What is E-commerce ? Types, Advantages and Limitations.

What is E-commerce? Types, Advantages, and Limitations.


E-commerce is formed by the combination of two words: Electronic and Commerce. Commerce means transactions involving the buying and selling of goods and services. So, e-commerce refers to the buying and selling of goods and services over the Internet. In e-commerce, each and every activity except delivery of goods is done using online and electronic media. The goods are advertised over the Internet and satellite channels.

The buyer places the order for goods and services online and transfers the funds electronically through online banking. The goods are then delivered by the supplier at the buyer’s doorstep. The status of the order placed can also be tracked online.

A great advantage of e-commerce is that it is not restricted to the political frontiers of a country. It can be domestic as well as international.

Types of e-commerce

E-commerce is divided into different categories on the basis of the type of relationship between the parties involved in a transaction. It is mainly divided into the following categories:

  • Business to Business (B2B): These are the transactions between two or more businesses. For example, a car manufacturer buys tyres, glass, seat covers, etc. from manufacturers of these products. The value of B2B transactions is much more than any other category.
  • Business to Consumer (B2C): These are the transactions between a business and consumers for the use of final goods and services. For example, customers do online shopping of books, clothes, toys, etc.
  • Business to Employee (B2E): These are the transactions or servic provided by a business to its employees. For example, announcement of company policies, management of insurance policies, etc.
  • Business to Government (B2G): These are the transactions or services provided by business to the government. For example, advertisement agencies for government, applying for government tenders, etc.
  • Consumer to Business (C2B): These are the transactions in which consumers or individuals offer products and services to business. For example, individuals writing reviews and blogs for products sold by business to earn money, etc.
  • Consumer to Consumer (C2C): These are the transactions that take place electronically between two consumers through some third party. You must have seen advertisements of various websites where consumers buy and sell used products. This is basically a C2C website that connects two consumers who buy and sell used household goods and appliances.
  • Government to Business (G2B): These are non-commercial transactions between government and business. For example, online advice or information on government policies, laws and regulations, etc. One such information can be online display of last dates for depositing various taxes, etc.
  • Government to Citizen (G2C): These are non-commercial transactions between government and citizens of a country. For example, consumer complaint services, information on government policies, etc.
  • Government to Government (G2G): These are the non-commercial transactions between different government organizations, departments, ministries, etc.

Advantages of e-commerce

E-commerce has become extremely popular because of the following reasons.

  • Time-saving: It saves a lot of time and effort as you can shop from the comfort of your home while sitting in front of your computer instead of going to the market.
  • Wide variety: You can compare the products and prices offered by different sellers and select a product according to your preference and budget.
  • Helps small businesses to compete with big businesses: Small businesses can display their products on websites and consumers can view them. In this way, small businesses can also compete with big businesses.
  • Wide market: Producers or manufacturers can increase their market even outside the state or national boundaries and can, therefore, increase their sales.
  • Business is open 24x7x365: This means that the business can continue 24 hours in a day, 7 days in a week and 365 days in a year. The consumers can purchase and sellers can sell their product irrespective of the time and even on holidays.
  • Better advertisement: Because of the rapidly increasing Internet use these days, online advertisements reach more customers than electronic or print advertisements.
  • Protection against frauds and thefts: Electronic payments, that is, direct transfer of funds from buyer’s bank account to seller’s bank account prevent frauds and thefts that may happen in case of credit sales.

Limitations of e-commerce

Although e-commerce has various advantages, it has the following limitations also.

  • Delayed delivery: While doing shopping in a market, you get the goods immediately once you pay for them. However, in e-commerce, you pay while placing the order on the website and get the delivery of goods later, which is generally after 7-8 working days.
  • Quality of delivered goods: While viewing goods on a website, you read about its features but you cannot actually touch and feel the goods. Therefore, it is difficult to imagine how good the actual quality of the goods is.
  • Less confidentiality: Consumers are not sure that their credit card/debit card numbers will remain confidential. They are always fearful about someone misusing their information and committing a fraud.
  • Every company and consumer cannot benefit: There is a procedure to pay and collect money’ electronically. Consumers need to have a debit card, credit card, net banking or mobile banking facility to make e-payments. Similarly, companies need to have payment gateways to make e-collections. Despite the limitations, e-commerce is a growing trend that is quickly dissolving physical boundaries and making everyone a potential buyer and seller.