What is e-commerce and how does it work: a primer

6 October, 2023 by
What is e-commerce and how does it work: a primer
Lameco JSC


E-commerce has revolutionized the way we shop and do business. This article will provide an overview of e-commerce, how it works, and the benefits it offers consumers and businesses.

What is E-commerce?

E-commerce refers to the buying and selling of goods and services over the internet. Rather than interacting in a physical store, online shopping allows consumers to browse and purchase products and services on websites and apps.

E-commerce can include:

  • Online retail - The sale of physical products through online stores. For example, buying clothes, electronics, or books on Amazon.
  • Digital downloads - The sale and delivery of digital content. This includes music, e-books, software, stock images.
  • Travel bookings - Booking flights, hotels, car rentals, and other travel services online on sites like Expedia.
  • Online auctions - Auction sites like eBay allow buyers and sellers to trade goods and services, often through bidding wars.

So in summary, any commercial transaction done electronically online can be considered a part of e-commerce. It covers a wide range of business activities.

How Does E-commerce Work?

E-commerce provides consumers with convenience, selection, and savings compared to traditional brick-and-mortar stores. But how does it actually work behind the scenes? Here is a basic overview of the e-commerce process:

Set up an Online Store
Businesses need to build and maintain websites or apps to sell their products or services online. This requires web hosting, an e-commerce platform (like Shopify or WooCommerce), a payment processor, and e-commerce software to manage inventory, orders, and fulfillment.

List Products/Services
The e-commerce site needs to display images, descriptions, and pricing for all products/services available for purchase. This catalog showcases everything being offered to customers.

Provide Shopping Cart
The shopping cart allows buyers to select multiple items and “save” them for final purchase. It stores all products they want to buy in one place before going through checkout.

Accept Payments
Once a buyer is ready to complete their purchase, they enter their payment information. Popular options include credit cards, PayPal, Apple Pay, etc. The e-commerce platform connects to payment gateways to securely process payments.

Fulfill & Ship Orders
After payment, the e-commerce business needs to fulfill the order by pulling the products from inventory and shipping them to the customer. Automation tools help streamline order processing and delivery.

Offer Customer Service
Customer service spans the entire shopping experience, from assisting visitors navigating the website to answering post-purchase questions. Online chats, emails, FAQs help support customers.
So in summary, e-commerce provides the digital infrastructure to connect merchants and customers. It enables products/services to be marketed, purchased, paid for, delivered, and supported online.

Benefits of E-commerce

E-commerce offers significant advantages to both businesses and buyers. Here are some of the top benefits:

More Choices
Online stores are not limited by shelf space. They can offer a wider selection of products and brands for customers to browse and purchase from.

Lower Prices
Selling online reduces overhead costs related to physical stores. E-commerce businesses can pass these savings on to customers by offering lower prices and deals.

Online shopping allows purchases anytime from anywhere via mobile apps and websites. No travel to physical stores required.

Global Reach
The internet lets e-commerce businesses sell to customers worldwide, expanding their addressable market. Geographic barriers disappear.

Data and analytics enable e-commerce sites to tailor content and offers to specific customer segments. This creates more relevant, personalized shopping experiences.

E-commerce businesses can more easily scale up or down to meet changes in demand. The infrastructure and processes are designed for rapid growth and flexibility.


E-commerce has changed how consumers access goods and services and opened up global markets for businesses. By selling and buying online, both parties can benefit from unparalleled levels of convenience, selection, and efficiency. While e-commerce can seem complicated on the backend, the user experience continues to get smoother. As technology and UX improve, expect e-commerce to become an even more integral part of the modern economy and our daily lives.

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