Loading the player...

What is 'Electronic Commerce (e-commerce)'

Electronic commerce, or e-commerce, (also written as eCommerce) is a type of business model, or segment of a larger business model, that enables a firm or individual to conduct business over an electronic network, typically the internet. Electronic commerce operates in all four of the major market segments: business to business, business to consumer, consumer to consumer, and consumer to business. It can be thought of as a more advanced form of mail-order purchasing through a catalog. Almost any product or service can be offered via ecommerce, from books and music to financial services and plane tickets.

BREAKING DOWN 'Electronic Commerce (e-commerce)'

E-commerce has allowed firms to establish a market presence, or to enhance an existing market position, by providing a cheaper and more efficient distribution chain for their products or services. One example of a firm that has successfully used e-commerce is Target. This mass retailer not only has physical stores, but also has an online store where the customer can buy everything from clothes to coffee makers to action figures.

Amazon, by contrast, is a primarily an e-commerce-based business that built up its operations around online purchases and shipments to consumers. Individual sellers can also engage in e-commerce, establishing shops on their own websites or through marketplaces such as eBay or Etsy. Such marketplaces, which gather multitudes of sellers, serve as platforms for these exchanges. The purchases are typically fulfilled by the private sellers, though some online marketplaces take on such responsibilities as well. E-commerce transactions are typically be done through a computer, a tablet, or a smartphone.

Aspects of Electronic Commerce

When you purchase a good or service online, you are participating in e-commerce.
Some advantages of e-commerce for consumers include:

  • Convenience. E-commerce can take place 24 hours a day, seven days a week.
  • Selection. Many stores offer a wider array of products online than they do in their brick-and-mortar counterparts. And stores that exist only online may offer consumers a selection of goods that they otherwise could not access.

But e-commerce also has its disadvantages for consumers:

  • Limited customer service. If you want to buy a computer and you’re shopping online, there may or may not be an employee you can talk to about which computer would best meet your needs. Some websites do include chat features to connect with their staff, but this is not a uniform practice across the industry.
  • No instant gratification. When you buy something online, you have to wait for it to be shipped to your home or office; however, services such as Amazon increasingly offer same-day delivery as a premium option for select products.
  • No ability to touch and see a product. Online images don’t always tell the whole story about an item. E-commerce transactions can be dissatisfying when the product the consumer receives is different than expected.
RELATED TERMS
  1. Commerce

    Commerce refers to the exchange of goods, services or something ...
  2. Social Commerce

    A type of electronic commerce that employs social media to promote ...
  3. Electronic Money

    Electronic money is money which exists in banking computer systems ...
  4. Online Banking

    Online banking is the performance of banking activities via the ...
  5. Click And Mortar

    Click and mortar is a type of business model that has both online ...
  6. Showrooming

    Showrooming is the practice of examining merchandise or products ...
Related Articles
  1. Investing

    E-commerce Earnings on the Rise

    E-commerce companies reported a healthy rise in earnings. But growth has come at the cost of operating margins for some.
  2. Investing

    First Data: E-Commerce Sees Holiday Growth (FDC)

    Point-of-sales transaction processor First Data says e-commerce represented 25% of total retail sales up 9% YOY on Thanksgiving and Black Friday.
  3. Tech

    China's Booming E-Commerce Market

    China’s rapidly growing consumer story is spreading to its e-commerce sector as well. Given the nation’s huge population and growing internet adoption, it may be prudent to add exposure to the ...
  4. Insights

    Two Wal-Mart Numbers are Working Against Each Other

    Walmart's online business is trending north, but is it making operating income trend south?
  5. Investing

    Alibaba Increases Stake In Paytm E-Commerce As It Sets Its Sights On India (BABA)

    Alibaba has raised its stake in Paytm E-Commerce as it sets it sights on the hot growing Indian ecommerce market.
  6. Personal Finance

    Comparing Online And In-Store Prices

    While every retailer is different, there are several factors that affect where you'll get a better deal.
  7. Personal Finance

    Short-Sighted Retailers: Why Target is Losing the Retail Wars (TGT)

    Target has not invested enough in its long-term future, preferring instead to borrow ideas from other retailers.
  8. Investing

    Report: Alibaba Seeks to Raise $2B Via Bullet Loan (BABA)

    China's leading ecommerce player is looking to raise $2 billion in fresh funding via a bullet loan.
  9. Investing

    Target's E-commerce Strategy May Not Be Enough

    Ever-growing e-commerce investment threatens Target's profitability in the face of stiff competition.
  10. Small Business

    How To Start An Online Business

    Setting up an online business can be a great way to make money, if you plan properly. Here are some tips to help you get started.
RELATED FAQS
  1. Are there significant seasonal patterns in the electronics sector?

    Examine the consumer electronics sector and learn what typical seasonal sales patterns can be identified for this important ... Read Answer >>
  2. What are the key barriers to entry for companies in the electronics sector?

    Learn how the entry barriers of economies of scale and scope, research and development, capital and brand loyalty affect ... Read Answer >>
  3. What is the growth rate of the electronics sector?

    Read some projections about the growth rate of the electronics sector. Find out which products are primed to be responsible ... Read Answer >>
Hot Definitions
  1. Inflation

    Inflation is the rate at which prices for goods and services is rising and the worth of currency is dropping.
  2. Discount Rate

    Discount rate is the interest rate charged to commercial banks and other depository institutions for loans received from ...
  3. Economies of Scale

    Economies of scale refer to reduced costs per unit that arise from increased total output of a product. For example, a larger ...
  4. Quick Ratio

    The quick ratio measures a company’s ability to meet its short-term obligations with its most liquid assets.
  5. Leverage

    Leverage results from using borrowed capital as a source of funding when investing to expand the firm's asset base and generate ...
  6. Financial Risk

    Financial risk is the possibility that shareholders will lose money when investing in a company if its cash flow fails to ...
Trading Center