e-Commerce (electronic commerce)

Every year, the number of Internet users grows, and with it, the volume of online sales increases. According to research, today, approximately 7 billion devices worldwide have access to the global network, and the number of people who shop online exceeds 2.7 billion.

Recent global events have accelerated the development of online commerce. The global coronavirus pandemic and the introduction of lockdown measures have given a powerful boost to the entire e-commerce sector. During this period, online sales grew by more than 27%, and the total value of the niche approached $5 trillion.

Despite the current economic challenges, experts predict further growth in the digital market to $7 trillion in the coming years. In some countries, such as China, the share of e-commerce in retail trade has already reached 50%.

What is e-Commerce?

E-commerce is a rapidly growing sector of the economy that encompasses all types of commercial transactions conducted via the Internet. It includes the purchase and sale of various goods, services, and information, as well as related processes such as marketing, order processing, payment processing, delivery, and customer service.

In essence, it can be compared to a giant shopping mall offering a huge range of products. However, unlike traditional stores, all interactions here take place via electronic devices connected to the network — from smartphones and tablets to computers.

The origins of this phenomenon are traced back to August 11, 1994, when a US resident made the first documented online purchase—a compact disc through an online store. Since then, digital commerce has undergone tremendous development and transformation, becoming an integral part of the modern economy and our daily lives.

E-commerce is also actively developing in Ukraine. Although the outbreak of full-scale war in 2022 dealt a serious blow to the industry, sales volumes began to recover to pre-war levels as early as 2023. In 2025, the lion’s share of the market belongs to the largest marketplaces — OLX, Rozetka, and Prom.

How does e-commerce work?

To understand how e-commerce works, let’s take a typical transaction in an online store as an example:

1. When a customer adds an item to their shopping cart on the website, their device sends a request to the store’s server. The information sent contains details about the selected product, its quantity, and the customer’s contact information.
2. Upon receiving an order, the server forwards it to the manager for further processing. The manager’s task is to check the availability of goods and confirm that the order can be fulfilled.
3. If the product is out of stock, the manager contacts the supplier and finds out when it will be available. If the product is in stock, the order moves on to the next stage of processing.
4. Payment systems and processing centers are usually used to pay for purchases. They receive a request to debit funds from the customer’s card or account and confirm the transaction if all the details are correct. If there are insufficient funds in the account or there are other problems, the payment is declined.
5. After successful payment confirmation, the manager creates a request for order assembly and packaging, which is sent to the online store’s warehouse. The completed order is transferred to the delivery service. As a rule, at this point, the buyer receives a notification with the tracking number of the parcel and the estimated delivery time.

Although the details of the process vary depending on the specifics of the business, in general, this scheme is universal for most online purchases, whether physical goods or digital products.

What are the advantages of e-commerce?

E-commerce is gradually conquering the market for good reason. It offers a number of advantages for both sellers and customers. Let’s take a closer look at them.

For business

1. Reaching a global audience. Thanks to the internet, businesses can go way beyond their local market and attract customers from all over the world. eCommerce breaks down geographical barriers and opens up access to millions of potential buyers. By building an effective logistics system and localizing your website for key regions, you can successfully scale your sales internationally.
2. Expanding your target audience. Every day, millions of people use the internet to communicate, search for information, and make purchases. With the help of web analytics tools, SEO optimization, and targeted advertising, you can identify your target audience and deliver personalized offers to them. This allows you to significantly increase traffic, conversion, and audience reach compared to traditional offline commerce.
3. Reduced costs. Launching an online store requires much less investment than opening a physical point of sale. You don’t need to spend money on renting premises, purchasing commercial equipment, or paying salaries to a large staff. Many processes, such as order processing, customer communications, and catalog management, can be automated. This allows you to optimize costs and recoup your investment faster.
4. Acceleration of business processes. Everything happens much faster online than offline. Customers can place an order in a couple of clicks, pay for it with a card, and receive immediate confirmation. With the help of chatbots, callback services, and online consultants, you can instantly respond to customer questions. And warehouse and delivery management systems allow you to speed up the processing and shipping of goods. The faster and more convenient the service, the more likely it is that customers will return.
5. Elimination of unnecessary intermediaries. Manufacturers and sellers can interact directly with end consumers, bypassing the chain of distributors, wholesalers, and retail stores. This allows them to offer more competitive prices, provide better service, and earn higher profits on each sale.
6. Data collection. Online platforms allow you to collect detailed information about visitor behavior and preferences. By analyzing this data, you can better understand your target audience, personalize marketing campaigns, and improve your product range. To do this, you can use a CRM system, Google Analytics, or Facebook Pixel.
7. Increased customer loyalty. Thanks to the convenience of online shopping, attractive prices, and high-quality support, online stores can more effectively meet customer needs and build long-term relationships with them.
8. Low entry threshold. You don’t need huge investments to start your own e-commerce business. All you need to do is create an online storefront, fill it with high-quality content, and develop a strategy for attracting traffic. In the early stages, you can do without a warehouse by outsourcing storage and delivery functions to fulfillment operators.
9. Opportunities for rapid growth. Scaling online sales is much easier and cheaper than developing a network of physical stores. By finding effective channels and tools for online promotion, you can significantly increase your target audience and sales volumes without expanding your staff or renting additional premises.

For the customer

1. Convenience. You can shop online at any time of the day or night, without being tied to store opening hours. All you need is a device with internet access, and the entire range is at your fingertips. People with busy work schedules or limited mobility will appreciate this advantage more than others.
2. Wide selection of products. Online stores offer a huge range of products, far exceeding that of offline retail outlets. Here you can find both mass-market and niche products, exclusive collections, and new items from various manufacturers.
3. Ability to compare prices. The Internet makes it possible to quickly compare the cost of the same product from different sellers and choose the most advantageous offer. In addition, there is a high level of competition in e-commerce, which motivates stores to reduce markups, hold sales, and offer bonuses. As a result, online prices are often lower than in regular brick-and-mortar stores.
4. Detailed product descriptions. On online store pages, customers can not only view photos of products, but also study their characteristics and instructions for use. Real customer reviews are usually published here as well, allowing you to form an unbiased opinion about the product. If you have any questions, you can always ask for advice via online chat, email, or phone.
5. Time savings. Online shopping helps you save one of your most valuable resources—your personal time. You don’t have to spend hours traveling to the store, searching for the right department, waiting in line for the fitting room, and waiting at the checkout. With just a few clicks, you can place your order and have it delivered to your home or a convenient pickup point.

Are there any disadvantages to e-commerce?

Despite all the advantages listed above, e-commerce is not without its drawbacks. Let’s take a look at its disadvantages for both parties to the transaction.

For the seller

• High competition. In popular product categories, such as electronics or clothing, the online market is already quite saturated. New players have to literally fight for every customer, investing significant funds in marketing and advertising. At the same time, large retailers often use dumping, which further complicates life for small and medium-sized businesses.
• Buyer mistrust. Due to frequent cases of online fraud, many customers are cautious about new and little-known online stores. To win the trust of your audience, you need not only to offer quality products at competitive prices, but also to provide impeccable service, use secure payment methods, and work on increasing brand awareness.
• Operational complexities. Business processes in e-commerce have their own specific characteristics and require different approaches than those used in traditional retail. Establishing effective working relationships with suppliers, setting up an order processing and delivery system, keeping the catalog up to date, and responding promptly to customer inquiries can be a daunting task, especially in the early stages.
• Dependence on technology. Online businesses are directly dependent on stable internet connections and software that works correctly. Any technical glitches, from website downtime to payment confirmation errors, can lead to financial losses and negatively impact the store’s reputation. In addition, due to the rapid development of technology, it is necessary to constantly monitor trends and implement innovations in order to compete on equal terms with other market players.
• Legal gaps. Legislation often lags behind technological developments, creating certain legal risks for online businesses. For example, rules for handling personal data, return procedures, and liability for product quality in distance sales are not always clearly regulated and can be interpreted in different ways.

For the buyer

• Inability to physically interact with the product. Unlike traditional stores, online shopping does not allow you to touch, try on, or test a product before purchasing it. This is especially critical for products where tactile sensations and visual perception are very important (e.g., clothing, shoes, or furniture). Even the most detailed descriptions and photos do not always give a complete picture of the actual properties of the product, which can lead to disappointment when receiving the order.
• Data security issues. Unfortunately, not all online platforms can guarantee reliable protection of users’ personal and payment information from leaks and hacker attacks. Cases of customer databases being leaked online have become quite common. Therefore, when shopping online, it is important to choose trusted stores and services, use complex passwords, and monitor your bank statements.
• Spread of counterfeit goods. The internet is literally flooded with fake copies of popular brands — from clothing and accessories to electronics and perfumes. It can be very difficult to distinguish between the original and the replica, especially if the seller deliberately misleads buyers. As a result, customers risk overpaying for a low-quality counterfeit and becoming disillusioned with online shopping for a long time.
• Legal restrictions. Although online stores usually offer a much wider range of products than offline stores, some product groups are prohibited from being sold online by law. In Ukraine, for example, this applies to alcoholic beverages, fireworks, and prescription drugs. This means that certain categories of purchases can only be made in physical retail stores.
• Difficulties with returns. Even on completely legal grounds, it can be difficult to return unwanted or defective goods to an online store. This is especially true for small online platforms that do not have offline outlets and are not always ready to quickly pick up purchases and refund money. In such situations, the customer may have to make additional efforts and incur additional delivery costs.
• The threat of addiction. Constant access to a huge range of products, combined with tempting promotions and simplified payment methods, can lead to the development of shopping addiction. For people prone to impulsive shopping, the ability to buy online poses a particular risk, as it is very easy to lose control of spending.

What types of e-commerce are there?

Marketers distinguish several types of e-commerce, depending on who the parties to the transaction are—companies, individuals, or government agencies. Below, we will examine the most popular types.

B2C (business to consumer)

One of the most common e-commerce models, in which businesses interact with end consumers by offering them their products or services through online channels. In this segment, companies focus not only on the functional advantages of the product, but also on the emotional engagement of customers, striving to create the most convenient and enjoyable shopping experience possible.

The main platforms for B2C sales are online stores, marketplaces, social networks, and mobile applications. Examples of successful B2C projects include large online retailers such as Amazon, eBay, and AliExpress, as well as more niche players such as educational platforms (Coursera, Udemy), subscription-based services (Netflix, Spotify), etc.

B2C commerce is characterized by:

1. Impulsive buying. Unlike the B2B segment, where decisions are made in a considered and collegial manner, in B2C customers often make purchases based on emotions and in a short period of time.
2. A wider audience. B2C businesses usually target a broad audience, using various tools to attract and retain customers, such as advertising, promotions, and loyalty programs.
3. Standardization. In B2C, goods and services are usually standardized and have fixed prices, while in B2B, individual offers and flexible terms of cooperation are more common.
4. Focus on user experience. To succeed in B2C, it is critical to ensure convenience and simplicity for customers throughout the entire purchasing process—from selecting a product to receiving it.

To succeed in the B2C niche, businesses need to carefully study their consumers, track market trends, and monitor competitors’ actions. The key factor is the correct positioning and “packaging” of the product, when marketing efforts are focused on a specific customer problem and the benefits of solving it.

B2B (business-to-business)

A model in which interaction occurs between two or more companies. Unlike B2C, where businesses work directly with end consumers, in the B2B segment, transactions are concluded between legal entities to ensure their operations.

Examples of areas in B2B commerce include:

1. Procurement of raw materials and components. Manufacturing companies can purchase the materials and components they need to manufacture their products through online channels. For example, a furniture factory orders wood from a wood processing company.
2. Provision of business services. Companies often outsource various functions, from accounting to website development and marketing. The search for contractors and the conclusion of contracts often takes place online.
3. Wholesale trade. Many B2B platforms specialize in wholesale sales, offering businesses a wide range of goods for further sale or use.

The following characteristics are typical for work in the B2B sector:

1. Long transaction cycle. Unlike B2C, where decisions are made quickly, in the B2B sector, the process of selecting a supplier and agreeing on terms can take weeks or months.
2. More time for decision-making. B2B customers analyze information about products and services more carefully, evaluating their advantages, price, and potential benefits for their business.
3. The importance of personal connections. In B2B, establishing trust between partners plays a major role, which is why significant efforts are directed toward communicating with decision-makers.
4. Individual approach. B2B sales often involve customizing offers to the needs of specific customers, more flexible payment and delivery terms, and additional services.

To be successful in the B2B niche, companies need to clearly understand the specifics of their target audience, its business objectives, and criteria for selecting partners. Key factors include competitive product advantages, customer focus, and the ability to build and maintain long-term relationships with corporate clients.

C2C (consumer to consumer)

In this model, interaction occurs directly between consumers. Unlike B2C and B2B, where one party to the transaction is a business, in the C2C segment, both the seller and the customer are private individuals.

The main venues for C2C commerce are online platforms that act as intermediaries between users. The most well-known examples are classified ad services (OLX, Craigslist), auctions (eBay), marketplaces for handmade goods (Etsy), etc. These platforms provide convenient tools for posting offers, searching for the right goods or services, and conducting transactions.

What can be bought or sold in C2C format:

1. Used goods. One of the most popular options is selling used goods, from clothing and appliances to furniture and cars. This allows sellers to get rid of unwanted items and buyers to purchase them at a lower price than in a store.
2. Unique products. C2C platforms are a great way for artisans and creative individuals to find their customers. Here you can buy handmade jewelry, designer clothing, interior items, and much more.
3. Services. In addition to goods, services such as tutoring, photography, repair work, etc. are often sold in the C2C segment. Some platforms, such as YouDo or Kabanchik, specialize in this particular area.

C2C commerce has many advantages, including:

1. Accessibility. Virtually any internet user can become a participant in the C2C model, as it does not require significant investment or skills.
2. Wide range of products. C2C platforms offer a huge variety of goods and services, including rare and unusual items that are not always available in regular stores.
3. Competitive prices. Since there are no intermediary markups in C2C, the cost of goods and services is usually lower than in the B2C segment. Sellers can make a good profit, and buyers can save money.

At the same time, C2C commerce is not without risks. The main one is the likelihood of encountering fraudsters or unscrupulous sellers, because unlike businesses, individuals do not value their reputation as much. However, many platforms are implementing user protection systems (verification, transaction insurance, ratings, and reviews) to minimize such cases and make purchases as safe as possible.

C2B (consumer to business)

A relatively new model of e-commerce in which consumers sell their products or services to businesses. In essence, it is a reversal of the traditional model of interaction between companies and their customers.

The C2B trade sector usually includes:

• Platforms for freelancers. We are talking about Upwork, Fiverr, or Freelancer.ua, where specialists in various fields (programmers, designers, copywriters, etc.) advertise their services, and business representatives select suitable contractors for their projects. This gives companies access to a wide pool of talent without having to hire full-time employees.
• Influencer marketing. Bloggers and popular social media users essentially “sell” their influence over their audience to businesses by promoting brands and products through their own channels. This can take the form of direct recommendations, reviews, or native content integration. Such collaborations are beneficial to both parties: companies increase awareness and trust in their products, while influencers monetize their personal brand.
• Crowdsourcing projects. This is when a business involves consumers in the joint creation of products or content. For example, a company announces a competition for the best packaging design or slogan, and participants send in their ideas in exchange for a reward. This not only gives the brand fresh ideas, but also engages the audience in interaction.

When working with the C2B segment, it is important for businesses to clearly formulate their requests and expectations for cooperation, as well as offer adequate payment terms. In turn, consumers need to objectively assess their skills and capabilities, build their personal brand and reputation.