What is an online shop? Definition, types and benefits

In recent years, online shopping has emerged as a major force in the retail world. In fact, due to a range of factors – from convenience to lockdowns – it has disrupted the way that we all shop every day.

The rise of online shops and ecommerce platforms has transformed the market, allowing customers to browse and buy products from the comfort of their own homes, using desktops, laptops, tablets and mobile phones.

In the article, we’ll take a look at the world of online shops, exploring what they are, how they work, and the benefits they can offer to consumers and businesses alike.

Online shop: definition

An online shop – also known as an ecommerce store – is a web-based platform where businesses and individuals can showcase and sell their products or services online.

These digital platforms allow users to find and choose products, and facilitate payments through built-in payment gateways.

Typically, businesses can provide virtual storefronts where users can browse products, buy them, and then arrange for delivery too.

Types of online shop

Even though the function of an online shop will often be the same, there are a range of distinctions to consider based on the type of online shop you’re launching. For example, you might specialise in:

Business-to-business (B2B), where your business sells to other businesses.
Business-to-consumer (B2C), where your business sells straight to consumers.
Consumer-to-consumer (C2C), where businesses aren’t involved at all.

There are other examples, such as consumer-to-business (C2B) and business-to-government (B2G), though they typically work more on a contractual basis, rather than through ecommerce in the way the options above may work. A freelance business might be classed as C2B, for instance.

As well as the classifications above, there is also a range of online shop types to consider, specifically in the ecommerce space.

Dropshipping – the owner of a dropshipping business will ‘sell’ products on their site that they don’t actually make or own. When the products are sold, they are packaged and distributed by a third-party company. Etsy is one example of a successful dropshipping business.
Subscription – subscription websites typically allow customers to sign up for a product, or a range of products, to be sent to their home, usually on a monthly basis. In recent years, the subscription industry has blown up, with options available in all sorts of spaces. The Willoughby Book Club is one niche example.
Online retail – different to dropshipping, online retailers own their own products and handle the distribution and packaging too. Online retail can be one brand selling just its own goods, such as Nike or Microsoft, or a brand selling a range of goods from a range of other brands, like Amazon.

There are, of course, a range of other online store types, but the ones above are among the most common and popular.

How online shops work

Online shops use a range of technologies and features. In the sections below, we’ll provide some simple information to give you an idea of what you can expect to find in most ecommerce stores.

Product catalogue
Website development
Shopping cart and checkouts
Payment processing
Order fulfillment

You can read on to find out more, or click any of the options in the list above to skip ahead.

Product catalogue

Businesses can create digital storefronts online that showcase their products. Normally, this storefront will show images of the products, with added information through text or videos. They’ll also let customers know what the price is for the product.

Normally, online stores will organise these products into categories, which will allow their customers to see related products they might like too.

Website development

An online store will always require a website or web-based platform of some sort, this might be an app.

Through this platform, customers can access the product catalogues, add items to their basket, and then checkout.

In the past, this sort of platform would have required experienced development work. Fortunately, today there are simpler tools that can help businesses get online; take a look at our best ecommerce website builders page if you want to find out more about some of those options.

Shopping cart and checkouts

As they browse through the products on offer, customers can begin adding them to their online shopping cart or basket. As these products are added, the online store will automatically calculate the total cost of these items.

Once the customer has finished selecting, they will then be able to navigate to a checkout. Typically, these checkouts will allow the user to pay for their items, as well as organise shipping or delivery.

It is possible to add more advanced functions here too, if you’re willing to pay a little more when you build your site. Some sites use abandoned cart functionality – which informs users if there are items waiting in their basket – as well as options to save card details for quicker checkouts.

Payment processing

Payment processing is the way that customers pay for things online, as well as the way that businesses process those payments.

Most sites provide a range of payment methods, such as paying by credit or debit card, paying with a digital wallet, or using another authorised method.

Payment processing tools on ecommerce platforms will use encryption along with a range of other security features to ensure that data and payment information is kept safe.

For more information on processing payments, you might want to check out our what is an online payment page or what is a payment gateway pages.

Order fulfilment

Once payment has been confirmed for whatever items are being purchased, the online store owner – or a third-party logistics partner that they work with – will receive details for the order.

They will use these details to process the order and will then prepare the items for shipment and delivery. Bear in mind that some products may work slightly differently, digital products being one key example. If you are purchasing software, you might expect to be downloading a product directly onto your own device.

Online shop benefits

The growth of online shopping over the years has resulted in a number of benefits, both for consumers and businesses.

Convenience
Variety and accessibility
Cost-effective
Reach
Personalisation and customer engagement

Read on to find out more, or click any of the options in the list above to skip ahead.

Convenience

Online stores allow customers to shop anytime, anywhere. They remove the barriers that you might find with traditional stores, including things like location and working hours.

Online customers can browse and purchase products with ease, saving them time and effort.

Variety and accessibility

Online stores can provide users with access to a range of products, and variations of products. Often, this range of products can far exceed what a brick-and-mortar store would be capable of displaying. For small businesses in particular, who may have less in-store space, this can be an enormous benefit.

Using online stores, customers can explore different brands and products easily to compare prices, read reviews, and make the most informed decision possible.

Cost-effective

Typically, an online store will incur lower overhead costs for a business compared to a real-life, physical store.

This often translates into more competitive prices for customers, driving increased demand over time.

Reach

For businesses operating online, the ability to reach customers in a variety of locations can be a massive benefit. Operating a high street store can restrict your reach to just local customers, whereas going online can extend this massively.

For a lot of businesses – from small to large – the reach of online stores has allowed them to build customer bases on a national, and even global, scale.

Personalisation and customer engagement

Online shops provide their owners and managers with a range of data and customer insight that they can tap into.

With this data, businesses and online store owners can begin to provide more personalised, tailored recommendations that can help them generate more sales, but that can also help customers to find the perfect products.

Customers can use tools such as wishlists and reviews to identify exciting products and can access customer support channels to get extra help from store owners.

What is an online shop? Final thoughts

In a world dominated more and more by technology and connectivity, online shops have revolutionised retail.

They offer a convenient and accessible shopping experience for customers while increasing the opportunities for businesses to expand their reach and maximise the value of their goods.

As the world continues to get online, the significance of online stores is likely to grow, and there are more evolutions guaranteed to happen too.

Bryn Glover

Bryn is the founder and editor of WebsiteJumpStart. He has worked in the digital field for over a decade and was editor for Startups.co.uk - the UK's leading small business website - and for NerdWallet UK before launching WebsiteJumpStart to help people and businesses get online with ease.

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