Ecommerce gets a great part in our lives day by day in parallel with increasing internet use in the world. And I am sure that we all are surrounded with people who are interested in ecommerce and internet sector. For this reason, I decide to gather all beginner-level terms and concepts, which can lead entrepreneurs to a successful ecommerce business.
Return on Investment (ROI)
This concept is known as the most common profitability ratio. It measures the profitability by evaluating the performance of an investment. And it is calculated by dividing net profit by net worth. In other words, if ROI is high, the investment gains are enough when compared investment cost. ROI calculation gives an idea to investor whether continue to investing or not.
Crowdfunding is a method of collecting capital in small amounts from a large group of individuals, who trust and invest in a project. And the investors, surely, wants to make a profit if the project they invested gets successful. Nothing is for free as you know.
Venture Capital, a popular term in ecommerce sector, is the money used to startup firms and small businesses at the risk of a long-term growth potential. Venture capitals generally invest not in ideas but in accomplished projects; and they may prefer to continue investment until the entrepreneurship is successful and goes public.
Private equity refers to funds provided for entrepreneurships having a growth trend and greater growing potential. It is more extensive than venture capitals and stand by the entrepreneurship on the level of financial partnership. It is generally preferred by companies offered to public and private financiers.
In incubator system, private companies or municipal entities and public institutions, such as colleges and universities assign sponsors to any kind of entrepreneurship in start-up phase. They provide mentorship, offices and capital in return for a really low interest. Cambridge Innovation Center (Cambridge, Mass.) and TechColumbus (Columbus, Ohio) are very good examples for business incubation programs.
Angel investors support promising projects not by a capital fund but by their own personal savings. They provide entrepreneurs with money and also with mentorship, advices and network. But they are not angels, actually. In return, they request a bit higher interest when compared with other investors but experience and network they offer you will create new opportunities and open a new door for you.
B2B (Business to Business)
B2B stands for Business to Business and refers to business that is conducted between companies, rather than between a company and individual consumers. In other words, manufacturers provide products or services to wholesalers; wholesalers to retailers. One of the greatest examples for B2B is Chinese Alibaba.com.
B2C (Business to Consumer)
If shortly described, it is an ecommerce model that provides products or services direct to the consumer. Especially online shopping stores prefer using B2C, in which companies sell products directly to the customers.
To learn about other basic concepts and terms like Due Diligence, Conversion Rate, Business Valuation, CRM, Affiliate, Joint Venture, Scalability, you are better to continue reading the latter post named Basic Ecommerce Terms for Ecommerce Entrepreneurs – 2