How E-Commerce Works

How E-commerce Works



It’s not difficult to explain how e-commerce works.  E-commerce is simply the exchange of goods and/or services electronically.  When you buy something from eBay, or any online store, you’ve participated in e-commerce.  If you’ve ever downloaded music from a site like Napster or iTunes, that’s e-commerce, too. 



These are the different types of e-commerce (and these four cover just about every commercial transaction on the internet!):


B2B:  B2B or business-to-business e-commerce is the oldest form of e-commerce.  Back in the 1960s, banks and other businesses began sharing and transferring files and information electronically. It was still limited, because there wasn’t one standard way of conducting this business, so not all businesses could successfully interact with each other.

However, once a reliable standard was set up in the 80s, B2B e-commerce really took off because they all used the same method and could exchange files much more easily. 


C2C: Consumer-to-Consumer, or C2C e-commerce is popular today.  If you’ve ever purchased something online from another person, rather than a business, either through an ad posting on an electronic bulletin board or an online auction, you’ve participated in consumer-to-consumer e-commerce. 

 By far, the most popular from of consumer-to-consumer e-commerce is in the form of online auctions, through the mammoth eBay auction site, where anyone can put goods online for sale to the highest bidder.


P2P:  P2P or peer-to-peer e-commerce started with Napster, where users shared files for free.  Now there are several similar websites and file-sharing programs and systems online. 


B2C:  We can’t explain how e-commerce works without mentioning the huge amount of e-commerce that takes places from business-to-consumer.  When anyone purchases anything at an online store or website, whether it’s a download of something electronically, or any item that must be shipped to the buyer, that’s e-commerce. 


So to explain how e-commerce works, you simply need to keep in mind… 

E-commerce involves one or more of the following:


  • the exchange of information online
  • the exchange of money online
  • the exchange of goods or services online


To explain how e-commerce works in your customers’ favour, the concepts are just as simple.

If they want to purchase a particular book, for instance, they can find several online bookstores and compare the prices of that book to find the lowest one. 

They can check the cost of shipping the book, and the shipping times, and determine which store can get it to them the quickest, for the lowest price. 

All without having to stand in line, fight crowds, or spend any money for transportation or gas.  So when you consider that they can comparison shop this way for small items and large alike, it’s easy to see the advantages e-commerce offers to them.


Though we can explain how e-commerce works in your customers’ favour, it’s a little more difficult if you’re a merchant who is trying to get your products in front of the customer. But we’ll cover that in other posts.


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