Traditional commerce perhaps started before recorded history when our ancestors first decided to specialise their everyday activities. Instead of each family unit having to grow crops, search for food, and make tools, families developed skills in one of these areas and traded some of their production for other needs. It started with bartering, which eventually gave way to the use of currency, making transactions easier to settle. However, the basic mechanisms of trade were the same. Some body created a product or provided a service, which somebody else found valuable, and therefore was willing to 'pay' for it in exchange. Thus, commerce, or doing business, is a negotiated exchange of valuable products or services between at least two parties and includes all activities that each of the parties undertakes to complete the commercial transaction.

Any commercial transaction can be examined from either the buyer's or the seller's viewpoint. These two sides of a commercial transaction are shown in the diagram given below.

Some people use the term Internet commerce to mean electronic commerce that specifically uses the Internet as its data transmission medium.

E-commerce did not just happen in the last five years. Automobile companies and supermarkets in the western countries have been doing e-commerce for many years; their e-commerce technology is called electronic data interchange (EDI). Airline seats have also been sold using e-commerce systems; and the French have also been using e-commerce since 1983, but they do it in French with a system called Télétel.

How do you know which products can be sold more effectively using traditional commerce, and which using electronic commerce? Products that buyers prefer to touch, smell, or examine closely are difficult to sell using e-commerce. For example, customers might be reluctant to buy high fashion garments and perishable food products, if they cannot examine the products closely before agreeing to purchase them. Retail merchants may have long traditional commerce experience in creating store environments that help convince customers to buy. This combination of store design, layout, and product display knowledge is called merchandising. Many salespersons have developed skills that allow them to identify customer needs and find products or services that meet those needs. The art of merchandising and personal selling can be difficult to practice over an electronic link.

However, branded merchandise and products, such as books or music CDs, can be easily sold using e-commerce. Customers are willing to order a book title without examining the specific copy they will receive, because one copy of a new book is identical to other copies of the same book, and because the customer is not concerned about its other qualities such as freshness, or smell. Furthermore, e-commerce also offers the advantage of providing the ability to offer a wider selection of book titles than even the largest physical bookstore; which outweighs the advantage of a traditional bookstore, such as the customer's ability to browse the book.