Fundamentals of e-commerce PGDCA - 203

 





Traditional commerce

  • Mass-marketing and sales force-driven
  • Difficulty to search for the best price and quality
  • Information asymmetry – any disparity in relevant market information among parties in transaction


Mr. Paul

E-commerce

PPT

In its broadest definition, e-commerce is digitally enabled commercial transactions between and among organizations and individuals, where digitally enabled means, for the most part, transactions that occur over the Internet and World Wide Web.


Commercial transactions involve the exchange of value (e.g. money) across organizational or individual boundaries in return for products and services. E-Commerce is a modern business methodology that addresses the needs of organizations, merchants, and consumers to cut costs while improving the quality of goods and service and increasing the speed of service delivery.


Ecommerce can be defined from different dimensions as;


From a communications perspective, EC is the delivery of information, product/services, or payments over telephone lines, computer networks, or any other electronic means.

From a business process perspective, EC is the application of technology toward the automation of business transactions and work flow.

From a service perspective, EC is a tool that addresses the desire of firms, consumers, and management to cut service costs while improving the quality of goods and increasing the speed of service delivery.

From an online perspective, EC provides the capability of buying and selling products and information on the Internet and other online services.

From a collaboration perspective, EC is the facilitator for inter- and intra-organizational collaboration.

From a community perspective, EC provides place for community members, to learn, transact and collaborate.

E-commerce Vs. E-business


E-business is the use of Internet and digital technology to execute all the business processes in the enterprise. E-business includes e-commerce as well as processes for the internal management of the firm and for coordination with suppliers and other business partners. E-business includes digital enabling of transactions and processes within a firm, involving information systems under the control of the firm.


For example, a company’s online inventory control mechanisms are a component of e-business and online selling of company product is e-commerce.


Types of ecommerce [Enjoy the video ]

Classified by the nature of market relationship – who is selling to whom


Business-to-Consumer (B2C)

Businesses sell products or services to individual customers

Example: Walmart.com sells merchandise to consumers through its Web site

Business-to-Business (B2B)

Businesses sell products or services to other businesses

Types include inter-business exchanges, e-distributors, B2B service providers, matchmakers and infomediaries.

Examples: Grainger.com sells industrial supplies to large and small businesses through its Web site, Intel sells products to other business rather than customers.

Consumer-to-Consumer (C2C)

Participants in an online marketplace can buy and sell goods with each other

Example: Consumers and businesses trade with each other on eBay.com



Classified by technology used;


1. Peer-to-Peer (P2P)


Use of peer-to-peer technology, which enables Internet users to share files and computer resources directly without having to go through a central Web server, in e-commerce

Examples: BitTorrent and eDonkey.

2. Mobile commerce (M-commerce)


Use of digital wireless devices to enable transactions on the Web

Unique features of ecommerce


The features the set e-commerce Technology apart from others used in traditional


commerce are:


1. Ubiquity – internet/web technology is available everywhere: at work, home and elsewhere via mobile devices.


Marketplace extended beyond traditional boundaries

“Marketspace” is created, available 24/7/365

Customer convenience increased, costs reduced.

Ubiquity reduces transaction cost – the cost of participating in a market

2. Global Reach – the technology reaches across national boundaries, around the earth.


The potential market size is roughly equal to the size of the world’s online population

The total number of users or customers an e-commerce business can obtain is a measure of its reach

3. Universal standards – there is one set of technology standards, namely internet standards that is shared by all nations around the world.


Promotes technology adoption

Reduces costs of adoption

Greatly lower market entry cost for merchants

Reduce search cost for consumers

4. Richness – Refers to the complexity and content of a message


Video, audio, and text messages are integrated into a single marketing message

The Internet has the potential for offering considerably more information richness than traditional media like printing press, radio, and television because it is interactive and can adjust the message to individual users

5. Information Density - Internet and Web vastly increase the total amount and quality of information available to all market participants


Information processing, storage and communication costs drop dramatically.

Accuracy and timeliness improve greatly.

Information becomes plentiful, cheap and accurate.

6. Interactivity – the technology allows active user involvement.


Enable two-way communication between merchant and consumer

Traditional televisions cannot ask viewers any questions or enter into conversations, and it cannot request that customer information be entered into a form

Interactivity allows an online merchant to engage a consumer in ways similar to a face-to-face experience on a global scale where consumers engage in dynamic dialog

7. Social Technology – the technology allows the persons to create communities of their own interest.


The Internet and e-commerce technologies have evolved to be much more social by allowing users to create and share content in the form of text, videos, music, or photos with a worldwide community.

Using these forms of communication, users are able to create new social networks and strengthen existing ones

8. Personalization/Customization – the technology reaches allows personalized messages to be delivered to individuals as well as groups.


E-commerce technologies permit personalization by targeting of marketing message to specific individuals by adjusting the message to a person’s name, interests, and past purchases

The technology also permits by changing the delivered product or service based on user’s preferences or prior behavior

Potential customer reach extended.

Ecommerce Challenges


Although using e-commerce offers organization a wealth of new opportunities and ways of doing business, it also presents managers with a number of serious challenges as given below


Unproven Business Models - Many Internet business models are new and largely unproven to prove enduring sources of profit

Business Process Change Requirements - Web-enabled business processes for e-commerce and e-business requires far-reaching organizational change

Channel Conflicts - Using the Web for online sales and marketing may create channel conflicts with the firm’s traditional channels

Legal Issues - laws governing electronic commerce are still being written

Trust, Security, and Privacy - Electronic commerce does not provide trust among buyers, sellers, and other partners involved in online transactions


‘Back to basics’

More products are bought and sold online every day. It started with books in the 1990s and it has moved to almost every market and sector of industry.


Ecommerce is the fastest-growing area of business, supercharged by innovations in technology and changing consumer behaviour. The Internet, the World Wide Web, user-friendly websites, secure online payments, broadband, smartphones and tablets have arrived and now more people are choosing to ‘shop online’, as well as ‘be online’.


Looking at it from the retailer’s perspective, the market forces of supply and demand are no different for ecommerce. If there is demand, and you can supply it, the Internet creates an ever-expanding opportunity. Anyone can sell anything to anyone online.


Ecommerce offers many benefits over traditional retail, including exposure to new geographical and international markets, a streamlined buyer-to-seller relationship, and unlimited growth potential.


Whether you are a high street multichannel retailer, an established or growing pure play site or a start-up considering targeting a particular niche, you will need to devise, implement, measure and manage your online project constantly.


Three guiding principles for ecommerce success

IRP Commerce recommends a dedicated focus on three guiding principles that will help deliver success in ecommerce.


1. The IRP equation

The most simple and important equation to understand online sales is:



The IRP ecommerce equation - Visitors x Conversion Rate x Average Order Value equals Sales

The IRP ecommerce equation - Visitors x Conversion Rate x Average Order Value = Sales

You calculate the total value of sales that you get by multiplying the number of people who buy items by the amount, on average, that they spend (the Average Order Total). To work out ‘the number of people who buy items’, you multiply the total number of visitors you receive by the percentage of those visitors who convert into purchasing customers (the Conversion Rate).


You can use the IRP Ecommerce Calculator to help you predict your costs and profits by manipulating the key variables in the fundamental IRP ecommerce equation.


It is critical to remember that these are the only parameters we have to play with to increase sales. The key is to either increase VISITORS, increase CONVERSION RATE or increase AVERAGE ORDER VALUE (AOV). The AOV should then be turned into Customer Lifetime Value (CLV) to maximize repeat business.


2. Traffic, conversion and retention

This equation is supported by an ongoing and dedicated focus on three key strategic areas: traffic, conversion and retention.



The IRP ecommerce strategic areas - traffic, conversion and retention

3. The four cornerstones

Underlying the key equation and the three key strategic areas are the four cornerstones for creating a winning and successful ecommerce business:



The four cornerstones of ecommerce success - Technology, Investment, Product and Customers

Technology

Secure, reliable, scalable and proven technology

Multichannel, device, language and currency capabilities

User-friendly with an expansive and innovative features list

Investment

Investment in people (Ecommerce Manager and Web Team)

Investment in product

Investment in marketing

Product

Competitive pricing or uniqueness

Expanding your product range, categories and brands

High-quality product information, images and data as well as useful content.

Customers

High-quality customer service

A focus on customer acquisition

A focus on customer conversion and retention

The IRP formula for success

The formula for IRP success




As with any offline retail business, you will make or break your online offering based on how strong your team is, your buying power and access to product. You also need efficient stock control, pricing, fulfilment, shipping, delivery, and returns services. Effective nurturing of your supply chain plays an important role, especially if you want to sell cross-border and into international markets.


Price is often a major focus and talking point. Almost everyone goes online to get the best deal, so it is vital to make sure that you remain competitive and profitable, taking into consideration the cost of sourcing, packaging and delivering the product.


However, price is not everything. The experiences you provide from the minute a visitor arrives on your site, through to checkout, delivery and aftercare go a long way in establishing a best-of-service brand with a loyal customer base.


Summary

At the core of your online business will be the construction, continued improvement and evolution of your ecommerce website. This will ideally be tied into your whole retail operation – from in-house stock control to till systems – providing you have a retail presence.


The development of a strategic plan focusing on traffic acquisition, on-site conversion and customer retention is a key and ongoing concern. Each of these aspects will cover many areas and open much debate, but all are part of the formula for success.


All ongoing changes and improvements to your website should always be to the benefit of the visitor. Treat the look and feel of your website like you would do your shop or your home and, in doing so, you will convert more visitors into customers and existing customers into bigger and more frequent spenders.





There are four fundamental aspects that will make the ecommerce endeavor successful. These are directly related to the consumer looking for a solution:

 

products/service selection
immediate availability
price
purchase experience.
 

When entering an online store, the consumer will expect to find the products and services they are looking for. They need to be available whenever they want or need them, the price be correct and adequate to the market, and finally, that the purchase process is simple and efficient.

 

The last one is what we call client experience or CX, which is the most important aspect of them all. This will determine whether purchases will be completed or abandoned.

 

According to a survey conducted by Baymard, a research institute that specializes in ecommerce and user-experience studies, 55% of clients leave the shopping cart due to delivery charges being too high. 34% leave as the site asks for a registration in order to complete the purchase. Other reasons include long or complex paying processes and technical issues, such as speed or page loading problems.

 

To create a satisfactory CX, the purchase process must be transparent and have as few steps as possible. This ideally includes several paying/delivery options and no technical issues. This will contribute to a higher sales rate and users that will come back later to purchase again.

 

It’s important to have an ecommerce development specialized team that is experienced enough to find an integral ecommerce solution, and that covers all the stages involved in the development of an online store. From conducting an audit and diagnostics, to understanding the current situation of the brand in its digital context, this is essential to the development of a full ecommerce site.

 

Our solutions will be perfectly adapted to our client’s needs. Some already have a site of their own and some currently have an indirect channel via another partner.

 

One of the main objectives is that this service improves the purchase experience in order to increase sales, which will improve their conversion rates and ROI.

 

The constant and rapid growth in the digital world, combined with the increase in social distancing, demands the ability to innovate and evolve at the same fast pace to those who want to enter the digital arena.

Topics Covered in E-Commerce Notes
Syllabus prescribed by the popular colleges and universities for e-commerce are as follows-

Unit 1 Introduction to E-commerce: Introduction, E-commerce or Electronic Commerce- An Overview, Electronic Commerce – Cutting edge, Electronic Commerce Framework, Evolution of E-commerce, History of Electronic Commerce, Advantages and Disadvantages, Roadmap

Unit 2

Network Infrastructure: Introduction, Overview, Internet Hierarchy, Basic Blocks, Networks layers & TCP/IP protocols, Advantages of Internet

Unit 3

E-commerce Infrastructure: Introduction, An Overview, Hardware, Server Operating System, Software, Network Website, Managing the e-Enterprise: Introduction, Managing the e-Enterprise, E-business Enterprise, Comparison between Conventional Design and E-organisation, Organisation of Business in an e-Enterprise

Unit 4

e-Commerce Process Models: Introduction, Business Models, E-business Models Based on the Relationship of Transaction Parties, e-commerce Sales Life Cycle (ESLC) Model

Unit 5

Risks of Insecure Systems: Introduction, An Overview of Risks Associated with Internet Transactions, Internet Associated Risks, Intranet Associated Risks, risks associated with Business Transaction Data Transferred between Trading Partners

Unit 6

Management of Risk: Introduction, Introduction to Risk Management, Disaster Recovery Plans, Risk Management Paradigm, Electronic Payment Systems: Meaning, Electronic Cash, Smart Cards and Electronic Payment Systems, Credit Card Based E-Payments, Risks and Electronic Payment Systems

Unit 7

Electronic Data Interchange(EDI): Meaning, History, Working Concept, Implementation difficulties, Financial EDI, EDI and Internet, E-Marketing: The scope of E-Marketing, Techniques

Unit 8

Website Design Issues: Factors that Make People Return to Your Site, Strategies for Website Development, Consumer Oriented Business: Consumer Market, One-to-One Marketing, Consumer Demographics, Maintaining Loyalty, Gaining Acceptance, Online Catalogue, the Pilot Catalogue, A Unique Search Engine

Unit 9

Management Challenges and Opportunities: New Business Model, Required Changes in Business Processes, Channel Conflicts, Legal and Regulatory Environment for e-commerce, Security and Privacy, Managerial Opportunities

Unit 10

Future Directions: Software Agents, Technology Behind Software Agents, Types of Software Agents, Characteristics and Properties of Software Agents, Frame-work for Software Agent-based e-commerce, m-commerce, m-commerce Architecture, Areas of Potential Growth and Future for m-commerce

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What is ecommerce?

First things first. Before we get into the nitty-gritty of the ecommerce realm, let’s first answer one fundamental question: what exactly is ecommerce?
Simply put, ecommerce refers to commercial transactions conducted online. This means that whenever you buy and sell something using the Internet, you’re involved in ecommerce.


10 Of The Best Ecommerce Business Examples To Learn From

Warby Parker – Online eyeglasses without the markup. ...
Bonobos – Better-fitting, better-looking men's pants. ...
TOMS – One for One shoes. ...
Leesa – great mattresses at affordable prices. ...
Everlane – Apparel + Radical Transparency. ...
Greats – Brooklyn sneakers. ...
ModCloth – Women's vintage-style fashion. ...
ASOS – one-stop fashion site.


Classifying ecommerce merchants according to what they’re selling

Let’s start with the products and services typically sold online. Below is a list of ecommerce merchants according to what they sell.

1. Stores that sell physical goods
These are your typical online retailers. They can include apparel stores, homeware businesses, and gift shops, just to name a few. Stores that sell physical goods showcase the items online and enable shoppers to add the things they like in their virtual shopping carts. Once the transaction is complete, the store typically ships the orders to the shopper, though a growing number of retailers are implementing initiatives such as in-store pickup.

2. Service-based e-tailers : Services can also be bought and sold online. Online consultants, educators, and freelancers are usually the ones engaging in ecommerce.
The buying process for services depends on the merchant. Some may allow you to purchase their services straightaway from their website or platform. An example of this comes from Fiverr.com, a freelance marketplace. People who want to buy services from Fiverr must place an order on the website before the seller delivers their services.
Some service providers, on the other hand, require you to get in touch with them first (i.e. book a consultation) to determine your needs. Web design company Blue Fountain Media is one example of a business that does this.

3. Digital products
Ecommerce is, by nature, highly digital, so it’s no surprise that many merchants sell “e-goods” online. Common types of digital products include ebooks, online courses, software, graphics, and virtual goods.
Examples of merchants that sell digital products are Shutterstock (a site that sells stock photos), Udemy (a platform for online courses), and Slack (a company that provides real-time messaging, archiving and search for teams).

 Classifying ecommerce according to the parties involved 

Another effective way to classify ecommerce sites? Look at the parties participating in the transaction. These typically include:

1. Business to consumer (B2C) – Transactions happen between businesses and consumers. In B2C ecommerce, businesses are the ones selling products or services to end-users (i.e. consumers).
Online retail typically works on a B2C model. Retailers with online stores such as Walmart, Macy’s, and IKEA are all examples of businesses that engage in B2C ecommerce.

2. Business to business (B2B) – As its name states, B2B ecommerce pertains to transactions conducted between two businesses. Any company whose customers are other businesses operate on a B2B model.
Examples include Xero, an online accounting software for small businesses, ADP, a payroll processing company, and Square, a payments solution for SMBs.

3. Consumer to business (C2B) – Consumer to business ecommerce happens when a consumer sells or contributes monetary value to a business. Many crowdsourcing campaigns fall under C2B ecommerce.
Soma, a business that sells eco-friendly water filters is one example of a company that engaged in B2C ecommerce. Back in 2012, Soma launched a Kickstarter campaign to fund the manufacturing of their product. The project was successful, and Soma went on to raise $147,444.

4. Consumer to consumer (C2C) – As you might have guessed, C2C ecommerce happens when something is bought and sold between two consumers. C2C commonly takes place on online marketplaces such as eBay, in which one individual sells a product or service to another.

5. Government to business (G2B) – G2C transactions take place when a company pays for government goods, services, or fees online. Examples could be a business paying for taxes using the Internet.

6. Business to government (B2G) – When a government entity uses the Internet to purchases goods or services from a business, the transaction may fall under B2G ecommerce. Let’s say a city or town hires a web design firm to update its website. This type of deal may be considered a form of B2G.

7. Consumer to government (G2C) – Consumers can also engage in B2C ecommerce. People paying for traffic tickets or paying for their car registration renewals online may fall under this category.

Ecommerce platforms: a look at where and how ecommerce takes place

We’ve talked about the types of ecommerce transactions on the web as well as the products and services sold online. But where and how do these transactions take place?

Answer: it varies.

In this section, we’ll shed light on some of the most common platforms on which ecommerce takes place.
 



1. Online storefronts  
Having an online storefront is one of the most straightforward ways to conduct ecommerce. The merchant creates a website and uses it to sell products and services using shopping carts and ecommerce solutions. The “right” solution will depend on the merchant and their products. Below is a list of some of the top ecommerce platforms. Check them out and see which one is right for you.

Magento – Considered by many as one of the most flexible ecommerce solutions in the market, Magento offers powerful features right out of the box. It gives merchants the ability to customize just about aspect of their ecommerce store, and you have complete freedom over the look, feel, and functionalities of your site.

Magento also has an active community of experts, developers, and agencies allowing merchants to easily connect with others if they need support. And if you need to further extend the functionality of Magento, you can always use add-ons to enhance your site.

Demandware – This fully-hosted solution allows you to run a powerful ecommerce store in the cloud. Merchants using Demandware won’t have to worry much about platform maintenance and development since it’s fully hosted by the company (though this may limit your freedom a bit).

One of Demandware’s strengths is that it’s built with omnichannel retailers in mind, and it has features that enable merchants to easily sell across physical and digital storefronts.

Oracle Commerce – This enterprise ecommerce solution can be implemented on-premises, or it can be hosted by Oracle or a third party. It has features that can benefit both B2B and B2C merchants, and it comes with powerful functionalities that enable you to sell more complex merchandise and data-rich offerings.

Oracle Commerce also allows users to easily customize sites and campaigns while giving them the ability to efficiently launch sites for multiple brands and markets.

Shopify – A popular choice among many SMBs, Shopify has features that let you sell online, on social media, and in-person. It lets merchants build and customize their ecommerce site through easy-to-use interfaces and templates. And it has features such as inventory management, reporting, buy buttons and more. It also has social selling functionalities for those who are active on sites like Facebook and Pinterest. 

Shopify is fully hosted, which means merchants won’t have to worry about maintaining the platform or using their servers.

WooCommerce – WooCommerce is an open source ecommerce platform for WordPress. It comes with standard features such as analytics and reporting, shipping options, and mobile-friendly functionalities. Built specifically for WordPress, WooCommerce seamlessly connects with the platform. This makes it a very attractive choice for existing WP users.

WooCommerce is highly extendable and very developer-friendly, offering things like custom AJAX endpoints, Webhook systems, and more.

BigCommerce – Used by big and small brands alike, BigCommerce offers features such as a site builder, shipping options, reporting, and more. It also enables merchants to sell on other sites and platforms, including eBay, Amazon, Facebook, Google Shopping, and Square. Plus it has a Buy Button for enabling sales on blogs, emails, and more.

Additionally, BigCommerce has a built-in B2B offering for wholesalers and merchants selling to other businesses.

BigCommerce is fully-hosted, so the company handles all platform maintenance and updates.
Volusion – Another popular ecommerce solution, Volusion enables merchants to create online stores, showcase their merchandise, and take payments all on one platform. Volusion comes with standard features including a site builder, shopping cart software, marketing tools, and more.

Drupal Commerce – This is an open-source ecommerce framework that enables users to build online stores and applications on Drupal. Drupal Commerce is highly flexible and offers hundreds of modules that allow users to enhance and extend its functionalities. There’s also Commerce Kickstart, “a distribution of Drupal Commerce packed with features that make it more complete, faster to launch, and easier to administer.”

2. Online marketplaces
Ecommerce transactions can also take place on online marketplaces — sites that facilitate transactions between merchants and customers. Many online marketplaces don’t own inventory; rather, they just connect buyers and sellers and give them a platform on which to do business.
Some of the top online marketplaces on the web are:

Amazon – A company that needs no introduction, Amazon is one of the world’s largest online marketplaces, offering extensive selections of books, electronics, apparel, accessories, baby products, and more.

As of 2015, there were more than 2 million third-party sellers on the site, and according to Amazon, these sellers sold 2 billion items in 2014.

eBay – eBay is another popular online marketplace that connects merchants and buyers, facilitating B2B, B2C, and C2C ecommerce. eBay offers products in several categories, including electronics, cars, fashion, collectibles, and more.

eBay merchants can also hold auctions that let buyers bid on products. This allows the possibility of selling items above market value.

Etsy – Etsy is an online marketplace that specializes in handmade, vintage, and one-of-a-kind goods. Millions of independent sellers use Etsy to showcase and sell their creations, and people (buyers and sellers alike) love the site because of its community-centric feel.

Alibaba – Alibaba is an online marketplace for wholesalers, manufacturers, suppliers, and importers/exporters. It’s an effective site that allows users to find vendors and purchase merchandise in bulk.

Fiverr – This is a “freelance services marketplace” that connects people (mostly entrepreneurs) with service providers who offer anything from graphic design and online marketing to translation and video development. As its name indicates, gig pricing on Fiverr starts at $5 USD, though depending on what you’re selling, that can go up to hundreds, even thousands of dollars.

Upwork – Formerly Elance-oDesk, Upwork is a marketplace that connects individuals and businesses with freelancers from all over the world. What types of services can you buy and sell on Upwork? Answer: a whole lot. Freelancers on the site range from web developers and designers to virtual assistants, accountants, and consultants.

3. Social media
Social media can pave the way for ecommerce in two ways: social sites can facilitate a sale by directing shoppers to a merchant’s ecommerce site, or they can allow users to buy something directly on the platform.

How social media facilitates ecommerce


In many cases, social networks such as Facebook, Instagram, Twitter, and Pinterest aren’t used as ecommerce platforms. Rather, merchants use these sites to showcase their merchandise. And when shoppers come across an item that they like on social, they are directed to the merchant’s ecommerce site.

For instance, many retailers who show off their products on Instagram use solutions such as Like2Buy to enable customers to purchase the items. Here’s how it works: when a user sees a product that they like on their Instagram feed, they can click the merchant’s Like2Buy link so they can view the item’s product page.

Conducting ecommerce transactions on social sites
Social networks are also exploring ways to let consumers complete purchases without having to leave the site.

Pinterest, for instance, has Buyable Pins that enable merchants to sell products featured on their Pinterest page. According to the site, “Buyable Pins have a blue price tag, which tells people your product is in stock and available for purchase. People can easily spot these Pins all over Pinterest—in search results, in related Pins and on your business profile.”

Buyable Pins are currently available on Shopify, BigCommerce, and Salesforce Commerce Cloud.
Speaking of Shopify, the ecommerce platform also offers a fully integrated Facebook store that allows shoppers to purchase products without having to leave the site. Shopify also has Messenger support, so customers can buy items and track their orders through chat.

The above-mentioned initiatives certainly are interesting, but it’s important to note that not all social selling projects are successful. Take Twitter’s Buy buttons. In 2014, the social site released a feature that allowed customers to purchase items directly from a Tweet.

It wasn’t a huge success.

In 2017, Twitter officially shut down the project, though it told Recode that the company “will continue to invest in ad products for retailers that help drive purchases via the social network.”

Ecommerce examples: success stories and flops

Now that you have sufficient background about ecommerce, it’s time to look at some real world examples of ecommerce success and failure stories. Check them out below, learn from their examples, and see what you can apply in your business.

Ecommerce success stories

This section lists some of the top ecommerce sites on the web, and it sheds light on what makes them successful.
Amazon
We’ve mentioned Amazon quite a bit in this piece and for a good reason: it’s one of the most successful ecommerce businesses in the world. Aside from a thriving marketplace featuring third-party sellers, Amazon also has massive revenue coming in from its Prime membership, as well as subsidiaries such as Amazon Web Services and Zappos.com.

What makes Amazon successful

Bestselling author and speaker Bryan Eisenberg, who recently published the book Be Like Amazon: Even a Lemonade Stand Can Do It (co-authored by Jeffrey Eisenberg and Roy H. Williams) often talks about the 4 Pillars of Amazon’s Success.

These pillars are:

1. Be Customer Centric – “Amazon is not trying to force customers to fit the way they want to sell them,” he says. “Amazon would rather fit themselves into how customers buy today and will change their buying behavior in the future.”


2. Be Creative – Amazon is always conducting experiments and coming up with ways to improve the shopping experience.


3. Be Focused on Customer Experience – According to Bryan, “Amazon will do everything possible to have people talking about what an amazing experience it was to shop or return items through their store. Every tiny detail in the store is designed to have customers engaged and excited to be there.”


4. Continuously Improve & Optimize – Amazon makes good use of its data. The company is always crunching the numbers, and it uses data in just about every aspect of the business, including customer experience, warehousing, operations, finance, and marketing.


Birchbox
Birchbox has a two-pronged business: it offers a subscription in which the company charges members $10 a month to receive “personalized mix of 5 hair, makeup, skincare, and fragrance samples.” Birchbox also has an online shop that allows customers to purchase full-sized products.  As of 2015, Birchbox had more than 800 brand partners and more than a million subscribers.


What makes Birchbox successful

Several factors contribute to Birchbox’s success, but one of the most important ones is data. The company’s co-founder, Katia Beauchamp, told Forbes that data became their best friend. 
Here’s one example of how the company uses data. Birchbox asks subscribers to review each item and uses that information to match customers with the best products. Birchbox also sends the data to their partners so they can determine what works and what doesn’t.


Another key to their success? Unlike most of their competitors, Birchbox isn’t just a box subscription service. The company allows members to buy full-size products rather than just with samples. This enables Birchbox to differentiate itself.


Wayfair

Wayfair is a home furnishings e-tailer that offers a wide selection of more than 7 million items. Forbes reports that “Wayfair netted an estimated $18 million on $915 million in 2013, up 55% from the year before.” And as of May 2017, the site had over 36 million total visits.

What makes Wayfair successful

Wayfair is a drop-shipper, and it hardly carries any inventory. That said, the company does a tremendous job managing suppliers, orders, and fulfillment. “They figured out how to manage 7,000 vendors and the drop-ship process so the vendors go directly to the consumer,” says Battery Ventures’ Neeraj Agrawal in an interview with Forbes.

It works like this. Vendors upload their inventory data into Wayfair servers, and the company’s algorithm crunches the numbers and uses that information to determine shipping time and processes.
“Once an order is placed, software kicks in to notify the supplier. The system then decides how to ship the item–a Quoizel lamp might mean a small package via UPS or FedEx; an area rug requires a delivery company Wayfair contracts with.”

In addition to efficient supplier and order management, Wayfair also strives to get to know its customers. The company encourages each shopper to create an account, and it observes user behavior, so Wayfair personalizes the shopping experience accordingly.

Zappos

Zappos is an online shoe and apparel retailer based in Las Vegas, NV. It’s currently owned by Amazon, but it’s still worth taking a look at what makes this ecommerce site successful.
What makes Zappos successful

Zappos is famous for its customer service. One of the retailer’s core values is to “Deliver WOW Through Service,” and it lives up to that value time and time again through its employees.

For instance, while other businesses encourage call center agents to get off the phone as quickly as possible, Zappos wants its employees to stay on the phone for as long as necessary. At one point, a Zappos employee even spent 10 hours on the phone with a customer.

When asked how the company felt about this, Jeffrey Lewis, Zappos Customer Loyalty Team supervisor said, “Zappos’s first core value is deliver wow through service, and we feel that allowing our team members the ability to stay on the phone with a customer for as long as they need is a crucial means of fulfilling this value.”

Ecommerce flops

You’ve seen the success stories; now let’s look at some of the biggest flops in the industry. Pay attention, and learn from these companies’ mistakes.

Boo.com

Boo.com was a UK-based clothing and cosmetics e-tailer that failed just two years after its launch. It was just one of the many Internet companies that shut down during the dot-com bubble in the year 2000.
 The NASDAQ Composite index (which was composed of many tech companies) shot up in the up late 1990s, but saw a sudden drop after the bubble.

For the uninitiated, the dot-com bubble burst occurred from 1997 to 2001. The rapid growth of Internet usage and adoption at the time fueled investments at incredibly high valuations and companies that haven’t even turned a profit went public. The hype wasn’t sustainable, though, and capital soon dried up. As you’ll learn below, this was ultimately one of the reasons why Boo.com (among others) shut down.

Why Boo.com failed 

Bad user experience, a faulty growth plan, and a high burn rate all contributed to the failure of Boo.com. For starters, the site needed JavaScript and Flash as well as many large files to run. This resulted in slow load times and ultimately, a bad user experience.

Boo.com also tried to expand way too fast, and its operating expenses were too high. And because of the crash of tech stocks at the time, the company wasn’t able to raise enough funds to stay afloat.
eToys.com

As its name suggests, eToys.com was an online toy retailer. It launched in 1997 and then filed for bankruptcy in 2001.

Why eToys.com failed

Like Boo.com, eToys had tried to expand too fast and also incurred high operating expenses. Because of the market conditions following the dot-com bubble, eToys failed to obtain capital that would allow it to continue operations.

But that wasn’t the only factor that led to its failure. According to ABC News, “during its first holiday shopping season after going public, the site was swamped with orders, as were other online toy sites. EToys sold more than any of its competitors, but the publicity over late shipments dogged the company. Analysts say it also made customers wary of holiday Web shopping during the 2000 holiday season.”
The bad publicity didn’t stop there. At one point, the company sued Etoy, a Swiss art site. eToys tried to obtain the etoy.com domain saying that it was too similar to eToys.com. The move was met with widespread backlash, and eToys.com backed off.

Toygaroo

Founded in 2010, Toygaroo was an online toy rental service that was dubbed Netflix for toys. Toygaroo enabled parents to rent toys for a period, then give them back when their kids got tired of playing with them.

Toygaroo had a promising start. Its founder, Nikki Pope, appeared on the hit TV show Shark Tank and secured a $200,000 investment from Mark Cuban and Kevin O’Leary. Unfortunately, that investment didn’t pay off. Toygaroo filed for bankruptcy in 2012 and subsequently shut down.

Why Toygaroo failed

While the exact details of Toygaroo’s shutdown weren’t clear, it looks like the company had problems dealing with its rapid growth as well as with executing its business model.
Phil Smy, former Chief Technology Officer for Toygaroo, told Shark Tank Blog, that Toygaroo might have had trouble scaling the business. “The business was growing,” he said. “To be honest, that was the problem. Explosive growth is a difficult thing to handle for small businesses. 

I thought – and still think – it is a great idea. The business model needs some changing from what we were doing. I would have grown more organically (i.e., slower) and also found investors who were willing to go the distance.”


Meanwhile, Kevin O’Leary, one of the sharks who invested in Toygaroo, told Forbes that it was his worst deal on the show. “Great concept but they proved unable to execute,” he said.
Putting ecommerce knowledge to action And there you have it. We just discussed what ecommerce is, the types of merchants that do business online, and the biggest success (and failures) in the industry.

What’s next?
Answer: take action.

Wherever you are right now in your ecommerce journey, we hope this post gave you some insights that you can apply in your venture. 




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