March 7, 2021

Definition of Ecommerce

Dr Peter Mowforth

The OECD definition for ecommerce has been adopted by Governments and their agencies in most of the major economies. It is:

“the sale or purchase of goods or services, conducted over computer networks by methods specifically designed for the purpose of receiving or placing of orders. The goods or services are ordered by those methods, but the payment and the ultimate delivery of the goods or services do not have to be conducted online. An e-commerce transaction can be between enterprises, households, individuals, governments, and other public or private organisations. To be included are orders made over the web, extranet or electronic data interchange. The type is defined by the method of placing the order. To be excluded are orders made by telephone calls, facsimile or manually typed e-mail.”

The OECD reference goes on to say in relation to the output of ecommerce:

“Measuring electronic commerce is difficult for a number of reasons including defining what constitutes electronic commerce, the speed of its growth and evolution and the fact that in many cases firms conduct both electronic commerce and traditional commerce simultaneously.
Quantifying the value associated with electronic commerce activities can be challenging since many of its key qualities -- convenience, variety and ease of access to information -- are difficult to measure. This leads to a situation where it appears unlikely that official statistical offices will be able to provide accurate statistics on electronic commerce and quantitative insight into the nature of this activity will have to rely on private providers of data which suffer from a number of shortcomings, not the least of which is a transparent definition of what is meant by electronic commerce.”

Until 2014, the UK was the largest ecommerce economy in the world. Because of that, most other leading economies (e.g. Eurostat) followed the UK Government Office of National Statistics in the way they define and measure ecommerce. The UK ONS bases its definition on the OECD definition.

The OECD definition highlights the point that the definition is a consequence of the methods used for implementing it. Ecommerce is not defined wholly by the single step of the electronic transfer of money, but rather by the set of internet-based methods and processes that lead to and from the transfer of money. This means the marketing and promotion as well as the multiple interactions with the customer along with fulfilment. For most ecommerce purchases, fulfilment is conducted offline but with online access to ascertain the delivery date or customs status. Throughout the entire purchasing cycle, the internet dominates as the joined-up mechanism by which the process is managed.

The most frequently used alternative definition to the OECD definition is where ecommerce is limited and narrowed in two ways:

  1. Avoiding EDI transactions.
  2. Retail only.

EDI transactions are included in both the OECD and the UK ONS definitions. They use the Internet but make use of earlier (pre-web) protocols such as Edifact or X12 that have been in use since the early 1970’s. EDI systems are exclusively Business-to-Business (B2B) and account for around half of all ecommerce in the UK. The ONS annual report highlights that EDI systems are quickly being replaced with web-based mechanisms.

With retail ecommerce purchases, financial transactions take place using payment service providers such as PayPal or WorldPay. Alternatively, with B2B ecommerce business selling in wholesale volumes, the transaction itself often ties in with electronic invoicing or other business procurement mechanisms. Large B2B ecommerce systems can often integrate with major procurement systems such as those used within the public sector.

Within the UK, ecommerce statistics are often supplied by organisations such as the British Retail Consortium who limit their definition to retail only. Many of the larger online traders pay little attention to whether a sale is to a business or to an end-user customer. These suppliers provides multiple ways for paying along with numerous options for buying in different volumes at different prices. From their perspective, ecommerce is a spectrum that’s defined simply by volume and price.

As well as definitions being set formally by respected organisations such as the OECD, it’s also appreciated that definitions are influenced by common assumption and usage. To help bring a shared understanding of what is meant by ecommerce, we looked at the top five books on Amazon on general ecommerce and looked through the index of each to identify commonly considered topics that fell within the subject area of ecommerce. Examples of just a few example headings, topics and sections are listed below:

In terms of topics covered on ecommerce courses, the following Venn diagram helps illustrate  the relationship between business subjects and technical subjects:

Within the established literature there is unanimity that ecommerce skills require a combination of both business and technical skills.
The final point is to clarify and standardise the name that we give to the subject. Even the OECD is inconsistent and uses multiple terms including “e-commerce” (3,810 occurrences), “ecommerce” (458 occurrences), “eCommerce” (458 occurrences) and “electronic commerce” (2,170 occurrences) to say exactly the same thing:

In order to investigate how people describe the subject, we compared overall search volumes worldwide using Google Trends:

Search volumes are the measure of the number of times that words are typed in search engines. They provide a clear picture of how different words and spellings change in popularity and usage over time.

While we recognise that there will remain a difference of opinion over what to call the topic, we note the trend in word usage towards adopting the term “ecommerce” rather than “e-commerce”. Because of case (upper and lower), the word eCommerce is difficult to start a sentence with while all other names for the subject show much smaller search volumes. Ecommerce is simpler and shorter. This is probably the main reason for its increased use. Finally, it’s worth noting that sites such as Google treat the two words almost synonymously so searches on e-commerce will also show similar (but not identical) results for ecommerce.

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