How to Define E-Commerce Business Models

What is E-Commerce

What’s e-commerce, you ask? E-commerce is the buying and selling of goods and services over an electronic network. This business plan means a business or consumer sells something through the internet. When you explain e commerce, you have to understand the three different types of business transactions. Business to business, business to consumer, and consumer to consumer.

In this article, we define e-commerce and discuss its advantages and disadvantages. We also talk about getting an e commerce degree. Is e commerce the way of the future? Read on for answers to this question and more.

What is Electronic Commerce?

To define ecommerce, you must understand how the internet powers the sale of goods and services. It is e commerce that changed the way people do business. In the last 20 years, we have seen widespread growth and a rise in the use of e commerce platforms. People have left the brick and mortar store (physical stores) to shop online.

In 2011, ecommerce business accounted for 5% of total retail sales. But by 2020, at the start of the COVID-19 pandemic, this number had grown to over 16%. There is steady growth for goods and services sold online. Amazon, among other online retailers, has changed the way people shop.

How Does E-Commerce Work?

Customers access an online store where they place orders or buy services. During online shopping, a customer places an order. The customer’s web browser communicates with the server that hosts the ecommerce website. Order details and data information get relayed to a central computer. This computer is the order manager. Information forwards to databases that manage inventory levels and payment details.

When an order gets validated, the online business gets notified. The store’s web server also gets notified. This process is different than a physical store because all transactions take place online. When an order processes, the customer receives confirmation. Details are then sent to the warehouse or order manager for shipping and delivery.

Platforms that follow this business model include online marketplaces such as Amazon. There are different types of ecommerce businesses, which we discuss below.

An image of an ecommerce shopping cart for our FAQ on How to Define E-Commerce Business Models

Different Types of E-Commerce

There are six different types of ecommerce platforms. Commerce websites get classified into categories by the parties participating in online sales.

Business-to-Business (B2B)

B2B ecommerce platform is the electronic exchange of:

  • Information
  • Products
  • Services

It is different than most e commerce sales because the exchange is between businesses instead of consumers and businesses. Online directories are one example of B2B e commerce companies.

Business-to-Consumer (B2C)

When consumers are shopping online they use B2C internet commerce. B2C is when businesses sell to consumers. E commerce websites of this kind can also offer services or information to consumers.

B2C e commerce business surged in the nineties when services online were limited. But today, there are many e commerce sites that sell products online. It isn’t rare. It’s the norm. Brick and mortar stores and small businesses turn to electronic business because it grows their presence and brand. Amazon is the largest e commerce retailer.

Consumer-to-Consumer (C2C)

When consumers trade products or services with each other online, it’s called C2C business models. A third party provides an online platform where the trades take place. An example of this type of ecommerce business is online auctions like eBay and Facebook marketplace.

Consumer-to-Business (C2B)

Consumer to business is a type of ecommerce store where consumers make their products or services available online for companies to purchase. Companies can also bid on services offered. C2B e commerce transactions are the opposite of the B2C e commerce platform model.

One example of a C2B ecommerce online store is a market selling royalty-free images like iStock or Pixabay. C2B companies also offer digital products.

Business-to-Administration (B2A)

Transactions that take place online between companies and government agencies or bodies is B2A. Some refer to it as a business to government business plan. Different branches of government rely on certain products or e-services. These transactions can refer to fiscal data, legal documents, or registries. Business supply these services electronically. This is an area of selling online that has grown in recent years.

Consumer-to-Administration (C2A)

Online transactions that take place between consumers and government bodies refers to C2A e commerce businesses. It is rare for the government to engage with customers online. They don’t buy products from individuals. But people use electronic means when engaging with the government. The government provides services direct to consumer in areas like:

  • Health: Consumers schedule appointments and receive lab results. They also make service payments.
  • Social security: The government delivers information to individuals. Consumers can also make payments.
  • Taxes: There are no online purchases made, but rather payments received from consumers. Individuals can pay their taxes or file returns.

Other Businesses and Types

There is another e commerce business that doesn’t get talked about as much as the above six types. Read on to get the e commerce description on mobile ecommerce business.

Mobile Ecommerce Sales

In ecommerce, what is mobile sales? Often referred to as m-commerce or mobile commerce, mobile sales transactions use mobile devices like tablets and smartphones. Selling products includes banking, payments, and shopping (retail ecommerce sales). Mobile devices and chatbots allow consumers to complete transactions via voice or text. In recent years, this industry has shown significant e commerce growth.

An image of a company warehouse for our FAQ on How to Define E-Commerce Business Models

Benefits of Electronic Commerce

E commerce business has had a massive impact on how customers find and buy products. It has also impacted how companies conduct their business. Businesses use techniques such as search engine optimization and targeted ads to drive traffic to their online retail store or e commerce site. Here are some of the benefits of ecommerce transactions.


The customer experience in a physical store has its downfalls. Customers have trouble locating products. Some products are out of stock. But e commerce businesses offer easy accessibility. An e commerce store allows you to browse products in real time. In some stores, you get one-day delivery. This is another huge benefit of e commerce businesses.


An online retailer can reach a wide audience. They aren’t limited by their geographic location. A large ecommerce company like Amazon can sell online to a global audience. They can also provide faster customer service. Because of this customers have success in finding what they want.

Lower prices

The cost of running an online store is lower than a physical storefront. There isn’t the overhead like rent, cashiers, and inventory. There are costs such as online advertising and marketing campaigns, but they are many times lower than brick and mortar businesses. While customers incur shipping costs, they receive an enjoyable online shopping experience.

Personalized products and services

E commerce businesses and sites can track a customer’s search history and purchases. They use the data to offer a personalized customer experience. The data collected can provide insights into target markets. You see how personalization plays out on product pages labeled “Frequently purchased products” or “Customers who viewed this item also viewed.” Amazon uses this kind of tracking to provide a personalized shopping experience.

Problems with E Commerce Business

While there are many benefits to traditional e commerce, there are drawbacks. Read on for more information about the disadvantages of ecommerce business.

Limited customer service

When a business sells online, questions from customers can arise. In a storefront, customers can see a cashier or seek help from a store manager. But at an e commerce site, the customer doesn’t always get the same assistance. Customer service at an online business is limited. The store may offer support during certain hours. After hours, help is not available.

If a person has trouble with the shopping online experience, or they need help navigating a site, they may not get assistance. The limited customer service is a disadvantage of goods and services online.

Limited hands-on experience

You don’t get the same product experience online as you do in person with electronic commerce. You can’t play a musical instrument or turn on a television, for example. You also can’t try on clothes you’re thinking of purchasing. But most online retail stores have improved their return policies. They make it easy to return an item that doesn’t fit.

Security issues

Data breaches can lead to a damaged store reputation. Skilled hackers can steal credit card information and other important data. When customers store their credit card information online to make future purchases with the retailer convenient, it is the store’s responsibility to protect this information. When there’s a security breach, the reputation of the ecommerce business is on the line.

Shipping and wait time

When customers shop in a store, they buy their products and take them home. Ecommerce business customers purchase a product then wait for delivery. While online stores have convenient shipping times, they are at the mercy of the shipper.

Businesses sell products to online shoppers. They offer next-day or same-day delivery. But if the shipper experiences issues, the packages get delayed. These delays can cause problems when an ecommerce company receives feedback from customers whose packages arrived late.

An image of an online shopper for our FAQ on How to Define E-Commerce Business Models

The Future Of E-Commerce

Like most areas of the tech field, e-commerce has changed over the years. It continues to evolve because it is a “goliath” industry, according to Forbes magazine and other online sources. Global ecommerce reached over five trillion dollars in 2022, and retail sales should exceed this in 2023.

Because of the increase in sales, now’s a good time to start selling online. If you’re a budding entrepreneur with a physical store, taking your services online can boost retail sales. But it’s the trends that really shape the future of e commerce business. We anticipate big changes in the coming years for large and small businesses. Here are a few trends e commerce businesses can expect in the future.


Over 60% of companies and small businesses use some form of automation software or tools. This number should increase as more companies invest in automation. Managing warehouses and supply chains benefit from automation. This is a definite trend to look for in the future of business online.

Climate and Sustainability Initiatives

As consumers lean into sustainability efforts and climate initiatives, businesses will follow. And doing so is good for business. Why? Studies show climate-first stores grow faster than those who don’t put in sustainability efforts. Some online marketplaces offer eco-friendly packaging or advertise suppliers who put climate first.

More Interactive Products

One of the biggest disadvantages of e commerce is that customers don’t have the same product experience that they do in a brick and mortar store. Consumer behavior shows that people like to touch, feel, try an item out before buying it. With e commerce, this experience gets lost. You can’t touch a product. But what if you can?

In the future, augmented reality technology will help consumers try it before they buy it. The technology creates an immersive shopping experience online. Shoppers can engage with the products they want to buy. One example of this experience is Shopify AR. Customers get to see brands in natural environments before buying them.

New Marketing Channels

New marketing channels emerge all the time. This trend won’t change in the future of e commerce. Instagram and TikTok release new shopping online features. Businesses can run ads on social media platforms. None of this will change. But what will evolve are the different channels you can choose.

Rise in AI and Chatbots

Chatbots will continue to evolve, and so will artificial intelligence. In e commerce, we will use both as personal assistants. AI assistants can help online stores manage inventory and stock levels. They can also help with reordering. We will see a rise in AI apps designed to streamline your business practices and help you grow your company.

Voice Search on the Rise

The future of e commerce includes more consumers using voice search tools and voice-activated devices. You will see e commerce sites optimize product information pages for common voice search commands. Shoppers can ask questions using a voice assistant. Questions may include: “Where do I find online coupons for Nike shorts?”

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This concludes our article on what is an e commerce business.