What is E-commerce

A model of buying and selling goods or services conducted over the internet, spanning everything from retail storefronts and digital subscriptions to software.

Experts project that in 2026, the global e-commerce market will reach more than $6.8 trillion. AI-powered personalization will most likely be a key driver for e-commerce growth.

Data powers the most successful e-commerce operations, which take advantage of best practices such as targeted email marketing, audience segmentation, and marketing automation.

For example, following up with a customer after they have placed an item in an online shopping cart but didn’t complete the transaction can significantly increase your likelihood of making the sale.

With that being said, anyone who wants to open an e-commerce business and benefit from the rise of e-commerce needs to understand its fundamentals. Direct sales strategies, combined with personalized shopping experiences, can also boost customer satisfaction and drive repeat business.

What is e-commerce?

Many people think of e-commerce as simply selling or purchasing physical products or services online, but electronic commerce covers much more than that.

Any business that sells online — whether it's offering services, digital products, or physical goods — is engaged in e-commerce. Online purchases can happen between businesses and consumers, between two businesses (business-to-business), or even between individual people.

So, how does e-commerce work? There are several models businesses can choose from. Some companies operate exclusively through an e-commerce website, while others use it to extend an existing brick-and-mortar presence.

Take a small business selling high-end pet products: where they once had to choose between opening a storefront or going wholesale, they now have a third option — selling directly through their own site, a third-party marketplace, or both.

The line between online and offline shopping has also become less defined. A customer standing in a store and comparison shopping on their phone via one or more e-commerce websites is doing both at once, which is increasingly common. Mobile commerce has made that kind of overlap the norm rather than the exception.

Pros and cons of e-commerce

E-commerce has many benefits for businesses, as well as a few potential drawbacks. Online stores can improve the customer experience because shopping online is easy and convenient.

Additionally, with a low startup cost and a wide range of e-commerce tools available for entrepreneurs, starting an e-commerce business is much easier than starting another type of business. Digital wallets also simplify online transactions, enhancing consumer trust and improving the checkout experience.

Pros of e-commerce

• Low startup and operating costs: Starting an e-commerce business is generally much cheaper than starting a brick-and-mortar store because there’s no rent or real estate costs, and you can start with fewer employees. Building maintenance costs are also virtually eliminated in digital commerce models.
• Offers flexibility: E-commerce is a more flexible solution for businesses and their customers because customers can shop at any time of day, from anywhere. This instant gratification contributes significantly to consumer satisfaction and loyalty.
• Easy to engage in data-based marketing: Your e-commerce store can provide you with a trove of marketing data through analytics and reports to help you make better decisions when promoting your business. Implementing strong search engine optimization practices is essential to maximizing visibility on online platforms.
• Wide selection of available products: E-commerce offers a wider variety of available products for customers as opposed to brick-and-mortar stores, which can only hold so much exclusive inventory in the physical space they occupy.

Cons of e-commerce

• Less connection with customers: Because there’s nobody to interact with when shopping, customers may feel less of a connection with your business. The customers also won’t get the opportunity to touch the product before buying it to ensure it’s what they really want.
• Requires more coordination for shipping logistics: E-commerce customers can be anywhere in the world, so business owners must ensure their shipping and logistics can get products to their destination in a timely manner. Managing inventory levels accurately is crucial for the timely delivery of products and maintaining customer satisfaction.
• Minimal customer service: Many e-commerce stores lack the presence of a customer service representative available to customers at all times to answer questions and resolve issues.

What are e-commerce business models?

An e-commerce business can operate as the digital arm of a retail giant or a physical store. It can also be a single person selling crafts out of their home through online marketplaces. Online retailers and cross-border e-commerce models offer new growth opportunities even for small sellers.

Of course, there's a whole range between those extremes. There are several different types of electronic commerce business models, and within these models are even more e-commerce revenue models to choose from, from subscriptions to selling physical products.

Here are the different types of e-commerce businesses:

• Business-to-business (B2B): B2B e-commerce refers to when a company purchases goods and services online from another enterprise. Some examples include a restaurant buying an ice machine or a law firm purchasing accounting software. Business software like customer relationship management (CRM) platforms and payment processing companies are considered to be B2B, too. B2B e-commerce transactions tend to be more complicated than other forms of e-commerce because they rely on large catalogs of complex products to sell.
• Business-to-consumer (B2C): B2C online retail happens when a consumer purchases an item over the internet for their own use. Although B2C e-commerce seems more prominent, it’s only about half the size of the worldwide B2B e-commerce transactions market.
• Consumer-to-consumer (C2C): C2C operates like a digital yard sale or an internet auction in which individual people sell goods to each other. Online auctions and peer-to-peer platforms have made C2C transactions more mainstream within the digital commerce space. These might be products they make, such as handcrafts or art, or secondhand items they own and want to sell.
• Consumer-to-business (C2B): When a consumer creates value for a business, that's C2B commerce. Creating value can take many forms. For instance, C2B can be as simple as a customer leaving a positive review for a business or a stock photography website purchasing images from freelancers. In addition, businesses that sell secondhand products sometimes purchase merchandise from private citizens online.
• Business-to-government (B2G): These are sometimes called business-to-administration (B2A) sales. They happen when a private firm exchanges goods or services with a public agency. Usually a business contracts with a public organization to carry out a mandated service. For instance, a custodial firm might bid online for a contract to clean the county courthouse, or an IT firm might reply to a proposal to manage a city's computer hardware.
• Consumer-to-government (C2G): Ever paid a parking ticket online? Then you've experienced C2G. This model also includes paying taxes online and purchasing goods from a government agency's e-auction. Any time you turn money over to a public agency using the internet, you engage in C2G e-commerce.

How the e-commerce journey is changing with AI

The way people shop online has shifted considerably over the past few years. AI is now embedded in nearly every part of how an e-commerce store attracts, engages, and converts shoppers — from the moment someone starts searching to the second they check out.

Staying ahead of these changes isn't optional. The brands seeing the strongest e-commerce sales right now are the ones that have leaned into AI early and built it into their strategy across multiple channels.

The shift from keyword search to conversational AI discovery

Not long ago, finding a product online meant typing a few words into a search bar and scrolling through results. That's changing fast. Shoppers are increasingly using conversational AI tools to describe what they want in plain language and getting back curated, specific recommendations instead of a list of links.

For retail e-commerce, this shift has real implications. An e-commerce website that's built around traditional keyword search alone may start losing visibility as AI-driven discovery becomes the default.

Optimizing for natural language queries, detailed product descriptions, and context-rich content will matter more and more for driving e-commerce transactions and staying competitive in retail sales.

How visual search and "shop the look" features drive sales

Visual search has quietly become one of the most powerful tools in retail e-commerce. Instead of trying to put words to something they've seen, shoppers can now upload an image and find similar or identical products instantly.

"Shop the look" features take it a step further — a single image can become a shoppable experience, pulling together multiple products and driving several e-commerce services into one seamless moment.

This kind of frictionless discovery reduces the gap between inspiration and purchase. Retailers that integrate visual search into their marketing strategies make it easier for customers to buy, which tends to improve e-commerce sales numbers.

Tips for getting started in e-commerce

Do you have a great idea for an e-commerce business? Whether you want to get into online wholesale, subscriptions, crowdfunding, digital products, or software as a service, there's a spot to open an e-commerce company in the digital space.

From choosing a business name, integrating a payment system with a reliable online payment solution, to a supply chain management solution and a customer experience platform for your website, there are many aspects to take into consideration when starting an online store (read our tips for how to start an online store for more).

Here are some tips to start an e-commerce business while providing a great customer experience to set yourself for up success and e-commerce growth:

Do your homework beforehand

Whether you’ll be starting a brick-and-mortar or selling solely online, you need to write a business plan. But before you put pen to paper or fingers to keyboard, you’ll have to do some research.

There are 2 major parts to research: studying your competitors and studying your target customers.

Find out what products other online stores offer, what social media channels they use, what their business models are, and so on. This research can help you do everything from selecting a memorable name to determining what products or services to sell.

As for studying your audience, reach out to people in your personal network. If your budget allows for it, you can also conduct surveys and focus groups to identify any e-commerce gaps you can fill.

Test everything

Your system, your ads, your products, your emails—everything. You may even want to consider hiring an e-commerce testing firm to set up tests for you. Once those are established, you can conduct your evaluations, study the results, make any necessary changes, and repeat.

Diversify your advertising

Start with—and stick with—the nuts and bolts of inbound marketing, which is a strategy that encourages people to actively seek out and engage with your brand. These include email, Facebook, and Google ads.

But you can expand to other e-commerce marketing channels, too. When you conduct your research, be sure to identify the specific channels that your target audience uses the most. Incorporate these into your marketing strategy to reach more customers.

Private labeling strategies help online retailers create unique, branded products that differentiate them in competitive e-commerce markets.

It also helps to mirror what other e-commerce brands in your niche are doing. Your competitors have likely done their own legwork in researching customers, and as long as you’re not copying their every move, it’s fine to look to them for strategic inspiration. Just remember to always cross-reference your competitor research with your own customer research as well.

Social commerce techniques, such as live shopping events, can also drive engagement and increase sales through social media networks. Here, again, you may want to consider getting some professional help. There are a number of firms that would be happy to help you make the most out of your digital marketing efforts.

Key e-commerce trends to watch

E-commerce doesn't sit still for long. Consumer expectations shift, new technology rolls out, and the businesses that pay attention to what's coming tend to be better positioned than those that don't. Here are three trends worth keeping an eye on right now:

The growth of social commerce and in-app checkout

Social media platforms have become full shopping destinations, not just places to discover brands. In-app checkout means a customer can go from seeing a product in their feed to completing a purchase without ever leaving the app.

That reduction in friction has made social commerce one of the fastest-growing areas of retail, and it's only getting more sophisticated. For businesses that are already active on social platforms, building out a shoppable presence is a natural next step.

Subscription models and building recurring revenue

More businesses are exploring subscriptions as a way to generate predictable, recurring revenue rather than relying entirely on one-time purchases. A loyal subscriber base provides consistent income and tends to have a higher lifetime value than a typical customer.

Whether it's curated product boxes, replenishment subscriptions, or access to exclusive content and perks, finding the right subscription model for your audience can add real stability to your bottom line.

Sustainable and ethical e-commerce practices

Shoppers are paying more attention to how and where products are made, and that scrutiny is showing up in purchasing decisions. Businesses that can speak honestly about their supply chain, packaging, and environmental impact are building trust with a growing segment of consumers who factor those things into where they spend money.

Set up your online business

Do some market research, come up with a solid business plan, stay focused on driving traffic to your site, and you’ll be off to a great start.

Leveraging digital platforms and online channels will be key for building visibility in the e-commerce industry. Monitoring future trends in e-commerce, like AI-driven personalization and blockchain transactions, can give you a competitive edge. Maintaining strong distribution channels helps ensure reliable product fulfillment across multiple regions.