What Is Electronic Commerce (e-commerce)?

Electronic commerce or e-commerce (sometimes written as eCommerce) is a business model that lets firms and individuals buy and sell things over the internet. E-commerce operates in all four of the following major market segments:

  • Business to business
  • Business to consumer
  • Consumer to consumer
  • Consumer to business

E-commerce, which can be conducted over computers, tablets, or smartphones may be thought of like a digital 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.

Key Takeaways

  • E-commerce is the buying and selling of goods and services over the internet.
  • E-commerce can be a substitute for brick-and-mortar stores, though some businesses choose to maintain both.
  • Almost anything can be purchased through e-commerce today.

[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 coffeemakers 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 conduct business.

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 is unavailable elsewhere.

E-commerce carries the following disadvantages:

  • Limited customer service. If you are 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 do not necessarily convey the whole story about an item, and so e-commerce purchases can be unsatisfying when the products received do not match consumer expectations. Case in point: an item of clothing may be made from shoddier fabric than its online image indicates.