronic communication including email, the Internet and extranets, the latter of which typically are private networks that use Internet technology and the public telecommunication system. “E-business B2Bs focus on four main goals: operational efficiency, strong direct relationships, growth, and keeping up with competition,” notes Dana Griffin in an article on Chron.com.8 “An online supply chain allows customers to serve themselves and improves both timeliness and accuracy of orders and delivery. When you connect directly to suppliers and distributors, you develop your brand and close relationships make it even easier to conduct business.”
The business-to-consumer (B2C) sector of e-commerce is focused on selling finished products or services to end consumers, which is where many of Transformation’s readers will fall. However, in today’s online selling environment, the boundaries are murky. When the Internet exploded in the mid-1990s, a bulk of investment was made in the B2C business sector, but when the “dot-com bubble” burst in 2000, there was a shift toward diversified models that incorporated both B2C and B2B. “B2C businesses played a large role in the rapid development of the commercial Internet in the 1990s,” according to the website marketingterms.com.9 “Large sums of venture capital flowed to consumers in the form of free online services and discounted shopping, spurring adoption of the new medium. When the capital markets turned sour, however, the B2C companies were among the first to fall, and they fell fast. Many companies tried to follow the herd of investors by undergoing a B2C to B2B makeover.”
A good example of how this now works is the book-publishing industry, according to an online article in Chron.com by Katie Jensen. “Authors market their manuscripts to book publishers. Both the author and the book publisher are in a B2B relationship. The publisher prints and markets the books to booksellers, both online and in retail stores. This relationship is B2B as well. However, the bookstores sell to the final consumer and are in a B2C relationship.”10
Consumer-to-Consumer (C2C) e-commerce plays into this mix of online selling by providing a channel that operates similar to old-time classified sales, where end consumers interact with each other to buy and sell both used and new items. The best examples today are eBay.com and craigslist.com. C2C models typically operate using a third-party online platform where buyers can shop for free, but sellers sometimes have to pay a fee to list their products, notes a definition on study.com. “Consumers often play an active role in monitoring e-commerce sites for scams and other inappropriate content, [and] the C2C model entails lower costs and higher profits for buyers and sellers.”11 Again, there often isn’t a clear boundary between the sectors of e-commerce, and B2C and C2C strategies often overlap on sites like eBay.com and etsy.com.
Asking the Right Questions
In this environment, offering flexibility, adaptability and diversity are key competitive concepts for companies selling goods and/or services via e-commerce. Once a company has decided on what type of product and/or service to sell online, three of the most important questions that must be answered to build a solid business plan include:
1) How will the business initially fund itself? Options include investors, loans and/or your own resources. And then there’s crowdfunding: websites that facilitate community financing of ventures. According to an online article in Forbes a few years back by the founder of Crowdfuner.com, Chance Barnett: “There are two main models or types of crowdfunding. The first is what’s called donation-based funding. The birth of crowdfunding has come through this model, where funders donate via a collaborative goal-based process in return for products, perks or rewards.
“The second and more recent model is investment crowdfunding, where businesses seeking capital sell ownership stakes online in the form of equity or debt,” Barnett explains. “In this model, individuals who fund become owners or shareholders and have a potential for financial return, unlike in the donation model.”12
2) How will the business market through traditional and/or online channels? If the business model is B2C, marketing and advertising can be focused on the general media, such as television, radio and print publications, in addition to online avenues such as Google Ads and facebook campaigns, according to Katie Jensen’s Chron.com article. “If the final customer is a business [a B2B model]…marketing is done through avenues that the business customer will use. For example, industry publications, business magazines, trade shows and tech shows would be more appropriate. The marketing message for [B2B] is based on value, service and trust. B2C marketing is focused on price and the emotional satisfaction of obtaining the product.”10
3) What distribution model will the e-commerce business use? Whether B2B (a.k.a. as wholesale), B2C (a.k.a. as retail or service provider), or C2C (a.k.a. consumer-to-consumer classified sales) a supply chain must be established to deliver products and/or services. In the service sector, for example, a company might need a booking software ASP platform for seats on a tour, while a life coach might decide to conduct sessions via Skype or another video conferencing program and take payments via mail and PayPal.
For a seller of goods, the distribution supply chain is more complex. Will the company warehouse and ship its own merchandise, or will it use a third-party such as Amazon.com to warehouse and ship? Or maybe the company will use dropshipping, where products go directly from the manufacturer to the consumer. According to shopify.com’s Ultimate Guide to Dropshipping, “This is a retail fulfillment method where a store doesn’t keep the products it sells in stock. Instead, when a store sells a product, it purchases the item from a third party and has it shipped directly to the customer. As a result, the merchant never sees or handles the product. The biggest difference between dropshipping and the standard retail model is that the selling merchant doesn’t stock or own inventory. Instead, the merchant purchases inventory as needed from a third party—usually a wholesaler or manufacturer—to fulfill orders.”13
Moving Forward
Another paramount question in developing an e-commerce business, which will be addressed in a future article, is a payment options for e-commerce. While it might make sense for large companies to develop a custom secure e-commerce payment program, most small- to medium-size businesses and independent practitioners/coaches will use options including PayPal or an existing e-commerce ASP (a.k.a. hosted) shopping cart program, such as Shopify (which currently is the leading platform according to an evaluation on the EcommerceFuel website in late December 2016), Squarespace and Pinnacle Cart.
In our case study for this series of articles, we will be using an e-commerce hosted shopping cart platform for a new tee shirt brand that has the registered trademark “The BhakTee Life.” The company creates custom T-shirt designs with spiritual and humor themes that are printed by a third-party company using screen-printing and digital printing using a local supply chain in Southwest Florida. Stay tuned….
Lisa Cedrone is the editor of Transformation Magazine and a freelance editor, writer, and graphic designer working primarily in the spiritual and alternative healing communities. Prior to establishing her Sarasota, FL-based freelance business in 2008, Lisa spent 20 years as an editor/editor-in-chief for two of the Top 10 business-to-business publishers in the United States, serving the apparel manufacturing and residential construction/building markets. Her company, DragonFly Nation, offers a wide range of creative services, with an emphasis on cost-effective, turnkey editorial and design projects for both print and web. Contact her at lisa@suncoasttransformation.com or visit DragonFlyNation.com.
References
1. “U.S. e-commerce grows 14.6% in 2015,” by Stefany Zaroban, Internet Retailer, online article at: https://www.internetretailer.com/2016/02/17/us-e-commerce-grows-146-2015
2. “Ecommerce Statistics all Retailers Should Know,” by Matthew Ellis, Readycloud.com, online article at: https://www.readycloud.com/info/ecommerce-statistics-all-retailers-should-know#.Vz4W2vkrK00
3. The difference between e-business and e-commerce,” by Andrew Bartels, Computerworld, online article at: http://www.computerworld.com/article/2588708/e-commerce/e-commerce-the-difference-between-e-business-and-e-commerce.html
4. “Online sales will reach $523 billion by 2020 in the U.S.,” by Matt Lindner, Internet Retailer, online article at: https://www.internetretailer.com/2016/01/29/online-sales-will-reach-523-billion-2020-us
5. “The Evolution of the Internet and its Impact on Retail Spaces,” by Michael Ellis, Wired, online article at: https://www.wired.com/insights/2014/07/evolution-internet-impact-retail-spaces/
6. The Experience Economy: Work Is Theater & Every Business a Stage, B. Joseph Pine II and James H. Gilmore, 1999.
7. Electronic Data Interchange, Wikipedia, online article at: https://en.wikipedia.org/wiki/Electronic_data_interchange
8. “Definition of a Business to Business E-Business Model,” by Dana Griffin, Chron.com, online article at: http://smallbusiness.chron.com/definition-business-business-e-business-model-3877.html
9. B2C Definition, Marketingterms.com, online reference at: http://www.marketingterms.com/dictionary/b2c/
10. “What Do B2B & B2C Mean?” by Katie Jensen. Chron.com, online article at: http://smallbusiness.chron.com/b2b-b2c-mean-56101.html
11. “Consumer-to-Consumer (C2C) e-Commerce: Definition, Business Model & Examples,” study.com, online definition at: http://study.com/academy/lesson/consumer-to-consumer-c2c-e-commerce-definition-business-model-examples.html
12. “Top 10 Crowdfunding Sites For Fundraising,” by Chance Barnett, May 8, 2013, Forbes, online article at: http://www.forbes.com/sites/chancebarnett/2013/05/08/top-10-crowdfunding-sites-for-fundraising/#1be751bb1cfb
13. “The Ultimate Guide to Dropshipping,” shopify.com, an online resource at: https://www.shopify.com/guides/dropshipping