How Online Shopping Business Works

How Online Shopping Business Works

Staff WriterSeptember 29, 2020

Introduction

It is impossible to sell successfully online without knowing how online shopping business works. Many sellers have been online before the COVID-19 pandemic and the resultant lockdown. However, the COVID-19 pandemic has awakened everyone to the necessities of selling online. Mortar and brick business while it has its own place could be limiting - online shopping is here to stay!

Learning how online shopping business works will help you to be relevant and stay relevant in business. Staying relevant in business requires being up to date with trends and the ability to switch things up or tone things down as the case may be. The stay relevant in the business of shopping, you must understand how online shopping business works.

So now, you are ready to transition from a mortar and brick only business. Or you are just starting out a new shopping business online, or you're just thinking of what to do. You are probably wondering how online shopping business works. This article discusses just that.

What Is Online Shopping Business?

Knowing how online shopping business works starts with knowing what it is. The online shopping business is not so different from the normal mortar and brick business. Everything that occurs during a normal mortar and brick transaction takes place in an online shopping expenditure too. The only difference is that online shopping is done virtually. 

Simply put, the online shopping business is selling goods over the internet to make profit. Online shopping is a subset of e-commerce, which includes every form of transaction that takes place online. 

The online shopping business broadly has 3 forms/models. It could be:

The Business to Business online shopping model

In this business model, online shopping businesses are set up to sell goods to other online shopping businesses. This is very similar to what is called wholesales in mortar and brick and usually features higher units of sales and purchases, bulk purchases, and lower prices. This is usually referred to as the B2B business model.

Business to Consumers online shopping model

Businesses sell goods directly to consumers. This is more or less like retailing. Purchase units are usually low and bulk purchases are rare. This is commonly referred to as the B2C business model. It is the commonest model.

Consumer to Consumer online shopping model

Consumers resell goods they have previously bought or used to other consumers. It is commonly referred to as the C2C model. This is the latest online shopping business model.

5 Reasons Why You Should Open An Online Shop

In case you're still undecided about making a decision, here are 5 reasons you should consider opening an online shop. 

Ease of operation

Online stores are easier to run than mortar and brick stores. You don't need a rented space. You can stay on your bed and do all you have to do without moving an inch.

Your customers do not have to deal with traffic to reach you. They have no waiting queue to fear. Your customers can reach you with a simple click. 

Inventory management is easy to manage with an online shop. There are systems that will manage that for you. If there is a single word that describes the business of online shopping, it's "convenience".

Global patronage

This point should actually be number 1. The world's your stage. Every human being with an internet connection is your potential customer; as long as they need what you sell. Their location doesn't matter. Oceans may separate you but the internet connects you. What could be sweeter! 

Brick and mortar stores will forever have geographical limitations and barriers to contend with. Not so with you. As long as you're on top of your shipping game, you're good to go in getting your customer from the furthest island!

Social media leverage

Selling online affords you the chance to leverage on social media. You have access to well-targeted ads to spread your net wide and draw in your customers. These are days of data and analytics that can serve as huge boosts to your advertisement efforts. You would be able to target the exact audience that may be interested in your products.

24/7 Availability

Isn't it amazing that your store operates 24/7? I mean you can be on your bed snoring and someone in another time zone entirely is ordering from your online store! There is no closing time. People can click in and order anytime! Business has never felt so good!

Lower costs

Here is another really juicy reason to consider going into the business of online shopping. Your initial cost is really low, compared to physical stores. You don't need storekeepers and sales girls. No need for extra funds to hire a cashier, etc. If you decide to go into drop shipping, you can even start with next to nothing!

What Are the Things to Do to Open An Online Store?

Now that you are now convinced of your need to open an online shop, you are probably asking how. If you will understand how online shopping business works, it is imperative that you open an online store. Simply follow the simple steps outlined below.

Choose a niche

Decide on the niche you want to operate in. Find a niche with growing demand and less competition. You must make an informed decision regarding this. Research wide to make an informed decision.

Choose a model

Apart from choosing a niche, you also need to choose a model. How do you want to operate? Which products will you be selling - yours or others? Which business model will you operate-business to business or business to consumers? Are you selling brand new goods or reselling used ones? Are you narrowing down your niche or you want to do a bit of everything? Will you be stocking products or you will be drop shipping? Research wide to make an informed decision.

Get a selling website and domain name

This is actually the easiest of all. The knowledge of software coding is not indispensable here. You actually don't need it. There are drag and drop sites for eCommerce you can leverage on. Don't waste too much time in choosing a domain name. There is no rule that says your domain name should reflect what you sell. You can choose to make it so, but it is not so important. Just let it be simple, memorable, and easy to recall. Get your domain name checked out for the availability and register it.

Choose products and add them to your store

Add products to your store. What's a store without goods? Use optimized images and videos or picture slides as the case may be. You don't want to use heavy images and videos though, as this can affect your site performance. Keep things neat and elegant.

Decide on the payment system

This here is a big one. Whichever payment system you choose has huge influence on your online shopping business. Tread with caution. Be customer-conscious. You need to get a merchant account with your bank or simply use cheaper and trusted payment systems like Paypal.

Set a solid shipping system

Although this may not bother you so much if you're drop shipping. If you're selling your own products, this is a big one for you. It is, therefore, better to limit your scope of operation to where your shipping arrangement is very strong. Customer satisfaction is very important.

Preview, Review and Publish

Finally, preview your newly set up store. Test how things run and make adjustments where necessary. There, your store is ready to go live!

How To Make Your Online Store Successful

Setting up an online store though admirable is not an end in itself. You also need to ensure that your online store is successful. Find actionable steps to achieve this below. The steps have been grouped into 3 just to simplify and highlight their relevance.

Pre Launch Success Tips

These are suggested actions to take prior launching your online store.

Plan

Failing to plan is planning to fail. Plan for success and you're most likely to succeed. Have a good business plan for your store. Draw budgets and monitor them. Also, evaluate your plan and execute them from time to time. Stay on top of your game.

Research

It is best practice to make use of tools like Google trend before choosing which product to stock. Look for high demand products. Don't stock what appeals to you. Stock what appeals to the market.

It is also important that you know who needs your product and where to find them. Good research is necessary for good results.

Good Web design

You also need a good web design. Get an engaging and appealing template. In addition, make sure your site is not clogged up and slowly responsive.

Evergreen Tips for Success

Good Images

Display your goods appealingly. You may have the best of goods but if your images are poor and blurry, you will get low sales if any at all. Use good-sized images. Invest in quality product photography. However, do not use heavy images and videos that could slow down your site.

Optimize your site for both desktop and mobile use

It is important that your site is mobile-friendly. Most shoppers these days prefer to shop with their mobile phones.

Good analytics

Moreover, you must have good analytics in place for your site. It will help you to track your progress, make necessary adjustments, and strategize properly.

Make your site SEO compliant

A good SEO practice in your page will drive organic sales for you. You cannot afford to trivialize SEO. Make your site discoverable for search engines and make it rank.

Post-Launch Success Tips

Advertise

It is good practice for most of your traffic to come organically. It will count towards a higher profit margin for you because your cost will be lower. However, do not disregard the place of advertisement in making your site successful. Leverage on social media and drive in useful traffic to your site through ads.

Easy Checkout

All the traffic in the world would do your site no good if your check out process is complicated. You will constantly be having high cases of cart abandonment. Let it be very easy for customers to pay. Or don't you want their money?

Quality goods

Most importantly, stock quality goods! Do you want your customers to repeat purchases and become your advertisers? Give them good value for their money. Don't swindle them by selling inferior goods at high prices. Bad reviews will damage your reputation and kill sales.

Now that you know how to make your online store successful, it is safe to say that you have a decent grasp of how online shopping business works.

What Is the Best Item to Sell Online?

You need sales, and not just sales, you need massive sales. I mean what is the use of an online store if it brings you zero profit? How can you make profits without sales?

You've decided to open an online store. You have opened the store. You have a good plan, beautifully designed and easy to navigate template, etc. The next natural question to ask is, what is the best item to sell online? Are there items that promise evergreen sales? The answer is yes and no. Confused? Don't be!

The truth is that there are no products that will guarantee you insane sales. If you want massive sales, apart from finding the right product, you have to put in real work. The ingredient of profit consists of the right product and the right market, both must be present. However, there are niches that can be said to be evergreen due to their relevance in people's lives.

Some profitable niches in 2020 and why they are so.

Fashion

How online shopping business works. fashion

Generally, there is always a ready market for fashion items. People are inherently vain; whatever will appeal to that inherent vanity will sell fast. Items like clothing, shoes, cosmetics, jewelry, shape wear, etc belong here.

Travel accessories

There is glamour in travel and when people travel, naturally, they need accessories like souvenirs, comfort mats, etc. Let your imagination and research aid you.

Tech

Have you noticed the latest craze for smart watches, Playstation, games accessories, popular brand remote controls, Bluetooth speakers, Drones, and accessories, etc. Just do your research.

Healthcare

Supplements, vitamins, natural and organic oils will always sell. 

Health and Beauty products

Yoga mats, Beauty masks, facial treatments, etc will always be on demand. Just be diligent in your research so that you can make an informed decision.

Remember, the list above is just a suggestion, not a guarantee. You have to brainstorm, research the trend (Google trend is your friend here), find a niche with growing demand, find a low competition sub-niche within a growing niche, and keep hope alive. Knowing what, when and whom to sell to is exactly how online shopping business works. Be on top of your game.

How Do Online Shopping Sites Make Money?

How online shopping business works. money

It is no news that online stores make way more money than their mortar and brick counterparts. The question is how they do it. How do online shopping sites make money the way they do? There are many reasons why this is so but the main reason is that they are cost effective.

To start with, most buy directly from manufacturers and sell directly to consumers. In doing this, they cut out costs accruing to the middleman (suppliers).

Also, operational costs like electricity, rent, utilities and maintenance, employee, multiple transportations, etc that mortar and bricks have to cater are almost zero to nonexistent for online shopping sites. As a result of this, they are able to offer goods at cheaper prices, give discounts, etc that drive their sales up.

Moreover, online shopping sites are able to leverage the convenience of patronage and interest-based targeted advertising to reach more consumers than their mortar and brick counterparts. This is how online shopping business works.

Can Online Shopping Business Make You Rich?

How online shopping business works. money

It is always good to approach every endeavor with realistic goals and expectations. The answer to the question, can an online shopping business make you rich is highly subjective. There have been cases of people who make up to millions of dollars in profit selling online but these are usually outliers. Most people do not become stupendously rich by selling online.

Selling online is profitable and can be a successful side business. However, you have to approach with managed expectations. You can build a successful business that may even become a full source of income later, if well managed but the truth is most people quit before making their first $1000. Manage your expectations well.

What Is A Good Profit Margin for Online Stores?

Profit margin is the difference between your total sales (total revenue) and total cost. It is usually stated as a percentage. The higher your profit margin, the better your performance.

A low profit margin indicates that you are spending much more than you are making. Your target should be a reasonably high profit margin.

You may be asking what a good profit margin means? The answer to that question depends on a lot of things which are peculiar to your business circumstances.

Generally, 10% profit margin is considered average. 20% is considered as high, while 5% is considered low. According to NYU Stern School of Business, 45.3% is considered a good profit margin for an online shopping business.

Tips to increase your profit margin:

Reduce costs to the barest minimum without compromising quality.

Strive to retain customers, get them to repeat patronage, and refer your store.

Make shopping with you safe for customers and easy for first-time customers.

Increase in gross sales.

Safely increase your prices.

Can Small Online Businesses Sell on Amazon?

How online shopping business works. Amazon

Amazon has grown to become one of the largest and one of the most popular marketplaces online. It has up to 180 million visitors monthly. Small businesses can cash into that. I mean, you already have millions of people interested in purchasing what you have to offer. What a good opportunity!

The downside to this is the fierce competition. You are not the only business selling what you are offering. You might find others selling at a lower price than you. Also, it is very easy to get buried by high ranking sellers. And the cost of your merchant account is something else to consider if it is worth it. If you're selling enough to justify the monthly fee Amazon charges, then you are good to go.

If you plan to sell on Amazon, you should consider putting strategies to stand out and survive the fierce competition in place.

How Can Small Online Businesses Compete with Amazon?

How online shopping business works. Amazon

Small online retail businesses see Amazon as a big retail monster to be feared. There are good reasons to fear Amazon. Amazon is a giant retail online marketplace where almost everything is available at cheap prices. Throw in free shipping into the mix and you get the picture of what makes Amazon formidable.

With all these, how can small online businesses ever hope to compete with Amazon?

Tactics For Small Online Businesses to Compete With Amazon

For one, your small size affords you the opportunity of making your brand very unique. Give your brand an unmistakable identity. Let your brand identity be really unique and ensure it is outstanding. This will keep you in your customers' minds.

You can also give your customers a personalized experience. Let buying from you make them feel special and they will be hooked for life.  Make it very easy for them to use your site and checkout with a maximum of 2 to 3 clicks. A single click is even better! Give them fewer things to do to spend money.

In addition, throw in freebies once in a while. Who doesn't like a freebie? Give out well calculated and designed freebies and discounts that are perfectly strategic to arrest your customers or get them to buy more or even spread the word about you.

Lastly, if you can't beat them, join them! Take your business onto the Amazon platform and use their platform to drive your sales. Give your business a very unique identity and brand voice while there and get your share of the millions of potential customers thronging the Amazon space.