What Is E-Commerce? Definition, Types & Getting Started (2024)

E-commerce (electronic commerce) is the exchange of goods and services and the transmission of funds and data over the internet. E-commerce relies on technology and digital platforms, including websites, mobile apps and social media to make buying and selling possible.

According to the U.S. Census Bureau, e-commerce sales totaled $253.1 billion during the first quarter of 2023, revealing that more businesses are embracing e-commerce. Here’s what you, too, can gain from e-commerce.

Global Marketing Reach

Unlike a physical store that limits a business to its geographical area, an e-commerce website allows you to reach customers anywhere. Once customers can place orders online and you can ship a product to their location or provide a service, there’s no limit to your reach.

Lower Operating Costs

Building an e-commerce website and maintaining it is cheaper than running a brick-and-mortar store. You won’t need to rent retail space or a warehouse or worry about building maintenance or property insurance. Plus, advertising online is cheaper, especially with organic blog posts and social media that can drive traffic to your site.

Convenience and Flexibility

E-commerce websites provide flexibility for their owners and customers. You can offer a wide selection of products while customers make round-the-clock purchases, regardless of their time zone or location. And as a business owner, you can earn even while sleeping.

Easier Management

Customer segmentation and other marketing and sales processes are easier for an e-commerce business. For instance, access to customer data (search and purchase history) combined with artificial intelligence (AI) will give you insight into your target market and help you streamline your marketing strategies, which increases your revenue. Also, you can expand your e-commerce business without the need to relocate or renovate a physical store.

Some businesses avoid e-commerce for the following reasons.

Limited Face-to-Face Interaction

Since there’s limited product experience, customers tend to buy products that don’t meet their expectations or are challenging to use. For instance, a shoe might not fit a customer, or they become frustrated when they find it hard to use a product. These expectation issues lead to buying indecisions or refunds that can mess with a store’s inventory or even cost it some money.

Technical Challenges

Since e-commerce websites rely on technology, if you experience glitches, a website crash, a cybersecurity attack or any of your integrated platforms (web builder, web hosting, inventory management software, etc.) experiences downtime, your business suffers. Your website won’t allow buying or selling, let alone completing a purchase.

Data Security Concerns

E-commerce websites often store customers’ card information to allow faster purchases in the future, so if a site is hacked, threat actors can acquire such information. Customer data is compromised, and the website loses sales from a damaged reputation. That’s if the store isn’t even closed down. Last year alone, e-commerce businesses lost $41 billion to fraud.

E-commerce takes several forms. A company can sell to its customers, other businesses or the government. Customers can also sell to businesses, government agencies or other customers. However, there are four primary types of e-commerce that describe the electronic transactions that can take place over the internet.

1. Business to Consumer (B2C)

This popular e-commerce model involves companies selling their products or services directly to the end user, the consumer who needs it.

2. Business to Business (B2B)

This e-commerce type refers to the exchange that occurs between businesses. Here, an e-commerce business sells to another business. An example is software-as-a-service, such as web hosting or accounting software for smooth business operations. B2B e-commerce can also be raw materials or machinery exchange over the internet.

3. Consumer to Consumer (C2C)

Some e-commerce platforms are like digital marketplaces connecting consumers. An example is eBay, which allows a consumer to list and sell their products to another consumer.

4. Consumer to Business (C2B)

For this type of e-commerce, consumers sell their products and services to businesses. For example, a photographer sells their photos to companies so that they can use them for ads or social media campaigns.

E-commerce uses electronic channels to connect buyers and sellers. It works like a physical store—customers visit your e-commerce store to browse your products and make a purchase. However, e-commerce involves back-and-forth communication between your website and its server host.

Typically, e-commerce follows these steps:

1. A business lists its products and services.
2. A customer browses the catalog to choose what they want and then adds it to the cart.
3. The customer pays for the item using any of the available payment options.
4. The business receives the order on its dashboard.
5. The payment is processed, and the order is approved.
6. An order manager sends the order to the fulfillment department or warehouse to authorize a dispatch.
7. The customer receives the notification of order approval and other details, including shipping and tracking information.
8. The business ships the product or renders the required service.

There are several platforms for building your e-commerce store, such as Shopify, Squarespace, and Wix. Every website builder varies in terms of ease of use, price, features and customization capabilities, so it’s important to pinpoint which is right for your online store. The top e-commerce platforms are detailed below.

Squarespace

Squarespace has the features you need to run an e-commerce website, so you won’t need to install a plugin. Its e-commerce builder starts at $23 per month and offers you a wide range of free template designs. You can also customize your e-commerce website with CSS or JavaScript, and sell as many products as you want. Squarespace also offers e-commerce analytics and the ability to tag your products on Instagram.

You’ll also get a shipping calculator to calculate and show customers their shipping fees. You can also send automated emails to customers who abandon their carts. But don’t expect to get all these features on lower plans. Also, note that only the Commerce plans exempt businesses from the additional 3% fee on each transaction.

Shopify

Shopify provides what you need to launch your e-commerce store, even without design experience. This e-commerce website builder also enables smooth integration with up to 6,000 apps, making it easy to run your website. Its plans offer unlimited storage and bandwidth, multiple staff accounts, point-of-sale (POS) access, abandoned cart recovery, shipping discounts, free SSL certificate and shipping label printing. You can also sell as many products as you want.

Shopify’s higher plans offer advanced features such as analytics and reports, and you’ll pay lower fees on transactions, credit card processing and shipping. You can get started with its three-day trial opportunity.

Wix

Wix offers more than 500 free templates and allows you to customize your website with editing tools that make your website responsive on different devices. Depending on your plan, you can sell unlimited products, recover abandoned carts, manage inventory and complete payments. And you’ll get priority customer support, unlimited dropshipping, customized reports and a customer loyalty program to make running an e-commerce business easy and relate with your customers better.

This e-commerce website builder also has built-in SEO tools for improving your site’s ranking, and it integrates smoothly with hundreds of apps, allowing you to add features to your website without coding knowledge. Wix also offers a free version, but don’t expect much from it. Also, you’ll need to pay $59 per month to enjoy unlimited storage, which can withstand a content-heavy e-commerce store.

For a better understanding of what e-commerce is and what an e-commerce site should look like, here are a few e-commerce examples.

Aspect Home

Aspect Home sells office furniture, including customizable work chairs and desks, to those working from home. This e-commerce store was built with Squarespace and has an easy-to-navigate layout. You’ll find category headers, which make it easy for you to locate an item. Each item also has its pricing and descriptions, such as height, width and color, to tell you what’s available, and you can customize the products.

This e-commerce website’s store policies are displayed at the foot of every page, making it visible to visitors. There’s also a “Contact us” footer that takes you directly to a support ticket, phone number and email address, in case you need help.

Vivi et Margot

Vivi et Margot is an example of a Wix e-commerce website. The store sells clothing, jewelry and home items to individuals and businesses. It has the key features of an e-commerce website, with its organized layout of product categories and readable fonts. Vivi et Margot allows you to browse categories such as kitchen, textile, clothing, jewelry and soaps, and most products have full descriptions.

You’ll see their size, color, origin and even how to use or handle the product.
There’s also a “You might also like” feature under the products, which takes you to related items. And the store’s policy stays visible at the foot of each page, while another footer takes you directly to the contact form for support. This Wix e-commerce website also makes it easy to pay for items, as it offers up to four interest-free payments via PayPal.

Modern Market

Built with Shopify, Modern Market offers photographers a selection of tools and designs, including Lightroom presets, online lessons, legal forms and page templates. This B2B and B2C e-commerce website uses a minimal design to showcase its offerings without confusing visitors. The product pages use high-quality images to show you what you get in a preset, and it allows you to preview as many sets as you want.

It also has videos showing you how to use them, but it doesn’t stop there. There’s an FAQs section to answer your questions. Also, the e-commerce website shares testimonials that assure you that your purchase will be worth it.