What is Ecommerce? Definition, types and models

The definition of ecommerce varies slightly depending on the context and industry. Let's have a look at the different definitions.

Most common definition

Ecommerce (or electronic commerce) refers to the buying and selling of goods and services over the internet.

Example: A customer orders a pair of shoes online. Here, the shoes are the product, and the process of scrolling, comparing products, and buying is ecommerce.

But if we look at how companies operate behind the scenes, the definition expands.

Business industry

In the business industry, ecommerce is not only about selling online, but the process that is involved with operations such as inventory management, online marketing, customer support, and automated order fulfillment.

Example: When a customer checks out on a fashion brand’s website, it triggers multiple workflows like warehouse picking, order packaging, and customer notifications.

Service industry

Not every ecommerce transaction results in a package on a door step. In the service sector, ecommerce involves selling services online instead of physical products. The transaction happens digitally, even if the service is delivered in person.

Example: Online services from cloud storage and music streaming to salon appointment bookings are fully a part of ecommerce.

Global commerce

From a global perspective, ecommerce represents the digital transformation of international trade. Businesses sell across borders without setting up physical stores in different countries.

Meaning of ecommerce: What it really represents

Ecommerce is:

• A digital method for buying and selling products and services

• A business model that allows 24/7 shopping from anywhere

• A platform that creates direct connections between businesses and consumers, eliminating traditional intermediaries

• An ecosystem that leverages data and automation to personalize customer experiences and optimize business operations

Difference between traditional commerce and ecommerce

The key difference that separates ecommerce from traditional commerce is where the transaction occurs. While brick-and-mortar stores require physical areas, staff, and fixed operating hours, ecommerce operates through digital storefronts that remain accessible around the clock.

A furniture store that sells products in their physical store is traditional commerce. The same store that owns an online website to sell their products is ecommerce.

Types of goods and services you can sell through ecommerce

Physical goods

Physical goods are tangible products that customers receive after a purchase like clothing, electronics, furniture, and books. Physical products require inventory management, shipping logistics, and return processing, but ecommerce has made it possible for businesses of any size to reach global customers without requiring physical retail locations.

Digital goods

Digital goods are intangible products delivered instantly online with no shipping costs, minimal inventory management, and infinite scalability. Digital goods include ebooks, online courses, software applications, design templates (Canva templates, resume templates, website themes), music, stock photography and video, digital art, and the like.

Ecommerce services

Ecommerce services are intangible offers that add value through expertise and support. Examples include freelance services (writing, graphic design, programming), coaching, digital marketing services, and the like.

What are the different types of ecommerce?

Ecommerce can be classified into different types based on who is selling and who is buying. Let's explore each type in detail.

Business to Consumer (B2C)

B2C ecommerce is the most familiar type of online commerce, where businesses sell products or services directly to individual consumers.

A customer visiting a beauty supply store to buy skincare products is a good example of B2C ecommerce. It drives high volume transactions and focuses on customer lifecycle growth through loyalty programs and repeat purchases.

Business to Business (B2B)

B2B ecommerce refers to online transactions where one business sells to another business.

A restaurant entering a food supply ecommerce portal to order 50 kg of packaged ingredients every week is B2B ecommerce. Prices are negotiated, invoices are generated, and delivery schedules are automated.

Consumer to Consumer (C2C)

C2C ecommerce refers to when individuals sell products or services directly to other individuals through an online marketplace. This allows anyone to become an online business owner without significant investment.

Consumer to Business (C2B)

In C2B ecommerce, individuals sell products, skills, or services to businesses. This type is commonly seen in freelancing, content creation, and influencer partnerships. The work done by an individual is delivered digitally, and payment is processed through the platform.

Business to Government (B2G)

B2G (or B2A called as Business to Administration) is when businesses provide products, services, or solutions to government departments or public organizations through digital platforms. This model follows unique protocols and requirements different from other ecommerce types.

Direct to Consumer (D2C)

D2C is when brands sell directly to customers without relying on wholesalers or retailers. This business model gives brands full control over pricing, branding, and customer experience.

What are different ecommerce revenue models?

Beyond the transaction types, ecommerce businesses operate under various revenue and delivery models.

Dropshipping

In this type of model, the business owner sells the product without any inventory. When a customer places an order, the seller buys the item from a third-party supplier who ships it directly to the customer. Dropshipping reduces upfront investment in inventory and storage costs.

Subscription services

Subscription ecommerce provides the customers with access to their products or services for the recurring fees. Streaming services are examples of subscription-based model. This model provides consistent income for businesses and encourages customer retention.

Wholesale

Wholesale is a model in which businesses purchase large quantities of products at cheaper rates and sell them to retailers or to the final customer.

White labeling

White labeling is when businesses sell products manufactured by other companies under their own brand name. This helps companies sell products without manufacturing but also builds brand recognition.

Marketplace model

Marketplace platforms are businesses that connect multiple sellers and buyers on a single digital platform. They act as an intermediary for transactions rather than selling their own products. Amazon, eBay, and Etsy are marketplaces, that provide infrastructure while sellers handle product listings and fulfillment.

Start your ecommerce journey

Ecommerce is a proven business model that offers opportunities for anyone with a great idea. As you go through this guide, take note of each concept to help you in your journey as an ecommerce business owner.

If you’re ready to build your own online store, Zoho Commerce makes the process simple. You can create a fully functional website without any technical skills; just drag, drop, and customize the way you want.