What Are The Components Of An eCommerce Business?


Laura Tien


November 15, 2022
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In the past decade, eCommerce has gone from something that most people were skeptical about to now being a major part in a lot of our lives. First of all, what exactly is eCommerce? Well, eCommerce or e-commerce is the shortened form of electronic commerce. The term eCommerce is often used interchangeably with online trading and online shopping.

eCommerce is a business model that allows you to buy and sell over the internet. Just like in traditional commerce, eCommerce has four market segments. This includes business to business (B2B), business to consumer (B2C), consumer to consumer (C2C) and consumer to business (C2B). Governments and administrations can also trade online.

In today’s article, we’ll go through the main components of an eCommerce business. Feel free to use the navigation below to click through to a certain section.

  1. Benefits of eCommerce
  2. Types of eCommerce products and services
  3. Selling physical goods
  4. Sales channels for eCommerce
  5. Acquiring and maintaining customers
  6. Managing money
  7. eCommerce trends and predictions
  8. Starting an eCommerce business
  9. More eCommerce business resources

Benefits of eCommerce

Businesses and consumers have both moved to eCommerce for its range of benefits. One of the major differences between running a business online compared to in-person is the ability for your business to be accessible 24 hours a day and every day of the week. Furthermore, customers can potentially have access to your products or services from anywhere in the world.

Having a business online creates a range of new opportunities in terms of marketing and customer engagement as well. For example, encouraging a consumer to visit a brick-and-mortar clothing shop could be significantly more difficult than encouraging a consumer to click on a link and to visit an eCommerce website.

Small businesses now have a unique opportunity to reach more people at a lower cost. Rather than needing to pay rent for a physical store, small businesses have minimal operating costs. With shipping becoming more affordable, customers all over the country or even internationally can be reached without much effort.

Types of eCommerce products and services

With eCommerce, people now have access to both products and services online. The ways these are sold range significantly in both what is sold and the form of transaction. Here are just some of the major types.

The first and arguably most well-known form of eCommerce includes stores that sell physical goods. Businesses that sell directly to consumers can be known as retailers or wholesalers. There are also dropshipping businesses where manufacturing and distribution to consumers is managed by a third party.

Shoes eCommerce Business
Shoes are an example of a physical good | Source: Pexels

Additionally, people can sell services online. For example, you can find website designers, freelance writers, and even legal consultants that offer their expertise in exchange for a fee. Generally, the services themselves are given online. With eCommerce, people now have the ability to compare hundreds of service providers online.

eCommerce has allowed for the rise in digital products. Rather than receiving tangible products or services, you receive products in a digital format. Think eBooks, online courses, website templates, movies and software. We no longer have to go to a physical store to pick up a DVD or a new video game.

That’s not even all of it! We now have crowdfunding models where businesses raise money before a product goes to market, as well as subscription models where consumers pay for a product or service on a recurring basis. We’re still continuing to see new types of eCommerce emerge and grow.

Selling physical goods

eCommerce businesses that sell physical goods have unique components. The three main parts are sourcing a product, storage and warehousing, and fulfillment and shipping. There are different ways to go about each of these depending on the type of eCommerce business you want to run.

Sourcing a product

Businesses who decide to sell products online will need to find a way to source their products. There are three common ways to source a product for your eCommerce store, each with their own advantages and disadvantages.

The first and potentially easiest way to source a product is to make it yourself! For example, you might want to make and sell knitted scarves. The barrier to entry will generally be low, depending on the product you’re making. However, it becomes difficult to scale your business if your number of orders start increasing exponentially.

Secondly, you can work with a manufacturer or wholesaler. You get to control how your product is made and ensure it has the unique features that you want. Scaling production levels is also easier. On the flip side, working with a manufacturer or wholesaler can be more expensive and risky if things don’t go well.

Finally, you can consider dropshipping. In this scenario, you find vendors who are producing existing products. They handle storage, warehousing, inventory and fulfillment, meaning all you need to do is sell. However, you won’t be able to find unique products and you won’t have any control over the parts of the process that the vendor manages.

Storage and warehousing

If you’re making or manufacturing your own product, you’ll need to find a place to store your inventory. When you’re just starting out, it’s fine for most people to store products in their home. However, if you’ve started growing out your home or just want your business space to be separate from your home space, it’s time to consider getting storage for your eCommerce business.

At Workit Spaces, we offer self-storage for eCommerce and small businesses. Our showrooms start at $250/per week and range from 25m² to 300m² in size. Our secure warehouse and storage facilities range from 5m² to 500m² in size. Many of our clients base their offices in these spaces or use our other coworking solutions.

Workit Spaces Warehouse Storage Space

If you don’t want to manage your own storage and warehousing, you can also outsource this to a third-party warehouse. You can find 3PL services for eCommerce businesses as well, where both warehousing and fulfillment are outsourced. However, this might not be suitable for smaller businesses or businesses who want to maintain full control over these functions.

Fulfillment and shipping

As mentioned above, you can outsource your fulfillment and shipping to a 3PL. Otherwise, you can manage this yourself. At Workit Spaces, we have a goods in goods out station at our eCommerce Hub. You get to use the discounted shipping rates we have with all major shipping couriers. All you have to do is drop off your packages at the station and they get picked up daily.

Sales channels for eCommerce

For those really looking into building a brand and online presence, you’ll want your own website to act as your sole sales channel or as one of your main sales channels. Platforms such as Shopify, WooCommerce, Magento and Squarespace make this process a lot easier. There are a number of other different websites and platforms that you can use as a sales channel as well.

Other popular sales channels include:

  • General marketplaces such as Amazon and Alibaba
  • Auction marketplaces such as eBay
  • Social media such as Facebook Store, Facebook Marketplace and Instagram
  • Handmade and crafts marketplaces such as Etsy
  • Subscription box service such as Cratejoy
  • Classified listings website such as Gumtree
  • Daily deals sites such as Groupon

Each sales channel comes with its own pros and cons. When deciding which sales channel or channels that you want to use, you’ll need to consider your business model, target audience, brand position, goals.

Shopify Selling Channel for eCommerce
Use Shopify to build your online store | Source: Unsplash

Acquiring and maintaining customers

The next major component of an eCommerce business is of course your customers. Finding customers and keeping them around are some of the most important parts of your business. There are a range of different customer acquisition strategies that exist, especially now with digital marketing on the rise.

When developing your initial customer acquisition strategy, there are a few things that you’ll need to consider. First of all, even though reaching a large quantity of people can be important, being able to find people who are of high quality is important as well. You need to have a thorough understanding of who your audience is and what channels they might be using.

In terms of tactics, there are many that might work for your business. Some are more short-term focused, others more long-term, some cheaper, more expensive and so on. Consider what return you’ll get on the investment and don’t be afraid to test if you’re unsure.

Here are some popular tactics you might want to add to your toolkit:

  • Run paid online advertising with Google Ads and Facebook Ads
  • Run traditional ads on television, radio, billboards etc.
  • Sponsor influencers with a relevant audience on Instagram, YouTube, blogs etc.
  • Create a referral or affiliate system
  • Invest in search engine optimisation (SEO)
  • Build your social media presence on Instagram, Facebook and Pinterest
  • Create content such as blog posts, videos, photos and infographics
  • Partner with other relevant businesses
  • Build an email marketing list
  • Offer deals, promotions or giveaways

Managing money

For most people, managing money isn’t the most fun part of running an eCommerce business. Unfortunately, keeping business records, managing cash flow and being ready for taxes is crucial. If you’re hoping to outsource this part of your business, you might want to consider our small business accounting service, CFO by Workit.

However, managing your cash flow doesn’t have to be super hard. You can use a simple spreadsheet template or an accounting software to get started. There’s no point in investing in complicated solutions if you know you won’t use all the features. Examples of small business accounting software include Xero, QuickBooks, Zoho and Wave.

eCommerce trends and predictions

No one can argue with the fact that eCommerce has boomed in the past few years. There are now a range of eCommerce trends appearing in Australia. With the coronavirus pandemic, more people have started shopping online as opposed to in physical stores. Analysts from KPMG are predicting that this eCommerce wave will continue and become crucial for retailers.

History of eCommerce Growth Australia
History and prediction for eCommerce growth | Source: KPMG

We’re also seeing the eCommerce industry itself evolve. Ensuring your sales channels are optimised for mobile is now more important than ever. Along the same lines, digital marketing is moving quickly. ECommerce businesses need to stay on top of the latest tactics. Furthermore, consumers are expecting to see a range of payment options, everything from PayPal to Afterpay.

There are also increasing expectations for sustainable and ethical products. Businesses can no longer ignore the environment and are being pushed to consider their carbon footprint. Similarly, consumers are looking for ethically made goods. It’s become more important to be transparent about how your products are made.

Starting an eCommerce business

Starting an eCommerce business is a massive feat. There’ll be lots you’ll need to research and learn beforehand. However, there are some tips that will help you out. The eCommerce retail industry is getting more and more competitive by the day. This means you’ll need to know how to stand out against competitors.

Here are five tips to help you compete when starting an eCommerce business:

  • Find a unique selling point such as a low price, niche market, premium products or customer service
  • Use platforms such as Shopify and Magento over marketplaces to build a better brand and customer experience
  • Keep your customers engaged by providing rewards or loyalty programs
  • Introduce free shipping and free returns above a shopping cart minimum
  • Create a seamless customer experience from the first viewing of your site to the delivery of your products

More eCommerce business resources

Workit Spaces offers a range of different solutions and resources for new and existing eCommerce businesses. Make sure to sign up to our newsletter below to get updates on any new blog posts and videos we release in the future. To book a tour of one of our spaces or to ask any questions, feel free to contact Workit Spaces.