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Jun 1
Eric Phung

How Do eCommerce Websites Work?

We are all familiar with shopping online, but what do you do if you want to become a merchant and start selling online? How do you create your own eCommerce website and start your own online business? Here's the guide for you to get started.

How Do eCommerce Websites Work?

If you ask most people, they would say eCommerce is mostly saturated, and it is. However, if you look at the data, eCommerce revenue worldwide was just a little over $1.3 trillion dollars in 2014. Fast forward to 2020, it was around $4.2 trillion dollars and is projected to reach almost $6.4 trillion dollars in 2024 (source: Statista)

With the pandemic still lurking around, the sales numbers are not going to fall any time soon. This means it’s not too late to start an eCommerce business today. Let's get started with these items:

  1. What is eCommerce
  2. How does it work
  3. Type of eCommerce
  4. Who can do eCommerce
  5. Best Platforms
  6. Payment Gateway
  7. Shipping
  8. Automation
  9. Fulfillment
  10. Digital marketing

1. What is eCommerce

eCommerce means electronic commerce. It is a way for businesses to sell their products/services, and allow the shoppers to buy these products/services on the internet. You can think of eCommerce as your digital storefront where your customers will visit your online store and buy your products/services online.

An online business is just like a physical store, you will still have to deal with taxes, pay your rent (eCommerce Plan to host your website, not including your domain name), and pay for the transaction fees. However, you are exposed to a bigger audience instead of just those in your local area. This increase your chances of making the sales.

2. How does it work?

The 5 main features that an online store needs to have are payment gateway, shipping integration, inventory management, a front end website, and automation.

When you land on a website, you will be able to experience the nice experience of the beautiful branding at the front end. As you scroll and explore the internal pages of the site, you will be able to engage with the products through the product images and descriptions. You can choose to click “Buy Now,” and you will be redirected to the checkout process.

At the checkout page, you will be asked to provide your shipping address and then the payment method that you wish to use to pay for the products/services you wanted to purchase.

Assuming you have paid for the products, you will receive an order confirmation email to tell you that you have been charged and your products/services will soon be on your way.

At the same time, the store owner will be notified that there is an unfulfilled order, so that the owner can start packing and ship the products/services to you.

3. Type of eCommerce

eCommerce is often referred to as the transaction of the physical goods, however, we have moved far past the physical products and entered the digital world, meaning anything that includes an online transaction can be classified as eCommerce. Nowadays, people buy and sell all sorts of products and services. You can sell digital products such as digital paintings, digital books, music, videos, online classes, tickets, virtual meetings, bookings, and many more.

  1. Retail
  2. Wholesale
  3. Crowdfunding
  4. Digital Products
  5. Drop shipping
  6. Subscription
  7. Physical Products
  8. Digital Products
  9. Services

4. Who can do eCommerce?

eCommerce is for everyone. We know you are looking at eBay, Amazon, Alibaba, JD, Walmart, ASOS, etc. You may wonder, without financial and human resources, how are you going to make it. The short answer is, you can. Let’s keep reading to figure out what and how you can do it.

As the digital world is growing, new businesses all over the world have joined the eCommerce race, making it available for everyone, especially entrepreneurs. We are sure you are one of them if you have read here.

The only difference between your online business and Amazon is the scale. But let’s focus on the small steps and get you started before dreaming of Amazon. We will use Amazon a lot as our example since they are the number one in the world right now.

You may also wonder, “why shouldn’t I just sell directly on Amazon?” The reason is, the fee. It will cost you $0.99 per item sold or if you choose to subscribe to get more perks, it is $39.99 per month. This cost seems small but there are ways you can’t even imagine how the retailers are doing to try to be on top of the search. You cannot beat them going in with a simple “I want to sell here.” The space is very competitive and can diminish your dream pretty quickly.

What is the other way?

Most small businesses choose to build their own brand, a private label. It means your products/services are in your name, and you get to decide your own direction. Branding will be your number one priority, then traffic, and then your products/services. Why?

People remember a brand, if it resonates with them. A brand that tells who you are, why you are doing what you are doing, and how you solve it (this will be your products/services).

Then you need traffic. You have a beautiful business card, a beautiful website, but no one is looking at it. You need to let people know you exist. We will talk about this later on in this post about digital marketing.

Finally, your products/services. We put this last because most of us care about ourselves. We often spend too much time polishing the products/services in a way that we like, but that will cost you a lot of time and money while you are not making any money. If you already have decent products/services ready for sale, get it out there. Rome wasn’t built in a day. You will use digital marketing and data to continuously improve your products and services. Never guess what your customers are doing, have a solid report to fall back on and make your decision from there. Again, we recommend you to do this because our world is evolving too fast. By the time your new product is done, it’s old news. If you can choose to make the sale while improving your product based on real feedback, you have made half the way.

5. Best platforms

When we mean half way, it means you have successfully shifted your mindset. The next step is to choose how you are going to do it. You will need an online store.

You can quickly create an online store using website builders. These website builders are sorted from top to bottom, but there are different pros and cons that you can take into consideration before picking your platform. These platforms require no knowledge of coding, they are very intuitive and easy to use, but let’s go over them so you can have a good picture of how they are different from each other.

1. Shopify

Shopify is known as the king of eCommerce due to its flexibility and robust backend capabilities that allow store owners to sell literally anything.

Pros: You can quickly set up an online store with the free themes, add your images and texts, set up shipping and payment gateway, and you are ready to sell. If you need a new feature and you don’t know how to code, there is a third part app for you. There are tons of themes for you to choose from, and you can either use the free version, buy it on Shopify Theme Store, buy it on Themeforest

Cons: Despite its legendary platform where you can manage and sell everything with ease, its front end development can be rather frustrating. You can use the free themes, or buy premium themes. They usually cost from $180 on Shopify Theme Store. If you want super premium themes, you can buy it from Out of The Sandbox but it can cost you from $180 to $450.

However, if you want to add extra movement like a marquee or hover effect, you would need to know how to code. And coding in Shopify would be a lot harder since they use Liquid Template Language.

2. Wix / Editor X

Editor X and Wix work differently. However, Editor X inherits a lot of built-in features from Wix as they are in the same ecosystem.

Pros: You have more control over your website front end design due to the versatile drag and drop interface. The Wix team makes sure you have all the tools you need to sell anything you have in mind such as hotel booking, restaurant booking, event booking, selling subscriptions, tickets, etc. You can set up your online store very quickly and start selling. Wix/EditorX is a great starting point for an online business since they have developed features that cater toward all types of online businesses.

Cons: Although you have control over the site design, the functionalities are closed source, meaning you cannot make further customization to how a feature would behave or look. Some features such as Event booking would have additional transaction fees on top of the payment gateway fee, so you may have to be mindful of this if you are selling high ticket products.

3. Squarespace

Squarespace is another big website building company that allows you to get your online store up and running fast with their beautiful website templates. The latest version of Squarespace is Squarespace 7.1 which is more versatile and more SEO friendly. 

Pros: You have a wide range of templates, more beautiful than Wix. Squarespace does have a wide range of online store capabilities including booking, event booking, selling products/services, and subscriptions.

Cons: Lack of store features. You cannot customize the checkout experience. The product page is fixed and cannot be changed. We tried different plugins (We listed all the best plugin markets for Squarespace here), but they do not work very well.

4. Webflow

This is our favourite website builder yet. Webflow allows you to build your own website visually without having to look at the code. You can build extremely amazing websites with surreal animation while maintaining the loading speed of your website, thanks to Amazon's Cloudfront CDN and Fastly acceleration.

Pros: Webflow is a visual builder so design-wise we would give them 10/10. Their system is robust and you can incorporate the most complex interactions to your website. This breathes life into your design, and certainly the shopping experience.

Cons: You can sell standard products/services directly on Webflow using the Webflow eCommerce Premium Plan. However, Webflow lacks a lot of eCommerce features especially the membership area, multilingual, POS, and payment gateways. There is a workaround which is using Foxycart, Snipcart, or Udesly to export Webflow frontend codes and use it with Shopify backend.

If you come from the Wordpress world, woocommerce certainly is another option to look at. You can use Elementor, Oxygen, Divi, or Beaver theme builders to build your website and utilize their biggest plugin store in the world.

6. Payment Gateway

Now that we have covered the platforms to start your online store, let’s look at the payment gateway.

If you live in the United States, you will get endless payment options (almost all payment gateways are available). However, if you sell in Europe or Asia (or elsewhere outside of the States), you will have to consider GDPR compliance and payment gateways that are available in your area.

Most people use Stripe in the United States and Europe, but when it comes to Southeast Asia, you may have to use 2Checkout. That’s for card payment, what about PayPal? Yes, PayPal is available almost everywhere in the world, but the problem is their high transaction fees and the ridiculous dispute resolution (often more lenient toward the buyers and not the suppliers).

If you are in the high risk businesses such as Cannabis, Tobacco, Adult Content, Gambling, Credit Repair, Pawn Shop, or Vape, almost all common payment gateways or the website builders themselves do not support these lines of businesses. To be able to stay in business, you will have to find other solutions such as Authorize, PayKings, and DigiPay.

With this, we found that Shopify is the best candidate with more than hundreds of payment processors beside Shopify Payment itself.

Most recently this September 2021, Adobe announced that it will release its own eCommerce payment gateway for Magento (which Adobe acquired from Permira in 2018). This will challenge the biggest retail eCommerce platform Shopify. We hope to see some strategic moves from Shopify to see what they will do next. To recap, Shopify released the new Shopify 2.0 with enhanced theme building experience in late June and also announced the release of its new Dawn theme for Developers on Github.

7. Shipping

Shipping integration is another aspect that you will have to consider when selling physical products online.This removes the additional work for your business such as contacting the shipping companies and other things that can be quite time consuming.

As soon as a customer purchases a product from you, the item information will be sent directly to the shipping company and you can get your product ready for shipping (with label, barcode, addresses, and tracking number).

Each platform has their own partnership with the shipping company, so you may have to do some research to find out which shipping company you want to use before choosing the platform.

Wix/EditorX: Shippo, ShipStation, Fetchy, Boxtal (Available only in France), Melhor Envio (Available only in Brazil), Envia (Available only in parts of North and South America)

Webflow: Only Shippo is available in Webflow at this moment.

Shopify: You can directly integrate with USPS, UPS, Fedex, DHL, and Canada Post via Shopify. Shopify also works with almost all other third party shipping companies like ShipStation, Net Parcel, etc.

8. Automation

Not many know how powerful automation is, and certainly how much effort it takes care of for you.

When someone places an order from your online store, you and the buyer can both receive an email notification to confirm the order. After that, the order will be sent to your shipping/fulfillment center.

You can also set up calculated shipping fees, flat rate shipping, taxes, discount code, and many other things with automation to enhance the user experience. We will talk more about this with Digital Marketing and how you can use automation as your ultimate selling weapon.

9. Fulfillment

Fulfillment is similar to Amazon Fulfillment Center. When you order a product, the center will take the order and ship it for you. This increases your turn around time and reduces shipping fees. You don’t have to worry about shipping if you are going with this route.

If you are doing dropshipping, you certainly have heard of Oberlo. They help you connect with the suppliers and allow you to focus on just marketing. We have many other dropshipping options these days but Oberlo was one of the first few companies that is still around today.

Some other companies such as POD (Print on Demand) Printful or TeeSpring are types of businesses that take care of your orders, and you only need to focus on getting the customers.

10. Digital Marketing

We mentioned digital marketing with automation, but what does it do?

A website is a marketing channel that you can sell directly to the consumers. However, with digital marketing, it opens up other methods that you can take advantage of to increase your touch points and reach more customers, and ultimately, increase your conversion rate.

Digital marketing can be done anywhere regardless of the platforms you use, it is more on your mindset and how you connect with your ideal customers that would result in the sales.

Digital marketing is the heart of eCommerce. Without getting known, your product is only for display, in your own space. As bad as it sounds, it is not too hard to get your name out there, but you still need to be strategic so you don’t waste a lot of time and money during the process.

The most popular way to connect with your customers is to use Email Marketing. Besides the automatic confirmation emails, you can set up an Abandoned Cart email directly on Shopify. When someone added a product to your cart, and something interrupted their action and they did not buy your product, you can use Automatic Abandoned Cart Email to remind them so they can get back and complete the purchase.