What Is E-commerce? Definition, Advantages and Disadvantages

E-commerce, or electronic commerce, is the buying and selling of goods or services electronically on the internet. It can also refer to other online activities, such as auctions, ticketing and banking. In this article, we discuss the different types of e-commerce, the advantages and disadvantages of e-commerce, and why e-commerce is important.

What are the different types of e-commerce?

E-commerce is an essential part of many businesses that rely on the sale of physical products or services online. Here are the main kinds of e-commerce:

- Business-to-consumer (B2C): B2C is the most common kind of e-commerce. When shoppers buy something from an online store, they are involved in business-to-consumer e-commerce.

- Business-to-business (B2B): B2B is when businesses sell raw goods or parts through e-commerce to other companies that will then use those materials to create their own products.

- Consumer-to-consumer (C2C): C2C e-commerce is when consumers sell to other consumers. Sites like eBay and Craigslist are examples of this kind of e-commerce.

- Consumer-to-business (C2B): C2B e-commerce is when consumers sell their products or services to businesses.

- Business-to-administration (B2A): B2A e-commerce refers to transactions between businesses and public administration, which includes areas such as social security, employment and legal.

- Consumer-to-administration (C2A): C2A e-commerce refers to transactions between consumers and public administration, where consumers pay for services like taxes and legal document preparation.

Related: Q&A: What Does B2B Mean? Definition and Popular Business-To-Business Roles

Examples of e-commerce

In addition to different types of e-commerce, there are also different functional versions of e-commerce, distinguishable by the relationship of the transaction and the products or services being sold. The most common examples include:

- Retail: Retail e-commerce is when a product is sold directly to a customer.

- Wholesale: Wholesale e-commerce is when products are sold in bulk often to a retail company who, in turn, sells them to its customers.

- Physical products: Physical product e-commerce refers to any products that affect inventory and must be physically shipped.

- Digital products: Digital product e-commerce refers to products purchased as downloadable goods—such as books, templates or courses.

- Dropshipping: Dropshipping e-commerce is when a product is sold by one company that outsources its manufacturing and shipping to another company.

- Subscription: Subscription e-commerce is when a customer has a recurring purchase of a product or service—weekly, monthly, yearly, etc—that automatically charges them and replenishes the product.

- Services: Service e-commerce refers to services purchased and often priced by time spent on providing the service.

- Crowdfunding: Crowdfunding e-commerce is when money is collected as product capital in advance of a product being available.

Related: 10 of the Top E-Commerce Companies

Advantages of e-commerce

There are many advantages of e-commerce including:

- Companies can reach a wider audience

- Companies have lower operational costs

- Shopping from home is more convenient for the consumer

- Consumers can easily comparison shop across different brands

- Greater selection of goods available

Disadvantages of e-commerce

While there are many benefits of e-commerce, there are some potential downsides as well. Below are some common disadvantages:

- No direct interaction with sales clerks leads to less personalized service

- Shipping charges and waiting for product to arrive

- Inability to see product before buying

- Inconvenience of returning products

- Security issues of website may put consumer information at risk

Related: 7 Ways To Market a Small Business

Frequently asked questions about e-commerce

Here are some frequently asked questions to help you better understand e-commerce:

What impact can the legal system have on online security?

The first record of a legislative body holding a hearing about e-commerce was in California in 1984. California was the first state to enact an Electronic Commerce Act to define consumer rights online. Today, many kinds of e-commerce activities are regulated by the Federal Trade Commission (FTC).

Can e-commerce be combined with other kinds of retail?

Yes, in the form of omnichannel retailing. Omnichannel retailing refers to strategies that merchants implement that combine online shopping and shopping at a traditional retail store to provide customers with a seamless experience. This trend allows consumers to transition between these two models easily.

5 e-commerce jobs

If you're interested in a career in e-commerce, there are different jobs you may consider. Here are five options for your career in e-commerce:

1. Digital marketer

Average salary: $61,145 per year

Primary duties: A digital marketer is someone who engages in digital advertising, social media and online content to sell a service or product. They help companies grow their brand and extend their online presence. Common tasks would include creating digital marketing campaigns and coordinating press releases, social media posts, website and landing page design and content. 

2. E-commerce project manager

Average salary: $80,325 per year

Primary duties: An e-commerce project manager is responsible for creating and coordinating projects that relate to the sale of services or products online. Responsibilities include troubleshooting challenges and issues, monitoring the progress of the project and coordinating all team members.

3. SEO specialist

Average salary: $54,079 per year

Primary duties: This role involves the optimization of digital content for search engines. An SEO specialist is a marketing professional who looks for ways to incorporate keywords into content and improve website ranking on search engine results pages. They are not involved in the design of the page but rather in the content and how well it ranks with search engines.

4. Website designer

Average salary: $49,885 per year

Primary duties: This role involves designing and implementing the creation of a website, and includes graphics, layout and navigability. Website designers must use both technical and graphic arts skills and they must have a clear understanding of user experience.

5. Social media manager

Average salary: $48,573

Primary duties: This role is tasked with the creation and implementation of a company’s social media presence through online posts. A social media manager creates content with adherence to search engine optimization standards and monitors usage to ensure that the content is ranked well by search engines. This role may involve responding to online comments and partnering with third parties to enhance online visibility.