Electronic Commerce (E-commerce)

What is Electronic Commerce (E-commerce)?

Electronic Commerce, commonly known as E-commerce, refers to the buying and selling of goods and services over electronic networks, primarily the internet. It also includes the digital transfer of money and data to execute these transactions.

Key Takeaways

• Enables buying and selling without physical interaction.
• Expands market reach beyond geographic boundaries.
• Reduces transaction costs and improves convenience.
• Supports multiple business models and payment systems.

Understanding Electronic Commerce

E-commerce transforms traditional commerce by digitizing transactions and customer interactions. Businesses use websites, mobile apps, and online marketplaces to showcase products, process payments, and manage logistics.

E-commerce models range from simple online storefronts to complex platforms integrating supply chains, data analytics, and customer relationship management. Growth in broadband access, mobile technology, and digital payments has accelerated global adoption.

While e-commerce offers scalability and efficiency, it also introduces challenges such as cybersecurity risks, logistics complexity, and regulatory compliance.

Formula (If Applicable)

There is no single formula for e-commerce performance, but common metrics include:

• Conversion rate
• Average order value (AOV)
• Customer acquisition cost (CAC)
• Lifetime value (LTV)

These indicators help assess effectiveness and profitability.

Real-World Example

An online retailer sells products through its website and mobile app, accepting digital payments and shipping directly to customers. Automated inventory and fulfillment systems enable rapid order processing.

This example demonstrates how e-commerce streamlines transactions and expands reach.

Importance in Business or Economics

Electronic Commerce is a major driver of digital transformation and economic growth. It enables small and large firms to access global markets, experiment with new business models, and respond quickly to consumer demand.

From an economic perspective, e-commerce affects productivity, competition, employment patterns, and consumer welfare.

Types or Variations (If Relevant)

• Business-to-Consumer (B2C): Firms selling directly to consumers.
• Business-to-Business (B2B): Transactions between businesses.
• Consumer-to-Consumer (C2C): Peer-to-peer marketplaces.
• Consumer-to-Business (C2B): Consumers selling to businesses.

Related Terms

• Digital Marketplace
• Online Payment Systems
• E-Business

Sources and Further Reading

• Investopedia – Electronic Commerce
• OECD – E-commerce and Digital Trade
• World Trade Organization – Digital Trade:

Quick Reference

• Key Concept: Online buying and selling.
• Primary Use: Digital sales and distribution.
• Limitation: Logistics, security, and regulatory challenges.

Frequently Asked Questions (FAQs)