What is e-commerce? Meaning and how online shopping works
E-commerce is buying and selling over the internet. Learn what it means, how online shopping works step by step, the main types and how to start.
E-commerce, short for electronic commerce, is the buying and selling of products and services over the internet. Online shopping is the same thing seen from the buyer's side: you choose a product on a website or in an app, pay online and get it delivered, downloaded or ready for pickup. In 2022, businesses in 43 economies sold almost $27 trillion online, according to UNCTAD.
This article covers the basics about e-commerce: what it means, how online shopping works from checkout to doorstep and which types of e-commerce exist. You also see what you need to start selling online, and how an online store and a physical shop can work together.
E-commerce meaning and definition
E-commerce stands for electronic commerce. People also call it online commerce or internet commerce. It covers every sale where the order, and usually the payment, goes through the internet: on a website, in an app, on a marketplace or through social media.
Three kinds of offer fall under e-commerce:
- Physical products: clothing, furniture, spare parts, groceries. They arrive as a parcel or wait in a shop for pickup.
- Digital products: e-books, software, online courses and music. The buyer downloads or streams them straight away.
- Services: a hotel night, a subscription, a taxi ride or an appointment that you book and pay for online.
E-commerce and an online store are not the same thing. An online store, also called a webshop or e-shop, is one place where e-commerce happens. Marketplaces, social media and business ordering portals count as well.
E-commerce in one sentence: buying and selling goods or services over the internet. Buying goods by placing orders online is called online shopping, or e-shopping. For the seller, that same sale is e-commerce.
E-commerce in numbers
| Figure | Value | Source |
|---|---|---|
| E-commerce sales by businesses in 43 economies, 2022 | Almost $27 trillion | UNCTAD (2024) |
| Growth in 2022 | About 10% more than in 2021 | UNCTAD (2024) |
| Who buys | Mostly other businesses; in most economies, sales to consumers are less than a quarter | UNCTAD (2024) |
| Online share of US retail sales, Q2 2026 | 17.1% | US Census Bureau (2026) |
| Growth of US online retail, Q2 2026 against Q2 2025 | 12.2%, against 6.7% for all retail | US Census Bureau (2026) |
Two things stand out. First, most e-commerce is not consumers shopping, but businesses ordering from each other. That follows from the UNCTAD estimate of business e-commerce sales, which covers economies that together produce about three quarters of world GDP.
Second, even in a large online market like the United States, about one in six retail dollars goes online. The US Census Bureau measured 17.1% in the second quarter of 2026. More than four out of five retail dollars there are still spent offline.
What is online shopping?
Online shopping is buying products or services over the internet, from an online shop, a marketplace or an app. You browse a catalogue, put products in a shopping cart, pay online and receive the order at home, at a pickup point or in a shop.
An online shop is a website or app where you can view products, add them to a cart and pay. Other words for it are online store, webshop and e-shop. An online purchase is one order you place there.
People shop online because it saves time: you shop at any hour, compare prices and reviews in seconds and choose from more products than one shop can hold. The downsides are that you cannot touch or try a product, you wait for delivery and sending something back takes effort.
Online shopping vs e-commerce
Online shopping is what the buyer does. E-commerce is the whole system around it: the seller, the online store, the payment, the logistics and the marketing. Every online purchase is e-commerce, but e-commerce also includes businesses ordering from each other, which nobody calls shopping.
How does online shopping work?
Every online order follows the same journey, whether a shop sends one parcel a week or a thousand a day. This is what happens on both sides:
| Step | The shopper | The seller |
|---|---|---|
| 1. Order | Adds products to the cart and checks out | Receives the order |
| 2. Payment | Pays by card, wallet, bank or cash | Gets paid via a payment provider |
| 3. Processing | Gets a confirmation email | Sees the order in order management |
| 4. Pick and pack | Waits for the parcel | Picks, packs and prints a label |
| 5. Delivery | Tracks the parcel or collects it in a shop | Hands the parcel to a carrier |
| 6. After delivery | Keeps it, asks a question or returns it | Handles returns and refunds |
A small online shop does all of this by hand. As the number of orders grows, the seller automates steps with software or hands them to a fulfilment partner, for example packing and shipping. Sell on more than one channel, and an order management system keeps all orders in one list.
Paying online
How shoppers pay differs a lot per country. These are the most common methods:
- Cards: credit and debit cards, entered at checkout or saved in the browser.
- Digital wallets: PayPal, Apple Pay, Google Pay and similar apps.
- Bank payments: a bank transfer or a real-time bank payment, such as UPI in India or iDEAL in the Netherlands.
- Buy now, pay later: the shopper pays after delivery or in instalments, through a separate provider.
- Cash on delivery: the shopper pays the courier when the parcel arrives.
The seller offers these methods through a payment service provider, which collects the money and pays it out. Offer the methods your customers already know and use.
Shipping and delivery terms
You see these terms often when you shop online:
- Shipping costs: what you pay for delivery. Many shops ship for free above a certain order value.
- Delivery time: how long it takes before the parcel arrives.
- Shipped or in transit: the shop has handed the parcel to the carrier and it is on its way.
- Tracking code: a number or link to follow your parcel, also called track and trace.
- Click and collect: you order online and pick up the order in a shop or at a pickup point.
- Return: you send a product back to the shop.
Return rules differ per country and per shop. In the EU, for example, you can cancel most online purchases within 14 days of delivery, as Your Europe explains.
Is online shopping safe?
Safety is the most common worry about online shopping. It is safe when you buy from a shop you can trust. These checks help:
- The web address starts with https, and the shop shows a company name, an address and contact details.
- Reviews on other websites sound real, and the shop has been around for a while.
- You pay with a method that lets you dispute a payment, such as a credit card or PayPal, and not with a transfer to a private account.
- The price is realistic. A deal that looks too good to be true often is.
- The shop only asks for the details it needs for your order.
For sellers, the same list works the other way around. A secure checkout, clear contact details and honest delivery times build the trust that brings customers back.
Types of e-commerce: B2C, B2B, C2C and D2C
Most guides sort e-commerce by who sells to whom.
| Type | Who sells to whom | Example |
|---|---|---|
| B2C (business-to-consumer) | A business sells to consumers | An online fashion store, or Amazon |
| B2B (business-to-business) | A business sells to another business | A wholesaler where shops order stock online, or Alibaba |
| D2C (direct-to-consumer) | A brand or manufacturer sells straight to consumers | A mattress brand that only sells through its own website |
| C2C (consumer-to-consumer) | Consumers sell to each other | Selling second-hand items on eBay or Facebook Marketplace |
Some guides add C2B, where a person sells to a business, such as a freelance designer. You also see m-commerce, short for mobile commerce: buying on a phone. That is not a separate type, but a device.
The way of delivery differs too. With dropshipping, you sell products that a supplier ships straight to your customer, without holding stock yourself. With D2C, a brand skips the wholesaler and the shop.
Where does e-commerce happen?
- Your own online store: you decide on the look, the prices and the customer contact. You do have to attract visitors yourself.
- Marketplaces such as Amazon, eBay, Takealot, Flipkart, Shopee, Lazada and Jumia: lots of visitors, but the marketplace charges a commission and sets the rules.
- Social commerce: selling through Instagram, Facebook, TikTok or WhatsApp.
- B2B portal: an ordering site where business customers log in, see their own prices and reorder.
Most sellers combine a few of these channels. The more channels you have, the more it matters that they all show the same stock.
Advantages and disadvantages of e-commerce
For shoppers
| Advantages | Disadvantages |
|---|---|
| Shop at any time, from anywhere | You cannot touch or try the product first |
| Compare prices and reviews in seconds | You wait for delivery and sometimes pay shipping costs |
| More choice than one shop can hold | Sending a product back takes effort |
| Delivery to your door or a pickup point | Fake shops and scams exist |
Advantages for sellers
- You sell 24 hours a day, also when your shop is closed.
- You reach customers outside your own town, and through marketplaces outside your own country.
- You see exactly what customers view, buy and send back.
- You can start small and grow step by step.
Challenges for sellers
- Competition: shoppers compare your price with other shops in seconds.
- Returns: customers send products back, which costs time and margin.
- Delivery: customers expect fast and affordable delivery.
- Being found: without marketing or a marketplace, few people find your shop. SEO, social media and email marketing bring visitors in.
- Stock across channels: sell in a shop, an online store and on a marketplace, and every channel has to see the same stock. Otherwise you sell the same item twice.
How to start an e-commerce business
An e-commerce business is a company that sells its products or services online, through its own store, on marketplaces or both. Starting one begins with the basics: decide what you sell and to whom, register your business and check the tax and consumer rules in your country. Those rules differ per country, so read your government's guidance for online sellers before your first sale.
Then you need these parts. The e-commerce platform is the software behind your online store or e-commerce website. The other parts handle what happens after the order.
| Part | What it does | Needed from |
|---|---|---|
| E-commerce platform | Online store: catalogue, cart, checkout | First sale |
| Payment provider | Processes payments and pays you out | First sale |
| Stock management | Stock per product and per location | First sale |
| Shipping | Labels, carriers, tracking | First sale |
| Accounting | Invoices and tax returns | First sale |
| Order management | Orders from all your channels in one place | Second channel |
| Point of sale system | Taking payments in a shop | Own shop |
An e-commerce system combines several of these parts in one package. Some sellers pick a separate tool for each part and connect them. Others choose one platform. The more channels you have, the more it pays off when every part works with the same stock and orders.
Selling in a shop and online with one stock
Many retailers started with a shop and added an online store later. Often the two run on separate systems: a till in the shop, an online store with its own stock count and maybe a marketplace on top. That works fine until the last item.
A customer buys the last coat in the shop. The online store does not know and still shows the coat as in stock. An hour later, someone orders the same coat online. Now you call that customer to apologise, or you look for the coat in another shop.
That is why it helps when all your channels work with the same data:
- One stock: every sale, in the shop or online, comes off the same stock, and every channel sees the new number.
- One order list: shop sales, online orders and marketplace orders sit in one list, so you see per customer and per product what sold.
- Click and collect: the customer orders online and picks up in the shop. That only works when the shop knows what is waiting.
- A buffer per channel: you hold back a few items, so a marketplace does not sell your last one.
How this works in Afosto
In Afosto, the point of sale system, the webshop, the warehouse and the order management system run on the same platform. Every receipt at the till is straight away an order, in the same overview as your webshop orders. The sale comes off the same stock that your webshop sells from.
When the stock changes, Afosto sends the new level to your webshop and to marketplaces such as bol and Kaufland. Per channel you can deduct a safety stock, so a marketplace does not sell your last items.
Already running a webshop on Shopify, WooCommerce or Lightspeed eCom? It can stay. Afosto imports the orders and sends the stock back, so till and webshop show the same numbers. For click and collect, Afosto emails the customer when the order is ready and passes the "ready for pickup" status to a connected Shopify store.
Do you sell in a shop and online? In Afosto, till, webshop and stock work from one platform. Create an account and look around: you get started in minutes. Prefer to see it on your own setup first? Request a demo.
E-commerce trends in 2026
- Online grows faster than retail: US online sales grew 12.2% in a year, all retail 6.7% (US Census Bureau, Q2 2026).
- The phone is the shop window: an online store has to work well on a small screen.
- Social commerce: shoppers buy inside social apps, through posts, live streams and chat.
- AI shopping assistants: they search and compare products, and some can already place the order. Clear, correct product data matters more.
- Shops as pickup points: with click and collect, nobody waits for a carrier.
E-commerce in short
- E-commerce is buying and selling products and services over the internet. Online shopping is the buyer's side of it.
- The main types are B2C, B2B, C2C and D2C. Measured in value, most e-commerce is business-to-business.
- Every online order follows the same journey: order, payment, processing, picking and packing, delivery and sometimes a return.
- Online keeps growing, but even in the US more than four out of five retail dollars are still spent offline. That is why many sellers combine an online store with a physical shop.
E-commerce is simple at its core: selling online and delivering. The hard part is what happens behind it, once you have more channels, more locations and more orders.
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Create free accountBook a demoFrequently asked questions
What does e-commerce mean?
E-commerce means electronic commerce: buying and selling products and services over the internet. It covers physical products that arrive as a parcel, digital products such as software and e-books, and services you book online. E-commerce happens in online stores, on marketplaces, through social media and in business ordering portals. Online shopping is the buyer's side of it.
What are the 4 types of e-commerce?
The four best-known types are B2C, B2B, C2C and D2C. In B2C, a business sells to consumers, such as an online fashion store. In B2B, businesses buy from each other, such as shops ordering stock from a wholesaler. In C2C, consumers sell to each other, often second-hand. In D2C, a brand sells straight to consumers, without a wholesaler or shop in between.
What are examples of e-commerce?
Buying clothes from an online store is e-commerce, and so is ordering on a marketplace such as Amazon or Flipkart. A shop that orders stock in a wholesaler's B2B portal, someone who sells a used phone on eBay and a student who buys an online course are examples too. Booking a hotel or a train ticket online also counts, because you buy and pay for a service over the internet.
How does online shopping work?
You find a product in an online shop or app, add it to your cart and go to checkout. There you enter your address, choose a delivery method and pay, for example by card, digital wallet or cash on delivery. The shop confirms the order by email, packs it and hands it to a carrier. You follow the parcel with a tracking code, or you collect the order in a shop.
Is online shopping safe?
Online shopping is safe when you buy from a shop you can trust. Check that the web address starts with https and that the shop shows a company name, an address and contact details. Read reviews on other websites and be careful with prices that look too good to be true. Pay with a method that lets you dispute a payment, such as a credit card or PayPal.
How do you start an e-commerce business?
Decide what you sell and to whom, then register your business and check the tax and consumer rules in your country. Next, choose an e-commerce platform for your online store, a payment provider and a way to ship. Set up stock and order management early, especially if you also sell in a shop or on marketplaces. Then work on being found through search, social media and email.