What Is eCommerce? The Definition, and the Seven Models It Covers
DEFINITION
eCommerce is the buying and selling of goods or services over the internet, together with the payment, fulfilment and customer-service operations that make the transaction possible. The word covers a shop selling fifty products and a marketplace moving millions of them.
Which is why the definition on its own is nearly useless. What matters in practice is which eCommerce model you are running, because the seven on this page have different margin structures, different operational demands and almost nothing in common beyond the word.
The definition is simple. The operations behind it are where businesses succeed or fail.
- The models
What eCommerce actually means in practice
One definition, three moving parts, and seven business models underneath it. Most of what people disagree about when they say eCommerce is really a disagreement about which model they mean.
DEFINITION
eCommerce = selling online + taking payment + fulfilling the order
Selling online
A storefront you own, a marketplace listing, a social shop, or all three at once. The channel decides who owns the customer relationship and the data, which is the difference that matters most later.
Taking payment
A gateway, wallet or marketplace handling the money, plus the fees, chargebacks and currency conversion that come with it. Payment costs are a real line in eCommerce margin, not an afterthought.
Fulfilling the order
Picking, packing, shipping, tracking and handling returns. This is the part most new entrants underestimate, and the part that decides whether a profitable-looking order was actually profitable.
Remove any one of the three and it is not eCommerce. A website that takes enquiries but not payment is lead generation; a marketplace listing you never ship is not a business.
- Seven models
The seven eCommerce models, and why the distinction matters
All seven are eCommerce. They differ in who the buyer is, how the margin is structured, and what usually goes wrong. Most established businesses run two or three of them at once without separating them in reporting.
Model
What it means
Where it usually goes wrong
B2C
Selling to consumers, usually through your own storefront. The default meaning of the word.
Acquisition cost rising faster than order value, because the first order rarely pays for itself.
D2C
A brand selling its own products direct, with no retailer or distributor in between.
Owning marketing, fulfilment and service that a retailer used to absorb, at a margin that assumed they still would.
Marketplace
Selling as a third-party seller on Amazon, Walmart, eBay, Etsy, noon or similar.
You rent the demand and never own the customer. Fees, buy-box competition and policy changes are outside your control.
B2B
Selling to other businesses: trade pricing, quotes, purchase orders and approval workflows.
Consumer software bent into a procurement process it was never designed for.
Subscription
Recurring delivery or access, billed on a cycle rather than per order.
Churn measured too late. The economics live in month four, not in the first order.
Wholesale
Selling in bulk to retailers or distributors who then sell on to the end customer.
Thin margins and long payment terms, with your brand presented by somebody who did not build it.
Dropshipping
Listing products a supplier ships on your behalf, so you hold no inventory.
No control over stock, shipping times or quality, and nothing proprietary to defend when a competitor lists the same product.
Most real businesses
Run two or three of these at once — typically D2C plus one or two marketplaces.
Reporting that cannot separate them, so nobody knows which channel is actually funding the others.
Seven models, one word. When somebody asks what eCommerce means, the useful answer is a question back: selling to whom, through whose channel, and who ships it?
- How it works
How eCommerce works, from search to delivered order
The part the definition leaves out. Every online sale passes through the same five stages, and each one is a place where the order can be lost.
THE SEQUENCE
Discovery → Consideration → Checkout → Fulfilment → Retention
Discovery and consideration
Somebody searches, scrolls or asks an assistant, lands on a category or product page, and decides whether to keep reading. Most eCommerce traffic leaves here, which is why category pages matter more than most stores assume.
Checkout and payment
The basket, the delivery options and the payment step. Roughly seven in ten baskets are abandoned, and the most common stated reason is extra costs appearing too late rather than anything about the product.
Fulfilment and what happens after
Pick, pack, ship, track, and handle the return if it comes back. This stage decides whether the customer orders again, which is where the economics of every model above are actually settled.
The stages are the same whether you sell seven products or seventy thousand. What changes with scale is how much of each stage is a template decision rather than a human one.
- What counts
What counts as eCommerce, and what does not
The boundaries matter because they decide which benchmarks and which advice apply to you.
It is not the same as a website
- A site that takes enquiries but not payment is lead generation
- A brochure site with a phone number is not an online store
- The transaction, not the web presence, is what makes it eCommerce
- This is why eCommerce SEO and ordinary SEO are different disciplines
It is not only your own website
- Marketplace sales are eCommerce, and for many brands the majority of it
- Social and live-shopping checkouts count too
- So do B2B portals, which are often the largest line and the least discussed
- Any channel where money changes hands online belongs in the same P&L
eCommerce is an operation, not a channel
- Payment, stock, shipping and returns all have to work, every day
- Marketing is the smaller half of the job for most established stores
- A brilliant campaign on a broken fulfilment process loses money faster
- This is why the operational floor gets fixed before the spend is scaled
The word hides enormous differences in scale
- A fifty-product store and a fifty-thousand-SKU catalogue share a word and nothing else
- Advice written for one is routinely wrong for the other
- Published benchmarks average both together, which is why they disagree
- Ask what catalogue size a figure came from before you use it
The useful question is never what eCommerce means. It is which model you are running, at what catalogue size, and which of the five stages is losing you the most money.
- Common confusions
Three things people get wrong about eCommerce
Each of these comes up in conversations with brands that are already trading, not just with beginners.
Treating it as a marketing problem
Most stores that stall are not short of traffic. They are losing the traffic they already pay for at the category page, the delivery message or the checkout. Marketing spend amplifies whatever the store already does, including the parts that lose money.
Assuming the models are interchangeable
Marketplace economics, D2C economics and B2B economics reward almost opposite behaviour. A business that wins on Amazon by competing on the buy box and a brand that wins D2C by owning the customer relationship are not doing the same job, and advice rarely transfers between them.
Measuring revenue instead of contribution
Online revenue is the easiest number to grow and the least informative. Once payment fees, fulfilment, returns and acquisition cost are taken out, plenty of growing eCommerce businesses are making less money than they were a year earlier.
Our article on why ROAS reports hide margin problems works through the third one with the arithmetic.
- Related terms
Terms that travel with this one
The vocabulary you will meet immediately after this definition.
Revenue divided by orders. The number that decides whether your acquisition cost is affordable, and the least painful of the three growth levers.
Conversion rate
Orders divided by sessions. Published averages sit between roughly 1.4% and 2.9% depending on who is measuring and what they count.
Contribution margin
What is left from net revenue after goods, fulfilment, payment fees and returns. The figure that tells you whether an order was worth taking.
GMV
Gross merchandise value: the total value of goods sold through a channel before fees, returns and cancellations. Not revenue, and frequently quoted as though it were.
Fulfilment
Everything between the order being placed and the parcel arriving, including the return journey. The half of eCommerce that is not marketing.
Revenue attributed to advertising divided by its cost. The most quoted figure in eCommerce advertising and the easiest to misread.
- Questions
eCommerce FAQs
The questions behind most of the searches that reach this page.
What is eCommerce, in one sentence?
eCommerce is the buying and selling of goods or services over the internet, including the payment and fulfilment that complete the transaction. If money changes hands online and something has to be delivered or granted afterwards, it is eCommerce.
What does eCommerce mean?
Literally, electronic commerce. In everyday use it means trade conducted online rather than in a shop or over the phone. What eCommerce means in practice depends entirely on the model: a D2C brand, a third-party marketplace seller and a B2B distributor all describe what they do with the same word and run almost nothing in common.
What is an eCommerce business?
Asked either way — what is eCommerce business, or what is an eCommerce business — the answer is the same: a business whose revenue comes from selling online. It holds or sources products, lists them on a storefront or a marketplace, takes payment and fulfils orders. The distinguishing feature of an eCommerce business rather than a business with a website is that the transaction itself happens online, which makes stock, payment, shipping and returns core operations rather than back-office ones.
How does eCommerce work?
In five stages. A customer discovers you through search, social, a marketplace or an ad; they consider the product on a category and product page; they check out and pay through a gateway or the marketplace; the order is picked, packed and shipped; and then they either return it or come back and buy again. Each stage loses some proportion of the people who entered it, and the stage losing the most is the one worth fixing first.
What are the main types of eCommerce?
Seven are worth distinguishing: B2C, D2C, marketplace selling, B2B, subscription, wholesale and dropshipping. The table above sets out what each one means and where each one usually goes wrong. The classic textbook list — B2C, B2B, C2C, C2B — is tidier but less useful, because it does not separate selling through your own storefront from selling on somebody else’s marketplace, and that is the distinction that changes how a business is run.
Is selling on Amazon eCommerce?
Yes. Third-party marketplace selling is eCommerce, and for a great many brands it is the majority of their online revenue. It is a different model from selling through your own store: the marketplace owns the demand, the customer relationship and the data, and it sets the fees and the rules. Most established businesses run both, which is why marketplace management and storefront work usually sit in the same plan.
What is the difference between eCommerce and retail?
Retail is the activity; eCommerce is one channel for it. A retailer with shops and a website is doing both, and the useful distinction is operational rather than definitional: in a shop the customer does the picking and takes the goods away, while in eCommerce you pick, pack, ship and absorb the return. That single difference is where most of the margin gap between the two channels comes from.
Is eCommerce still worth getting into?
That depends on the model and the margin, not on the channel. Established brands with a product people reorder and a margin that survives fulfilment have a straightforward case. Reselling commodity products at thin margins against marketplace competition is a much harder business than it was, and dropshipping the same items as everybody else is harder still. If you are already trading and want to know where your own numbers actually stand, the free eCommerce audit measures it.
- Keep reading
Related resources
Where to go once the definition is out of the way.
STATISTICS
Market size, growth, device share and returns, each with its original source and year attached.
GLOSSARY
Every term we use in reporting, defined the way we actually use it rather than the way a textbook does.
GUIDE
Eight complete guides on SEO, CRO, PPC, retention, marketplaces and expansion, published in full.
Already trading and want to know where you actually stand?
Definitions are the easy part. A free eCommerce audit measures your own five stages — discovery, consideration, checkout, fulfilment and retention — and tells you which one is costing you the most, whether or not you ever work with us.