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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.
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