This research paper explores the impact of e-commerce on Small and Medium Enterprises (SMEs), focusing on both the challenges and opportunities presented by the digital marketplace. SMEs play a crucial role in the global economy, yet they often face significant obstacles in adopting e-commerce solutions. Through an extensive literature review and a combination of qualitative and quantitative analyses, this study identifies key benefits of e-commerce for SMEs, including market expansion, cost reduction, enhanced customer engagement, and access to valuable data analytics. However, it also highlights major challenges such as the digital divide, financial constraints, lack of expertise, cybersecurity risks, and regulatory compliance issues. The paper includes detailed case studies of SMEs that have successfully integrated e-commerce into their business models, providing practical insights and recommendations for other SMEs. The findings suggest that while e-commerce offers substantial growth potential for SMEs, targeted support from policymakers and strategic planning by business owners are essential to overcome existing barriers. This study contributes to the understanding of e-commerce's role in SME development and offers a foundation for future research in this area.