Definition (canonical)
E-commerce is selling goods or services online — a category spanning own-store retailers, marketplace sellers, D2C brands and dropshippers. The economics differ radically by model, which is why "we do e-commerce" says nothing until you name WHO holds inventory, traffic and the customer relationship.
Three models, three different businesses
| Model | You own | Margin profile | Main risk |
|---|---|---|---|
| Own store | traffic, brand, data | highest gross, heavy CAC | acquisition cost treadmill |
| Marketplace selling | listing, fulfillment | fee-compressed | platform dependency, price wars |
| Dropshipping | marketing only | thinnest | zero moat, quality out of your hands |
Mature operators run hybrids: marketplaces for reach and cash flow, own store for margin and the customer relationship — because the strategic asset in e-commerce is not inventory but the RIGHT to contact the buyer again without paying for the click twice.
The metric stack
Traffic × conversion rate (typically 1–3%; levers here) × average order value = revenue; then the honest layer: contribution per order after shipping, payments, returns and promos (unit economics — returns in fashion reach 30–50% and quietly decide viability), and finally repeat purchase rate: first orders in paid channels are often break-even at best, so the business lives or dies on whether customer two-through-N arrive organically. LTV-to-CAC discipline applies exactly as in subscriptions, just built from repeat behavior instead of contracts.
Where the margin actually hides
Rarely in the product price. Real margin moves: shipping economics (thresholds nudging basket size, packaging engineering, carrier mix), returns reduction (size guides, honest photos, review mining), private label on proven demand, post-purchase monetization (email/SMS flows costing near zero per contact), and buying power once volume justifies it. Paid ads are the model's gravity — every structural improvement above is a step off the treadmill.
FAQ
Is dropshipping a real business? As a testing tactic, yes; as a durable model, rarely — no control over quality or delivery and no moat. Validate, then own what works.
Which platform stack matters? Less than operators think — logistics, offer and repeat rate decide; the storefront software is a commodity choice.
B2B e-commerce? The fastest-growing half of the category: catalogs, negotiated pricing and deferred payment online — same metrics, longer cycles, stickier customers.
One number to watch weekly? Contribution per order by channel — it catches shipping creep, promo abuse and returns drift before the monthly P&L does.
Related: Marketplace · Conversion · Unit Economics Reviewed: 2026-07-15 · Sources: e-commerce practice