Let's Ask the Basic Question: What Is Ecommerce?

It Might Be a Good Idea to Start From First Principles

What Is Ecommerce?
What Is Ecommerce?. Jamie Grill / The Image Bank / Getty Images

Question: What Is Ecommerce?

Answer: Transacting or facilitating business on the Internet is called ecommerce. Ecommerce is short for "electronic commerce."

Interestingly, I am credited with teaching ecommerce at the business school at the University of Texas at Austin, far before the term "ecommerce" was invented. So, I have had the opportunity to see the earliest versions of ecommerce in the late 80's and early 90's.

Popular examples of ecommerce revolve around buying and selling online. But the ecommerce universe contains other types of activities as well. Any form of business transaction conducted electronically is ecommerce.

Examples of Ecommerce

  • Online Shopping

    Buying and selling goods on the Internet is one of the most popular examples of ecommerce. Sellers create storefronts that are the online equivalents of retail outlets. Buyers browse and purchase products with mouse clicks. Though Amazon.com is not the pioneer of online shopping, it is arguably the most famous online shopping destination.
  • Electronic Payments

    When you are buying goods online, there needs to be a mechanism to pay online too. That is where payment processors and payment gateways come into the picture.

    Electronic payments reduce the inefficiency associated with writing and mailing checks. It also does away with many of the safety issues that arise due to payment made in currency notes.
  • Online Auctions

    When you think online auction, you think eBay. Physical auctions predate online auctions, but the Internet made auctions accessible to a large number of buyers and sellers. Online auctions are an efficient mechanism for price discovery. Many buyers find the auction shopping mechanism much interesting than regular storefront shopping.
  • Internet Banking

    Today it is possible for you to perform the entire gamut of banking operations without visiting a physical bank branch. Interfacing of websites with bank accounts, and by extension credit cards, was the biggest driver of ecommerce.
  • Online Ticketing

    Air tickets, movie tickets, train tickets, play tickets, tickets to sporting events, and just about any kind of tickets can be booked online. Online ticketing does away with the need to queue up at ticket counters.

Types of Ecommerce

Ecommerce can be classified based on the type of participants in the transaction:

  • Business to Business (B2B)

    B2B ecommerce transactions are those where both the transacting parties are businesses, e.g., manufacturers, traders, retailers and the like.
  • Business to Consumer (B2C)

    When businesses sell electronically to end-consumers, it is called B2C ecommerce.
  • Consumer to Consumer (C2C)

    Some of the earliest transactions in the global economic system involved barter -- a type of C2C transaction. But C2C transactions were virtually non-existent in recent times until the advent of ecommerce. Auction sites are a good example of C2C ecommerce.

    Benefits of Ecommerce

    The primary benefits of ecommerce revolve around the fact that it eliminates limitations of time and geographical distance. In the process, ecommerce usually streamlines operations and lowers costs.

    Specialized Forms of Ecommerce

    On some platforms, ecommerce has shown the promise of explosive growth. Two such examples are:

    Despite this discussion, at the consumer level, online retail has become synonymous with ecommerce.

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