E-Commerce

E-commerce is the sale of products or services through the web. The buyer browses a website or app, selects items, pays electronically, and receives the product — either shipped physically or delivered digitally. As of 2024, e-commerce accounts for 16% of total U.S. retail sales [census2024] and a higher share in most European and East Asian markets.

In e-commerce, the web is the storefront. Revenue comes from selling goods at a markup over cost. The website displays the product, processes the payment, and coordinates fulfillment.

The unit economics of e-commerce center on three numbers: average order value (AOV), cost of goods sold (COGS), and customer acquisition cost (CAC). A clothing brand selling a $60 shirt with$20 in COGS and $15 in customer acquisition cost earns$25 gross profit per order. If the customer buys twice, LTV is $50 gross profit on$30 in acquisition cost — viable. If the customer buys once and never returns, LTV is $25 on$15 in acquisition — thinner, but still positive.

E-commerce businesses acquire customers through four channels:

Paid advertising. Google Shopping ads, Meta (Facebook/Instagram) ads, and TikTok ads drive the majority of e-commerce customer acquisition. The business pays per click or per impression and earns back the spend through resulting purchases. Paid acquisition is immediate but unprofitable without strong conversion rates and repeat purchase rates, because CAC scales linearly with volume.

Organic search. E-commerce sites rank for product-related queries (“best running shoes for flat feet,” “ceramic plant pots”) through product page optimization, category page SEO, and content marketing (buying guides, how-to articles that link to products). Organic acquisition is free per click but slow to build and dependent on Google.

Marketplaces. Selling through Amazon, Etsy, eBay, or Walmart Marketplace gives access to the marketplace’s existing traffic. The tradeoff: the marketplace takes 8-45% of the sale price (depending on category and platform) and controls the customer relationship. The seller gets volume but not ownership of the customer data or the ability to build brand recognition.

Email and retention. Once a customer has purchased, the email list becomes the primary channel for repeat sales. Post-purchase email sequences (order confirmation → product care tips → related product recommendations → seasonal promotions) drive 20-40% of revenue for mature e-commerce businesses. The email list converts the one-time buyer into a repeat customer, which is where e-commerce margin lives: repeat customers cost nothing to acquire.

The platforms that run e-commerce storefronts (Shopify, WooCommerce, BigCommerce, Squarespace) handle product display, cart management, payment processing, and order fulfillment integration. Shopify alone powered $236 billion in gross merchandise value in 2023 across millions of stores. The platform choice determines the technical ceiling and the fee structure, but the business questions — what to sell, to whom, at what price, through which acquisition channels — are independent of the platform.