E-commerce: Definition, history and examples

Electronic commerce, or e-commerce for short, is the buying and selling of goods and services online. And according to the U.S. Census Bureau of the Department of Commerce, e-commerce accounted for an estimated $1.8 trillion for the second quarter of 2023.

Keep reading to learn more about e-commerce and how it works. 

Key takeaways

• E-commerce is short for electronic commerce, and it refers to the buying and selling of goods or services online.
• There are many types of e-commerce, and they can be categorized by who’s doing the buying and who’s doing the selling.
• Though these aren’t exclusive to e-commerce, some common e-commerce business types include business-to-consumer, business-to-business and consumer-to-consumer. 
• There are several kinds of e-commerce revenue models, including wholesaling, dropshipping and subscriptions.

E-commerce describes the buying and selling of goods and services over the internet. Buyers can make purchases from a computer or mobile device using digital payment options, including credit card or electronic fund transfers.

There are different types of e-commerce businesses, and they’re categorized based on who’s doing the buying and the selling. While these business models aren’t unique to e-commerce, here are some common types:

With a B2C e-commerce business model, products and services are sold online directly from the business to the consumer—there’s no company or distributor working in the middle to facilitate the transaction.

With a B2B e-commerce business model, products and services are sold online directly from one business to another. B2B e-commerce companies may also work with entities like:

• Wholesalers
• Resellers
• Large companies

With a C2C e-commerce business model, consumers can use an e-commerce platform to connect with and sell to other consumers, often through auction-style listings or digital marketplaces.

With a C2B e-commerce business model, consumers offer their services to businesses using online platforms. On these platforms, consumers can interact with companies to solicit bids in exchange for their services. This might involve things like contracts, gig work or freelancing.

Like the B2B model, B2G e-commerce companies sell products and services online to another entity—but in this case, products and services are sold to a government entity. This business model requires B2G companies to meet particular government-specific criteria and follow certain processes.

Consumers can also interact with government entities online with the C2G e-commerce business model. This can occur when an individual makes an online payment to a government agency for something like paying property taxes or exchanging information with the IRS by submitting a federal tax return.

E-commerce describes the buying and selling of goods and services online, but what kinds of services and products might those be? Here are a few examples of the most basic types:

Physical products are tangible items that businesses sell and ship to their customers. Businesses typically set the price on these products and earn profit on sales.

Digital products are products that consumers purchase and download online. Examples include templates, media, guides or courses. 

E-commerce services are any skills that businesses or individuals sell online. Examples of this could be anything from online banking to local landscaping or freelancing gigs.

There are several different ways an e-commerce business can operate. Here are some common e-commerce revenue models: 

Wholesaling involves selling products in bulk to retailers or consumers, typically with a volume discount.

With dropshipping, products are shipped to consumers through third parties. A dropshipping business will create a digital storefront and facilitate sales and payments. After this, they’ll communicate with their supplier, who has the inventory. The supplier will then package and ship the product to the consumer. 

Subscription-based products are offered at fixed prices. Consumers receive their product or service on a recurring basis until they choose to cancel. Some examples of common subscriptions include meal kits and online streaming services.

E-commerce allows businesses and consumers to buy and sell goods and services online. This has given consumers more convenient shopping opportunities and allowed businesses to reach more people.

Ready to make your next online purchase? Consider using a digital wallet for added convenience when you check out.