What is Electronic Commerce?

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  • Written By: R. Kimball
  • Edited By: A. Joseph
  • Last Modified Date: 20 October 2019
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Electronic commerce, sometimes called e-commerce, is the buying and selling of goods and services electronically. It also includes additional forms of commerce performed over the Internet, such as the transfer of funds. Electronic commerce includes consumer-based business and transactions between businesses. It has no time or space barriers. For example, a consumer in one country is instantly able to complete a transaction with a business in another country.

An electronic commerce transaction can be as simple as purchasing a book from a company on the Internet, for example. The consumer purchases the book he or she wants to buy and places it into an electronic shopping cart. The online bookstore completes the transaction with the consumer by asking for payment and delivery information. The consumer then provides this information to the online bookstore.

In this example, if the customer's payment information is valid, the online bookstore receives payment from the consumer by charging a credit card or taking some other form of payment. The consumer receives an indication of the completion of such a transaction and possibly separate shipment information. The online bookstore then ships the book to the consumer. This online bookstore might have a physical store where consumers can go to purchase books, or it might be only a virtual store.


Another form of electronic commerce is the transfer of funds between bank accounts. If the consumer used a credit card to pay the online bookstore for the book it purchased, then the credit card company is going to need to transfer funds to pay the online bookstore for the transaction. When the consumer’s credit card payment is due, rather than sending a payment by mail, the consumer could transfer funds from his or her account to the credit card company online to pay for the book and any other charges made with the card.

The online bookstore can complete another form of electronic commerce when it ships the consumer’s book. The online bookstore might schedule the shipment of the book with a shipping company. After the shipping company receives notice from the online bookstore that an item is ready to be shipped, the shipping company will pick up the shipment from the online bookstore. The online bookstore could send the consumer a notice of the shipment and information to track the location of the book during the shipping process. At some point, the online bookstore will need to transfer funds to the shipping company to pay for the shipment of the book.

Businesses also can transact electronic commerce directly between themselves. The online bookstore will place an order from a book publisher for a certain number of books to have in its inventory. The book publisher will receive payment via a funds transfer arranged by the online bookstore. The book publisher will arrange for shipment of the books to the online bookstore’s storage facility. Then the book publisher will also have to transfer funds to the shipping company in order to finalize the transaction.


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