Ecommerce describes the action of buying or selling goods or services through digital channels like the Internet.
You’ve probably heard of ecommerce and purchased something through an ecommerce website before. But you might not fully understand how ecommerce works. This article will provide a comprehensive guide to ecommerce — what it is, the various types, advantages and disadvantages, steps to starting an ecommerce business and more.
In this guide:
What is ecommerce?
Ecommerce refers to any type of commercial transaction made over the Internet. Ecommerce platforms enable sellers to list their products and services so buyers can purchase them online. Companies with brick-and-mortar retail locations can use ecommerce platforms to create an integrated omnichannel experience.
The first ecommerce transaction reportedly took place in 1994 on a website called NetMarket. Since then, it’s only got easier to sell goods online, as ecommerce platforms serve large companies and small businesses alike. The B2B ecommerce market was valued at $19.34 trillion in 2024 and is expected to reach $47.54 trillion by 2030.
Ecommerce is just one way to sell goods and services and it is a business model that helps startups and small businesses — as well as large ones — scale up and reach customers around the world.
How does ecommerce work?
Since ecommerce relies on the Internet, customers need an online store to access and browse products and services. This involves using different channels, like a dedicated website or social media.
If the transaction is for a physical product, the seller must package and deliver the item. To build trust with the customer and create a positive experience, the seller can send a confirmation email and provide a tracking number for delivering. For digital products and services, follow-up communications are key to ensuring customers are satisfied.
Ecommerce businesses rely on a robust digital platform to facilitate transactions. Since payment information is exchanged through these platforms, security is a top priority. Visitors can jump from one platform to another in a second, so your ecommerce shop front needs to be easy to use and items should be simple for customers to find.
Types of ecommerce.
Business-to-consumer (B2C).
A business-to-consumer or B2C model sees a retailer selling products and services directly to consumers. A simple example of a B2C transaction is someone purchasing an article of clothing from their favourite retailer — either online or in-store.
Retail companies largely make up the business-to-consumer portion of ecommerce shop fronts on the Internet. An example of a B2C ecommerce company is retail giant Amazon, which sells its own branded products as well as other brands’ products directly to consumers through its extensive distribution channels both online and from a logistics perspective. Similarly, Adobe offers a B2C subscription model for Adobe Creative Cloud.
Business-to-business (B2B).
B2B ecommerce involves one business engaging in a commercial transaction with another. This is most common with businesses sourcing materials for their production process.
B2B ecommerce accelerates the sales process by eliminating the need for these businesses to meet and negotiate the sales and exchange of goods in person. Cloud computing offered by Microsoft Azure, Google Cloud and Amazon AWS is a prime example of B2B ecommerce where companies ranging from small businesses to enterprises can scale up or down their cloud computing needs. There is no need to submit an RFP; instead, businesses can simply order and checkout online.
Business-to-business-to-consumer (B2B2C).
B2B2C stands for business-to-business-to-consumer and is a business model where two companies work together to deliver complementary goods or services to the same end customer. In this model:
- One business (for example, a manufacturer) produces the product or service.
- Another business (such as a retailer, service provider or marketplace) sells, delivers or facilitates the customer transaction.
Consumer-to-consumer (C2C).
In a C2C business model, consumers trade products, services and information with each other. This type of ecommerce business is generally carried out on third-party platforms.
An example of a C2C platform is Etsy, a popular online marketplace for selling handmade items. Etsy hosts seller accounts where each account has its own shop within the Etsy platform to sell directly to consumers. In fact, most online marketplaces — such as eBay, Airbnb and Facebook Marketplace — are examples of C2C ecommerce.
Direct-to-consumer (D2C).
A business that sells directly to consumers is a D2C business. Unlike B2C businesses, D2C businesses bypass intermediary distribution channels entirely. A D2C business does not need to go through a distributor, wholesaler or retailer.
Allbirds is considered a D2C because it sells its own products directly to the customer base without needing a retailer or third-party distributer.
Examples of ecommerce.
Ecommerce gives sellers the flexibility to sell a variety of physical goods, but also digital products and services. Buyers can easily browse and compare product options in seconds to quickly purchase the product that best suits their needs.
Selling physical goods.
Physical goods are tangible items that are bought and sold. The selling of physical goods typically follows a B2C or D2C ecommerce model — although some B2B companies sell physical goods as well.
Many brands have brick-and-mortar shops with an online presence and some stores solely focus on online sales. Think of your favourite clothing or electronics retailer — these are prime examples of popular goods to buy online.
Ecommerce platforms enable sellers to list their products and services so buyers can purchase them online.
Selling digital goods.
Digital goods include things like files, templates, tools, images or online classes. Since digital goods are easily transferred through the Internet, it makes a great option for an ecommerce business.
Selling digital goods is not only a convenient option for sellers but also allows buyers to quickly receive and start using the product or service they purchased.
Selling services.
Ecommerce services include specialised services like freelance writing, design, marketing, coaching and more. These services often follow a B2B model but also can be B2C or models that sell to administrations or government agencies.
In-person services can also be reserved online thanks to ecommerce platforms. This could include lawn care or a spa appointment, for example.
Ecommerce revenue models.
There are many business models and types of products and services your ecommerce business can focus on. You’ll want to establish how your company will profit. Ecommerce platforms give you a variety of methods for making money to fit many business models.
- Wholesaling involves maintaining a large inventory of physical products. In this revenue model, you must track orders, maintain delivering information and manage the physical location where you store the merchandise. Wholesalers may charge bulk pricing to sellers and unit prices for consumers. However, wholesaling generally focuses on connecting sellers with large quantities of a certain product.
- White labelling focuses on selling generic products with your branding on the item. Using this revenue model, your business avoids manufacturing constraints and investment. An example would be selling on-demand t-shirts, mugs or hats — the base product is the same but with your brand’s logo or artwork on it.
- Private labelling gives you the most control over the products your company sells. Instead of selling a generic product, you have a manufacturer produce a specific item for your brand. Generally, the product delivers to the customer directly from the manufacturer. This model usually involves manufacturing on-demand, which eliminates the need to warehouse and store large quantities of physical products.
- Dropshipping is a business model in which you use a supplier to fulfil an order while you focus on sales and marketing. Different from traditional retail models, stores that use dropshipping don’t have any products in stock. In this revenue model, you advertise a product on a digital shop front and once the transaction is complete, your ecommerce store passes the order to the supplier, who manages inventory and handles delivering.
- Subscription companies depend on repeat orders. These orders can include physical products or digital goods. For a fixed price, an ecommerce business will package and deliver a good or service on a set schedule. This usually involves items and services consumers need regularly, like grooming products, meal kits and more.
The advantages and disadvantages of ecommerce.
Advantages of ecommerce.
Ecommerce opens many doors to reach new customer bases conveniently. Some of the top benefits of ecommerce include the following:
- Rapid growth potential. Sellers who take advantage of ecommerce can also realise a significant boost to their bottom line. An online shop front can reach vast consumer audiences across the globe, capturing incredible opportunities for expansion and revenue growth.
- Convenience. Ecommerce drastically increases the convenience of shopping as consumers can make their purchases almost anywhere at any time from their smart devices. This convenience is complemented by a wealth of delivering options that make rapid delivery possible.
- Greater selection. When you aren’t limited to a brick-and-mortar store, you can offer customers more options. Items can be delivered from different warehouses and customers have a better chance of finding what they want.
- Potential for low startup cost. Without the need for a physical shop front, companies can save on rent and personnel costs. Ecommerce platforms are also built to scale so companies don’t have to spend time or money on back-end infrastructure as they grow.
- Easier to retarget customers. As an online shop front, you have access to a variety of tools to analyse past purchase behaviour from customers. You can create personalised shopping experiences that will lead customers to go back to their baskets after leaving items behind.
Disadvantages of ecommerce.
While ecommerce offers a plethora of engagement and convenience options, it still poses its fair share of challenges. Here are some of the main disadvantages of ecommerce:
- Limited customer interaction. Some messages are more difficult to convey on an online platform. Without in-person interactions, it’s essential to collect and act on feedback and communicate as much as possible.
- Technical issues. If your website has slow load times or crashes frequently, you are more likely to lose customers. Technical issues can affect product delivery times and affect customer loyalty.
- Data security issues. Customers often store credit card information on ecommerce sites. If the website experiences a data breach, card information could be stolen and customer trust and company reputation can be damaged.
- Delivery and order fulfilment at scale. When first starting your ecommerce business, storage space may not be an issue. However, as your business grows, you may find yourself short on space and struggling to keep up with increased orders.
- Greater competition. With startup costs being generally lower than founding a brick-and-mortar business, it’s easier for competitors to be a part of the ecommerce market. This means it’s essential for online businesses to stay on top of SEO and other best practices to draw people to their websites.
- Consumers can’t try products. The ecommerce experience may be more challenging for customers to make their purchases because they may have to guess on sizing or quality for certain items. This may slow down or prevent purchases.
Ecommerce offers businesses a convenient way to sell products to a vast consumer base with little upfront and maintenance costs.
Steps to starting an ecommerce business.
After determining which business model defines your company best, you’ll need to decide how you want to deliver your products or services, what market space you’ll operate in, and how you can distinguish yourself from the competition.
The following steps can help you start your ecommerce business:
- Research your business idea.
- Ensure there is a demand for your product or service.
- Work out the logistics for selling your product or service.
- Source a supplier or manufacturer.
- Decide the online channels you’ll sell through.
- Build a website or online shop front.
- Create a list of products with optimised descriptions.
- Develop a fulfilment strategy.
- Market what you’re selling.
Use a powerful platform to run your ecommerce store.
Ecommerce offers businesses a convenient way to sell products to a vast consumer base with little upfront and maintenance costs. When you’re ready to start your ecommerce store, look for a robust platform to build your online shop front.
Adobe Commerce is the world’s leading digital commerce solution for merchants and brands. With Commerce, you can build engaging shopping experiences for every type of customer — from B2B and B2C to B2B2C. Businesses of all sizes can use it to reach customers wherever they are, across devices and marketplaces.
Watch the overview video to learn more about Adobe Commerce.
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