What Is Ecommerce? How It Works, Types, and Business Models in 2026

Two cartoon shoppers beside a large phone showing a shopping bag, a shopping cart, a payment card and parcels under the word ECOMMERCE

What is ecommerce?

Ecommerce, short for electronic commerce, is the buying and selling of goods and services over the internet. It covers everything from a customer ordering shoes on a brand’s website to a wholesaler placing a bulk order through a B2B portal, a shopper buying through a marketplace app, or a subscriber paying for a monthly box. If the order is placed online, it’s ecommerce, even when the product is picked up in a store.

For US businesses, ecommerce is now a large and still-growing share of retail. The US Census Bureau’s Quarterly Retail E-Commerce Sales report estimated seasonally adjusted US retail ecommerce sales at $340.2 billion for the second quarter of 2026, up 12.2% from the second quarter of 2025, and 17.1% of total retail sales. Those were the latest published figures as of October 2026, with the third-quarter release scheduled for November 19, 2026.

This guide explains how ecommerce works, the main types and business models, what you need to start, and the rules US sellers should know. It draws on official sources and on the platform and migration work PROSeCommerce, part of PROS Global in San Diego, does with online retailers.

How ecommerce works, step by step

Every online sale follows roughly the same path, whatever the platform:

A dotted path linking a magnifier, a shopping cart, a card terminal, a parcel, a delivery truck and a house, with two people — From search to doorstep: discovery, cart, payment, fulfillment, delivery.

Discovery. A shopper finds the product through search, social media, ads, email, a marketplace, or a direct visit.
Browsing. They view product pages with photos, descriptions, prices, and reviews, and add items to a cart.
Checkout. They enter shipping details and pay. The store calculates taxes and shipping.
Payment processing. A payment gateway and processor authorize the card or wallet payment and send funds to the merchant’s account, minus fees.
Fulfillment. The order is picked, packed, and shipped from a warehouse, a store, a third-party logistics provider, or a supplier.
Delivery and service. The customer receives tracking updates, gets the order, and may contact support or start a return.
Retention. The store follows up with email, SMS, loyalty programs, or subscriptions to earn the next order.

Behind those steps sit a storefront, a product catalog, inventory, payments, tax calculation, shipping, customer records, and analytics. An ecommerce platform bundles most of these into one system.

Types of ecommerce by who buys and sells

Type	Who sells to whom	Example
B2C (business to consumer)	A business sells to individual shoppers	A clothing brand’s online store
B2B (business to business)	A business sells to other businesses	A parts supplier with wholesale pricing and purchase orders
D2C (direct to consumer)	A manufacturer or brand sells directly, skipping retailers	A skincare brand selling from its own site
C2C (consumer to consumer)	Individuals sell to each other through a platform	Second-hand marketplaces
C2B (consumer to business)	Individuals sell products or services to businesses	Freelancers or creators licensing work
B2G (business to government)	Businesses sell to government agencies	Online procurement portals

Many stores mix types. A D2C brand may also run a wholesale channel, which is why B2B features matter even for consumer brands. Our guide to Shopify Plus for B2B merchants covers how that works on Shopify.

Ecommerce business models

The type describes who buys; the business model describes how you source products and make money:

Retail with your own inventory. You buy or make stock, store it, and ship orders. More control over quality and margins, more cash tied up in inventory.
Dropshipping. A supplier ships directly to the customer when an order comes in. Low upfront cost, but thinner margins and less control over delivery and quality.
Print on demand. Products like apparel or posters are printed after the order, often by a partner.
Subscriptions. Customers pay on a schedule for replenishment, curated boxes, or memberships.
Wholesale. You sell in bulk to retailers or businesses, often through a B2B portal with customer-specific pricing.
Digital products and services. Downloads, courses, software, or bookings, with no physical shipping.
Marketplace selling. You list on third-party marketplaces alongside, or instead of, your own store.

Ecommerce examples by business size

Ecommerce looks different depending on the size and type of business:

A solo maker sells handmade products from a hosted store, ships from home, and promotes through social media and email. The priorities are a simple setup, low fixed costs, and reliable payments.
A growing D2C brand runs its own store as the hub, adds a marketplace channel and a wholesale page for retailers, and works with a third-party logistics provider. Priorities shift to inventory accuracy, retention marketing, and site speed.
A local retailer connects a physical shop to an online store so customers can buy online and pick up in store, with one inventory count across both.
A B2B distributor gives approved business customers a login with their own price lists, payment terms, and quick reorder forms, replacing phone and email orders.
An enterprise brand runs several storefronts for different countries or brands, with integrations to ERP, warehouse, and customer service systems.

The core building blocks are the same in every case: a catalog, a checkout, payments, fulfillment, and marketing. What changes is the scale and how many systems need to talk to each other.

Where ecommerce happens: channels

Most brands sell in more than one place:

Your own online store, where you control the brand, data, and customer relationship.
Marketplaces, which bring traffic but charge fees and control the customer relationship.
Social commerce, selling through social platforms.
Mobile apps for brands with frequent repeat buyers.
In-person sales connected to the same inventory and customer records, through a point-of-sale system.

Your own store is usually the hub, because it’s the channel where you own the customer data. Our guide to the Shopify online store explains how that hub is set up on Shopify.

Advantages and challenges of ecommerce

A balance scale with a green check and shopping bag on one side and a red cross and parcel on the other, between two people — Weigh the reach and data of selling online against costs like shipping and returns.

Advantages

Sell around the clock to customers anywhere you can ship.
Lower startup costs than a physical store in many categories.
Detailed data on what customers view, buy, and return.
Easy to test prices, products, and offers.
Room to grow into new channels and markets.

Challenges

Competition is one search away, so pricing and differentiation matter.
Customer acquisition costs through ads can rise quickly.
Shipping, returns, and fulfillment eat into margins.
Payment fraud and account security need attention. Our ecommerce security guide covers the basics.
Customers expect fast sites, clear policies, and responsive support.

What you need to start an ecommerce business

A product and a customer. Know what you sell, who buys it, and why they would choose you.
An ecommerce platform. Hosted platforms like Shopify include hosting, checkout, and security. As of October 2026, Shopify’s pricing page lists plans from $29 a month billed yearly. Open-source options like WooCommerce have no platform fee but need hosting and maintenance. Our guide on how to find the best CMS for ecommerce compares the options.
A way to take payments. A payment provider that supports cards and wallets. Our guide to the Shopify merchant account explains how Shopify Payments compares with third-party gateways.
Shipping and fulfillment. Carriers, packaging, rates, and a returns process.
Business setup. A registered business, a separate bank account, and sales tax registration where you have obligations.
Policies. Shipping, returns, privacy, and terms pages that match how you operate.
Marketing. A plan to bring in the first customers through search, email, social, and ads. Our ecommerce marketing strategies guide lays out a 90-day plan.

Rules US online sellers should know

Ecommerce has a few legal basics every US seller should understand. These are summaries, not legal advice.

Shipping promises. The FTC’s Mail, Internet, or Telephone Order Merchandise Rule requires a reasonable basis for any shipping time you state. If you state no time, you must have a reasonable basis to ship within 30 days. If you can’t ship on time, you must ask the customer to consent to the delay or give a prompt refund.
Sales tax. Most states with a sales tax require out-of-state online sellers to collect it once their sales into the state pass a threshold that each state sets. Check the revenue department of every state where you have customers, or use your platform’s tax tools and a tax professional.
Advertising and reviews. Claims must be truthful, and the FTC’s rule on consumer reviews and testimonials prohibits fake reviews and certain misleading review practices.
Privacy. Collect only the customer data you need, explain how you use it in a privacy policy, and protect it.

How search and AI shopping fit in

Most online purchases still start with a search. Clear product pages, accurate structured data, fast load times, and helpful content make a store easier to find in Google and in AI-assisted shopping experiences. Google’s guidance on creating helpful, reliable, people-first content applies to product and category pages as much as to blog posts. Our ecommerce SEO tips go through the practical steps.

Frequently asked questions

What is ecommerce in simple words?

Ecommerce is buying and selling products or services online. A customer finds an item on a website, app, or marketplace, pays digitally, and the seller ships the item or delivers the service. It includes online stores, marketplaces, social selling, subscriptions, and online orders picked up in store.

What are the main types of ecommerce?

The main types are B2C, where businesses sell to consumers; B2B, where businesses sell to other businesses; D2C, where brands sell directly without retailers; and C2C, where individuals sell to each other through a platform. Many companies combine more than one type, such as a D2C brand with a wholesale channel.

How big is ecommerce in the US?

The US Census Bureau estimated seasonally adjusted US retail ecommerce sales at $340.2 billion in the second quarter of 2026, which was 17.1% of total retail sales and 12.2% higher than a year earlier. Those were the latest published figures as of October 2026.

How do ecommerce businesses make money?

Ecommerce businesses earn the difference between what customers pay and the cost of products, fulfillment, payment fees, platform costs, and marketing. Common models include selling your own inventory, dropshipping, print on demand, subscriptions, wholesale, and digital products.

Is Shopify an ecommerce platform?

Yes. Shopify is a hosted ecommerce platform that provides an online store, checkout, payments, hosting, and tools for selling on social channels, marketplaces, and in person. Merchants pay a monthly plan, and Shopify handles the servers, security, and platform updates.

Do I need a business license to sell online in the US?

Requirements depend on your state, city, and what you sell. Most sellers register a business, get any required local licenses, and register to collect sales tax in states where they have obligations. Check with your state and local government or a tax professional before you launch.

The short version

Ecommerce is any sale where the order happens online, and it now accounts for about one in six US retail dollars, according to the Census Bureau. Success comes down to a clear product and customer, a platform your team can run, reliable payments and fulfillment, and steady marketing.

If you are starting a store or moving an existing one to Shopify, PROSeCommerce can help you plan the platform, migration, and launch.