What Is Electronic Commerce (e-commerce)?

Electronic commerce or e-commerce (sometimes written as eCommerce) is a business model that lets firms and individuals conduct business over electronic networks, most notably: the Internet. Electronic commerce operates in all four of the following major market segments:

E-commerce, which can be conducted over computers, tablets, or smartphones may be thought of as a modernized version of mail-order catalog shopping. Nearly every imaginable product and service is available through e-commerce transactions, including books, music, plane tickets, and financial services such as stock investing and online banking.

[Important: E-commerce lets firms and individuals conduct business over the Internet.]

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Electronic Commerce

Understanding Electronic Commerce (e-commerce)

E-commerce has helped businesses establish a wider market presence by providing cheaper and more efficient distribution channels for their products or services. For example, the mass retailer Target has supplemented its brick-and-mortar presence with an online store that lets customers purchase everything from clothes to coffee-makers to toothpaste to action figures.

By contrast, Amazon launched its business with an e-commerce-based model of online sales and product delivery. Not to be outdone, individual sellers have increasingly engaged in e-commerce transactions via their own personal websites. Finally, digital marketplaces such as eBay or Etsy serve as exchanges where multitudes of buyers and sellers come together to transact.

The Advantages and Disadvantages of Electronic Commerce

E-commerce offers consumers the following advantages:

  • Convenience. E-commerce can occur 24 hours a day, seven days a week.
  • Increased selection. Many stores offer a wider array of products online than they carry in their brick-and-mortar counterparts. And many stores that solely exist online may offer consumers exclusive inventory that's unavailable elsewhere.

E-commerce carries the following disadvantages:

  • Limited customer service. If you’re shopping online for a computer, you cannot simply ask an employee to demonstrate a particular model's features in person. And although some websites let you chat online with a staff member, this is not a typical practice.
  • Lack of instant gratification. When you buy an item online, you must wait for it to be shipped to your home or office. However, retailers like Amazon make the waiting game a little bit less painful, by offering same-day delivery, as a premium option for select products.
  • Inability to touch products. Online images don’t necessarily convey the whole story about an item, and so e-commerce purchases can be dissatisfying when the products received don't match consumer expectations. Case in point: an item of clothing may be made from shoddier fabric than its online image indicates.