Table of Contents
- 1 What is e-commerce?
- 2 What is an e-commerce platform, and does my small business need one?
- 3 Types of e-commerce platforms
- 4 Cost of e-commerce platforms
- 5 Benefits of an e-commerce platform
- 6 Features to look for in an e-commerce platform
- 7 Popular e-commerce platforms
- 8 FAQs
- 9 How can an e-commerce platform help your business’s bottom line?
- 10 What are some drawbacks to using e-commerce platforms?
- 11 How do I know if I should use an e-commerce platform vendor or build a custom solution?
- 12 What do the top-rated e-commerce platforms have in common?
- 13 Should you use a marketplace or an e-commerce platform?
- With e-commerce surging in demand, it behooves many entrepreneurs and small business owners to set up an online shop.
- E-commerce platforms take the work out of selling online. For a monthly fee, customers get access to an online shop, order and inventory management, app integration, and shipping and logistics services.
- A top-rated e-commerce platform is easy to use, built with SEO in mind, accepts several payment options and can integrate with a lot of third-party vendors.
- This article is for business owners who are preparing to launch either an online business or an online store for their brick-and-mortar business.
Online shopping is skyrocketing in 2020, as shelter-in-place orders changed consumers’ shopping behaviors. Thanks to e-commerce platforms and marketplaces, it is easy to sell online; however, before you take the e-commerce plunge, you must first understand the tools available to you so you succeed. Here is a deep dive into selling online, including the various types of e-commerce platforms, what platforms are the most popular, how much you can expect to spend, and whether it’s best to use a platform to sell online or use a marketplace seller like Amazon.
What is e-commerce?
E-commerce is the purchase and sales of products or services over the internet. The first e-commerce transaction was in 1994, when a consumer sold a Sting CD on NetMarket, a retail e-commerce platform. It wasn’t until Amazon and eBay were established in 1995 that e-commerce took off. Today it’s a multi-trillion-dollar industry that is poised to grow even bigger. At the end of 2019, worldwide e-commerce sales were $3.53 trillion. That’s projected to increase to $6.54 trillion in 2022.
“While selling online was already a growing trend, COVID-19 has accelerated it, and having an online presence has become essential for small businesses,” Ben Richmond, U.S. Country Manager at Xero told Business News Daily. If we look at how quickly technology adoption has advanced during the pandemic, I believe 2020 became 2025.”
Key takeaway: E-commerce has been around since the 1990s, but companies like Amazon and eBay propelled its growth. Today it’s a multi-trillion-dollar market.
What is an e-commerce platform, and does my small business need one?
An e-commerce platform is, in essence, a software application that helps a business set up an online store, manage its inventory, and accept and process payments.
E-commerce platforms are cheaper than marketplaces such as Amazon or Etsy, but your business doesn’t get access to a ready-made customer base. For an established store owner pivoting to online sales or those who are launching an online business, an e-commerce platform is the better choice, according to Tory Brunker, director of product marketing at Adobe.
“Most e-commerce platforms connect your point of sale mechanism and create that digital catalog for you,” Brunker said. There are several e-commerce platform providers, serving different aspects of the market.
Key takeaway: A digital commerce platform helps businesses set up an online store, manage inventory, and accept and process payments. The fees for an e-commerce platform are lower than those charged by marketplaces, but you don’t get access to millions of customers.
Types of e-commerce platforms
E-commerce platforms have evolved over the years and now come in three varieties, including:
- Saas: A software as a service platform is less complex, which is why they’re popular with merchants. You “rent” the platform instead of creating or buying the software. They are quicker to set up than an open-source platform and are easier to use and maintain, but you do give up control of the e-commerce environment.
- Open-source software: Open-source e-commerce applications give businesses greater control over the software that runs the store. Open source means the code source of the software is made freely available to everyone. With an open-source application, one can modify the code to suit the online store. It’s up to the business, however, to find a hosting plan to host the software, to regularly update the software, to ensure it complies with industry standards and rules (such as payment card industry compliance), and keep it secure. An open-source platform is best suited for an entrepreneur or store owner who wants more control over their e-commerce environment (versus what they would have with a SaaS option) and who has the technical expertise to manage it themselves.
- Licensed software: A licensed e-commerce software program is one you purchase from a vendor to run your e-commerce store. You typically get access to the software, as well as support and updates, for a set period. Once the license expires, you’re required to renew it to continue to sell your products online. The drawbacks of using a licensed application include that it’s up to the business to find a web hosting service that supports the software. Further, licensed software requires time and money to support it, which may not make sense for all small business owners.
Key takeaway: E-commerce platforms can be SaaS, open-source or licensed. Open-source and licensed platforms offer businesses greater flexibility to customize the software, but they require more expertise, as well as time and money. With a SaaS platform, you rent the platform and the software company is responsible for updates and maintenance.
Cost of e-commerce platforms
The cost of e-commerce platforms varies, depending on the type of business you’re running. If you’re selling apparel, furniture, or food, for instance, you’ll need inventory and customer-relations management tools. If you’re providing a service, you’ll require less functionality.
Costs are also impacted by whether you’re integrating an existing brick-and-mortar business or if your venture is new. Expect to pay anywhere from $29.99 to $299 a month.
Shopify’s basic plan, for example, costs $29 a month. Customers receive an online store, the ability to sell on Instagram and Facebook, unlimited products to list, two staff accounts and four store locations that are supported. For its advanced plan, which costs $299 a month, you get everything in the Basic plan, plus up to 15 staff accounts and eight locations that are supported. Customers also have access to professional reports and advanced report-building capabilities. Credit card processing fees are also cheaper with the advanced plan. Merchants pay 2.4% plus a per-transaction fee of 30 cents. For the basic plan, it’s 2.9% plus 30 cents per transaction.
Additional costs include a domain name, which is about $15 a year, and web hosting, which can cost $80 or more per month. Some e-commerce platforms include web hosting in their pricing.
Key takeaway: An e-commerce platform can cost as little as $29.99 per month or as much as $299 per month (which is what popular e-commerce platform Shopify charges). For most businesses, the basic plan may suffice. If you have a large business, however, the benefits of higher-priced plans, which include multiple staff accounts and store locations, as well as advanced reporting capabilities, may be worth the extra monthly expense. Be aware that other fees, such as web hosting and credit card processing, may apply.
Benefits of an e-commerce platform
E-commerce platforms have significantly lowered the barrier to entry to entrepreneurs and small businesses wanting to launch an e-commerce site. But that’s not the only benefit of using an e-commerce platform. Here are five other advantages:
- It’s easy to use: Small business owners need an easy-to-use, low-maintenance solution and that is a significant benefit of e-commerce platforms. These solutions are designed with novices in mind. Setting up an online store is significantly streamlined, thanks to templates, drag-and-drop capabilities, and a database of product images and prices you (or your staff) can upload with a few clicks. These platforms also automate certain aspects of e-commerce, including e-mail alerts and inventory management. The systems track when a product is running low and will alert you when you need to order more. These platforms also let you run real-time reports on everything from shopping cart abandonment to customer engagement. And because these solutions are hosted in the cloud, you don’t have to worry about infrastructure (like servers) and security – the e-commerce platform handles all that for you.
- It enhances customer engagement. If your website is unappealing or hard to navigate, customers aren’t going to buy from you. E-commerce platforms offer inviting, well-designed e-stores that are easy for customers to navigate and buy from.
- A platform offers increased security protections. A data breach can be devastating to your business. Much of the threat that hackers pose can be lessened by using an e-commerce platform. Leading vendors include multiple security measures with their platforms.
- Many platforms integrate with dozens of third-party apps. A single platform that hosts your e-commerce site; manages your inventory; and helps with your accounting, marketing, and customer service is a business owner’s dream. An e-commerce platform can make it a reality. Many of these e-commerce platforms integrate with third-party apps, which allows you to handle all aspects of your e-commerce operations through a single, unified platform.
- It easily supports expansion. Many e-commerce platforms are designed to grow right alongside your business. Since many solutions reside in the cloud and aren’t a physical piece of software, it can handle all aspects of your website, whether you are selling 20 or 200 products a month.
Key takeaway: There are lots of reasons small business owners should consider an e-commerce platform for their online shop. These platforms are easy to set up and manage, have built-in security to protect data, integrate with your other business apps, and can easily scale as your business expands.
Features to look for in an e-commerce platform
As you search for e-commerce solutions, you’ll find dozens to consider. Some solutions focus on specific industries, while others offer solutions based on the size of your business. However, these are the seven essential features you want to ensure the platform has:
- SEO functionality: With an online marketplace, there are built-in customers – that’s not the case with an e-commerce platform. A platform provides the tools needed so you can launch and manage your business. You need to find the customers.”If you create an e-commerce platform store, it’s the equivalent of a superstore in the middle of the Sahara Desert,” said Mike Nunez, chief communications officer at Incfile. The platform must offer robust SEO tools to promote your brand and drive sales online through social media. The platform should be built from the ground up with SEO in mind, ensuring your shop shows up high in Google searches.
- Mobile optimized: Most e-commerce transactions take place on smartphones. Adobe predicts that this November and December, smartphones will account for 42% of all online sales. Most e-commerce platforms support mobile commerce. That means if a customer is shopping your store from a mobile device, the experience won’t be clunky or cumbersome. Another mobile-friendly benefit of e-commerce platforms is that they optimize the stores for mobile searches so customers can easily find you wherever they are.
- Security should be top of mind: Your e-commerce platform should have top-notch security, adhering to the highest standards to protect customer data. That includes, at the very least, encryption and two-factor authentication.
- Payment options: The more payment options you accept, the easier it is to close the sale. Make sure the e-commerce platform you’re considering accepts popular payment methods such as credit and debit cards, PayPal, Apple Pay and Google Pay. When you choose an e-commerce platform that supports different payment options, customers can choose which one works best for them when checking out.
- Ability to scale: Many online businesses start small, and the hope is not to stay small for very long. As you expand, you need more from your e-commerce platform, and that entails not just greater capacity but a secure payment gateway, apps, customizable themes, and processing power to support your expansion. E-commerce platforms that can easily accommodate growth should be on the top of your list. “There are wonderful platforms out there, but it’s a matter of choosing the right platform for growth,” said Meghan Stabler, vice president of product marketing at BigCommerce. “You want one platform that can help you scale and grow with rich functionality you need depending on where you are in the journey as a merchant.”
- Product and order management system: E-commerce platforms are designed to take the complexity out of online selling and that includes managing your orders. A good platform offers order tracking, shipping services, and customer email and text notification. The systems integrate with your inventory management system to create a comprehensive solution that delivers accurate information to your customers and that helps you efficiently manage and fulfill orders.
- Third-party app integrations: A quality e-commerce platform should integrate with several different apps, ensuring you can run everything from inventory to customer relationship management from one platform.
Key takeaway: The best e-commerce platforms offer robust features that make it easy to sell online. Choose an e-commerce platform that offers SEO services, supports several payment methods, integrates with several apps, and can scale as your business grows.
Popular e-commerce platforms
Choices abound with e-commerce platforms, but there are six in particular that are well known and regarded by entrepreneurs and small business owners:
- Shopify: Shopify is used by more than 1 million businesses. Customers can create an online store; sell products on the web; and manage product inventory, customer relations, payment processing, and logistics. It’s a cloud-based solution. Shopify charges a monthly subscription fee: It costs $29 a month for its lowest-priced plan, $79 monthly for its midtier package, and $299 for its priciest package. With the latter plan, Advanced Shopify, online businesses can create customized reports, and up to 15 staff accounts are supported.
- BigCommerce: Another leading e-commerce platform, BigCommerce’s lowest-priced plan is $29.95 a month. The midtier service, Plus, costs $79.95 a month, and the top plan, Pro, costs $299.95. BigCommerce doesn’t charge any transaction fees, and it provides unlimited storage, bandwidth, and staff accounts.
- Wix: Aimed at small businesses, online merchants, restaurants, and artists, Wix is a low-cost way to quickly launch your new online venture. The e-commerce platform is optimized for mobile, gives you control over the design of your website, and access to templates and third-party apps. Wix charges $14 a month for individuals, $18 a month for entrepreneurs and freelancers, $23 a month for complete online branding, and $39.99 a month for VIP access.
- Volusion: Also targeting small businesses, Volusion offers a customizable online shop, SEO and social media marketing, and payment processing. (It has integrations with Stripe, PayPal and Apple Pay.) Volusion costs $71 a month for businesses bringing in $100,000 or less in gross merchandise sales. For businesses, generating up to 250,000 in gross sales, the monthly cost increases to $161 a month, and for businesses generating $500,000 in gross sales, the monthly rate is $269.
- Squarespace: Known for its robust blogging tool and customer support, Squarespace offers more than 100 templates and is mobile optimized. It’s not as easy to use as other e-commerce platforms, but it’s competitively priced. Squarespace’s basic commerce package costs $26 a month, while the advanced commerce version costs $40 per month.
- 3dcart: 3dcart provides the same capabilities as its rivals and lots more features, such as accurate shipping rates and the ability to save shopping carts. Prices range from $19 per month for a startup store to $229 a month for a pro shop.
Key takeaway: Popular e-commerce platforms include Shopify, BigCommerce, Wix, Volusion, Squarespace, and 3dcart, with monthly subscriptions costs that range from $14 a month to nearly $300 per month.
E-commerce platforms take a lot of the work out of running an online shop. That in turn frees up business owners to focus on growing the enterprise. If you use a SaaS e-commerce platform, you can quickly launch your online shop with few upfront costs. Thanks to advanced technology, these platforms track inventory in real time, manage orders and prevent costly mistakes. It can also scale as your business grows – you won’t need to overhaul your website or find a new hosting service.
What are some drawbacks to using e-commerce platforms?
When you use an e-commerce platform, you are giving up control. Yes, you can customize your online shop and integrate with third-party apps, but the software resides in the cloud, not on your business’s premises. You can’t change the source code and are beholden to the security the e-commerce platform has in place. You’re also at the mercy of your e-commerce platform regarding uptime. If the platform goes down, you aren’t able to sell.
How do I know if I should use an e-commerce platform vendor or build a custom solution?
Whether or not you should use an e-commerce platform or build a custom solution depends on your products, gross merchandise volume and brand. A custom e-commerce platform is better suited for companies that have the technical know-how and financial resources to manage the platform themselves. An e-commerce platform, however, is best suited for small and medium-sized businesses that don’t have to time or desire to control all aspects of their e-commerce shop.
What do the top-rated e-commerce platforms have in common?
E-commerce platforms have evolved from the days when all you could do is list photos and collect payments. Today, these platforms manage your inventory and help you promote your products and brand. Whether it’s Shopify or BigCommerce, the top-rated e-commerce platforms are mobile-friendly, SEO optimized, they integrate with third-party apps, have top-notch security, accept different payment methods, and can easily scale.
Should you use a marketplace or an e-commerce platform?
When it comes to selling online, you have two options: Business owners can go it alone, creating their online store with an e-commerce platform or they can join a marketplace. Which one makes sense depends on how long you’ve been in business and the type of products you want to sell.
Marketplaces are ideal for those starting out
For those entrepreneurs who are just starting out, a marketplace like Etsy or Amazon may make the most sense. You upload photos of your inventory, link your bank account with the marketplace, and get paid when a sale is complete. You don’t have to worry about marketing your online store. Your business gets access to all of Amazon or Etsy customers.
It isn’t cheap, but it offers an easy entry to online sales. “Amazon is incredible for somebody starting a new business,” said Nunez. “If you create on Amazon, you have a superhighway in front of your store.”
Here are three of the most well-known marketplaces and a breakdown of their fees:
- Amazon Marketplace: Amazon’s Professional plan is $39.99 a month and is geared toward high-volume vendors. The Individual selling plan is 99 cents per unit sold and is designed for merchants who sell less than 40 items a month. There’s also a per-item referral fee. The fee is based on the product category. You can pay extra for Amazon logistics services.
- Etsy: Etsy charges a listing fee of 20 cents per item. Listings on the marketplace remain live for four months or until they sell. Etsy also charges a 5% transaction fee and a 3% plus 25 cent payment processing fee. If you close a sale that is a result of one of Etsy’s offsite ads, you lose 15%.
- Walmart Marketplace: Walmart charges a referral fee per product that varies depending on the product. Apparel and accessories, baby and beauty products, and books are subject to a 15% fee. Cell phones, cameras and consumer electronics are charged an 8% fee.