E-commerce Explained: Part 1

E-commerce or Electronic commerce is a type of industry focused on buying and selling products or services over the Internet. It is typically regarded as the sales aspect of the electronic business, and deals with the financing and payment of business transactions. 
A typical E-commerce site must have certain basic functions:
Shopping Cart
A shopping cart is actually a database that allows clients to select items on your website that they wish to purchase.
Shipping Module
If you are selling products online you will need to ship them to the people who purchase them. There are different ways of calculating the shipping costs.
1. Flat Rate Shipping - This is where the website will charge a flat fee for every purchased item. You must calculate the amount of shipping it will actually cost you so you can be fair to both you and the client.
2. Zone Shipping - This is where you can create different zones and charge a different rate for each zone. For example if someone is in the same city as you the shipping should be relatively inexpensive. However if they live outside the local area, the shipping will obviously cost more.
3. Live Shipping Cost Calculation  - Your website will take your postal code and the postal code of the customer along with the volume weight of the parcel and calculate the proper shipping costs and then insert it in the invoice on your checkout page.
Payment Gateway
A Payment Gateway is a service run by a financial institution that allows your website to connect to it and process credit card payments. There are two ways that a credit card payment gateway can process the payments.
First is called a payment hosted page, this is where the client is taken to the payment gateways website and the payment is processed on their web site. The second method is when the pay page is hosted on your website, to have a page on your website it must be placed on a Secure Socket Layer or SSL. Additionally you must purchase a Certificate of Authenticity or COA.
Why is this necessary? When your website tries to process a credit card payment, it first sends a signal to the payment gateway asking for permission to transmit secure data. The payment gateway then sends a signal to the issuer of the Certificate of Authenticity to confirm this is a valid transaction request.  
The company that issued the certificate in turn sends a signal to your website and confirms that the encrypted piece of code is placed properly on your site. This verifies that your website is truly legitimate and sends a signal to the credit card company that it is OK to process the payment. This all takes place in a matter of a second or two.
Some payment gateways offer both methods of credit card processing. For example PayPal Standard, the customer goes to PayPal's website and it makes the payment there. One problem that may come up here is when the customer goes to PayPal's website it looks like they have to sign in to PayPal to make the payment but they do not however this confuses a number of customers. Some customers will think that they cannot pay here because they do not have a PayPal account.  
PayPal Standard is the easiest payment gateway to get approved for. All you need is a credit card and a bank account.  One advantage to PayPal standard is that you do not need to have an SSL because PayPal has these features on their website.
To use PayPal on a payment page that is hosted on your website, PayPal will need to conduct a credit check on you and your business.  Once approved, you will need to purchase a Certificate of Authenticity and set up an SSL. The advantage to this is that your customer does not leave your website and go to another web site to make the payment.
You will need a Certificate of Authenticity and will have to setup a SSL. Also payment gateways charge a monthly fee for using their service. PayPal Pro charges a fee of $35.00 per month. This fee also includes a web terminal that allows you to process phone in orders. Other companies such as Paymentech, Moneris, BeanStream and others also offer both solutions.