How Does Selling on the Internet Work?

An Online Vendor Selects a Market and Gets Licensed

Before getting started, online vendors typically perform some measure of market research. While market research may be as complex as thorough research of online competition and collection of public opinions, the research may also be as simple as deciding what craft he most fully enjoys. Some vendors choose to sell online without actually producing or warehousing their own products; these vendors use the services of a drop-ship supplier and simply act as the middleman to broker purchase transactions. In a drop-ship scenario, the prospective vendor may compare several drop-ship suppliers before entering into a business agreement with the one he ultimately selects. Once the items to be sold have been identified, or dropship accounts put in place, the vendor obtains a business license from his local county clerk to comply with local regulations and ensure any due sales tax is paid.

The Vendor Sets Up An Online Shop

With products to be sold (or resold), the new merchant creates an online marketplace where customers can browse and purchase her wares. The online storefront may be a dedicated website with cutting-edge ecommerce software, or it may be as simple as a basic store on a site like eBay or Amazon. Each product to be sold must be carefully entered into the online database, with pictures, descriptions and pricing provided for each individual item. Many listings feature two or more pictures to ensure the item is represented as accurately as possible. The merchant must also put payment gateways in place to collect online payments, and basic security must also be implemented to ensure the online store remains safe from hackers and other undesirable activities.

The Vendor Advertises Her Shop

With the online store set up and ready for operation, the vendor must recruit customers. Online merchants use a variety of techniques to recruit customers, and these methods may include email marketing, store newsletters, sponsoring other websites or placing clickable banner ads on similarly themed websites. Some online sellers choose to advertise in more traditional venues like radio, television and newspapers, offering promotions or information about their business and directing prospective customers to the web address. Some merchants combine the traditional and online approaches by placing some ads in newspapers or on television and supplementing those ads with online banners and emails.

The Vendor Collects Payment and Ships Products

As word of the online store spreads, customers begin to visit the merchant's shop and make purchases. The online payment gateway (which could be a number of systems ranging from a credit card merchant account to a simple account with an online agency like Google Checkout or PayPal) collects payment, notes the customer's purchase and sends an email to the online vendor. Traditional vendors use the information in this email to select the purchased products and send them to the customer, while drop-ship merchants simply place an order to be shipped directly from their supplier. Merchants may also use some information in the email, like the customer's email address, to create future marketing opportunities.

The Vendor Grows the Business

As products are sold and profits are produced, the vendor becomes increasingly capable of expanding his online business. Some merchants choose to reinvest their profits in expanding the type and brands of items they carry, while others dedicate their proceeds to professional quality web designs and procedures to improve operational efficiency or advertising results. As the online venture grows and becomes more profitable, the merchant can continue growing the business while also enjoying its profits.