Introduction to eCommerce Home Business Model

After you read this short introduction to ecommerce business model you will have learned the essential information that you need so you can join the rest of us who are selling goods and services on the internet.

The internet has opened up a whole new platform for entrepreneurs to sell products.

Instead of investing hundreds of thousands of dollars to open a brick and mortar store, today you can open an e-commerce home business store for just a few thousand dollars. Even less if you're on a shoestring budget!

eCommerce is basically an online store. Much like a physical store, visitors come and browse through your various products.

They may or may not compare the quality and the prices with other stores. Then, they choose one or more products that they want to buy and make their purchase.

You can make opening an eCommerce online store as complex or as simple as you want. You can build your own custom system from the ground up with all the bells and whistles, or you can use an almost-free system right out of the box to start making sales right away.

The eCommerce industry generated $99 million dollars in sales in 2007 and $106 million dollars in sales in 2008, according to the U.S. government census.

And according to a recent study conducted by Forrester Research, U.S. online e-retail sales are expected to reach $335 billion by 2012 for e-commerce goods sold. In short, this industry is huge and a lot of people are taking in a great living.

Is it for you?

Here's an information-packed introduction to ecommerce business model to help you decide.

How Does e-commerce Home Business Work?

The term eCommerce simply refers to a business model where you setup an online store with a multitude of products to sell.

Successful examples of e-Commerce home business include Amazon.com for books and Zappos.com for shoes. Sure, your ecommerce online store may not be the same magnitude of Amazon or Zappos. Yet, hundreds of thousands of folks are quietly and steadily earning a good living from their own ecommerce home business storefronts.

The downside is that there's a relatively high startup cost and it's considerably more challenging to maintain. In order to get into eCommerce, you'll have to setup both the online infrastructure and the fulfillment infrastructure.

Let's take a look at each.

Types of eCommerce Storefront Websites

There are a few different kinds of eCommerce websites you should be aware of.

You can create your own website to sell your products on and include a product catalog and shopping cart. Or you can use a store based system like: Zen Cart, Magneto, and OpenCart.

These are basically free eCommerce storefronts websites that you can install on your own server for free. They're pre-packaged solutions that enable you to sell your own products.

The upside is its ease of use. Some of these are truly one-click install packages. The downside is that some of them can be difficult to customize. Try and get an open source package if you need customization in the future. Setting Up an eCommerce Website. Additionally, you can use subscription based storefront services like: Amazon webstore, Yahoo Merchant, and eBay store.

In order to get started, you'll first have to get a merchant account to take payments with. That means you'll have to incorporate or file for a DBA (doing business as) to get a tax ID number, required to make tax-free purchases from wholesalers.

You'll have to setup the eCommerce software and enter all your products into the database. You can use out-the-box software to do this setup or have an IT professional setup a more custom package.

You'll also have to source the products you're selling. Usually the first places to look are trade magazines and industry magazines, where wholesalers and manufacturers will be advertising.

To begin, you may look into drop shipping, where wholesalers ship the product for you instead of selling to you in bulk. This can help you reduce storage and fulfillment costs in the beginning, but the per-unit cost of drop shipping adds up in the long run.

What Skills Do You Need to be Successful with e-commerce Home Business Store?

You'll need solid business skills as well as a decent amount of technical experience.

For business skills, you'll need to be able to work with suppliers, market your business, manage customer satisfaction and allocate cash flow intelligently.

For technical skills, you'll need to setup a mail server to email your customers, setup the payment gateway to process credit cards and manage a considerable database of products.

The Pros and Cons of eCommerce Home Business Model

One of the main benefits of setting up an eCommerce website is how inexpensive it is. Compared to starting a physical store, the costs are virtually non-existent. Plus, the profit potential is high you can make quite a lot of money selling products online.

An eCommerce website is also highly scalable. If you can profitably sell one item, then you can profitably sell a thousand items, provided you can fulfill on the orders. Other online businesses, like services for example, will hit a cap at a certain point and can't grow anymore. eCommerce doesn't have this issue.

The main downside of eCommerce is the difficulty of managing inventory. First you have to deal with a range of suppliers, some of whom may not want to deal with online merchants. Then you have to deal with a system that indexes hundreds, sometimes even thousands of product ID numbers (SKUs).

Finally, you also have to deal with customer service, shipping issues and repackaging returns.

Although none of these things are truly difficult to handle, they can all add up to cause a bit of a headache. That said, if you're willing to go through the process of designing an effective system for your eCommerce site, there are tools that will help with much of the difficulties of the process.

What's the Profit Potential?

On the low end, eCommerce websites may only make a few thousand dollars. On the high end, you have businesses like Zappos selling for $1.2 billion dollars. There's a whole range in between. The amount of money you'll be able to make in the market depends on the size of the market and your ability to take a large slice of that market.

Though eCommerce is a relatively skill and capital intensive home based web business to get started in, it has the potential to grow quite huge.

Hopefully this introduction to the ecommerce business model has help you understand what is required to be successful in selling physical products online. If this is the type of home based business model that appeals to you, then there are strategies and technologies you can use to help you succeed and achieve your business dreams. Many of these technologies can help you overcome some of the potential drawbacks discussed.

Next: Home to Tap in to The Most Overlook Opportunity: Home Based Service Businesss

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