There is no denying that the Ecommerce storm has taken over the world. In 2013, only 6% of the retail sales happened online in the US. Today, they make 13% of total retail sales. Even the projected e-commerce market worth is about to reach 5.4 trillion US dollars.
Seeing this, you might also want to jump the bandwagon and start your own eCommerce business. But first, I want to remind you not to forget the basics. Many companies make this mistake and fail terribly.
Start with the basics. Evaluate your business idea, understand your target audience and the E-commerce model on which you want to base your business. You can innovate and exceed customer expectations only after knowing these simple yet critical things.
This article will discuss five e-commerce business models and their pros and cons. By the end, you will be aware enough to select a suitable e-commerce model for your business. Let’s begin:
5 Types of Ecommerce Business Models
1. B2C Ecommerce Model
B2C is the most common e-commerce business model. In it, businesses directly sell their products and services to end-users. Examples can be Spotify, Netflix, any company selling cars online, or even a plumbing company selling services on its website. In all these scenarios, businesses directly sell their products without involving any middle party.
We can further classify the B2C e-commerce business model into five types:
- Direct Selling: Online retailers directly sell to consumers. For example, a car company directly sells its cars online.
- Online Intermediaries: The business acts as a bridge between seller and consumer—for example, a platform like BookMyShow allows people to book movie tickets on their site.
- Advertising-based: The business earns revenue through the advertising on its website—for example, newspapers, magazines, and media websites.
- Community-based: The business brings people together and earns revenue by targeting ads based on their demographics and locations. Twitter can be a suitable example.
- Fee-based: The business sells information or entertainment media to consumers for a fee. Netflix is an example.
Upsides of B2C Ecommerce Model
- Starting a B2C e-commerce business is easy.
- With $469 Billion worth, there is a large potential market to tap.
- Less complexity as the B2C commerce business operates similarly as a retail store.
- You can quickly diversify into other potential markets if you want.
Downsides of B2C Ecommerce Model
- B2B business owners face cut-throat competition.
- Finding and retaining customers is challenging.
- Customers have higher expectations.
- There are risks of fraud.
Excellent customer service is the key to success in the B2C e-commerce model. Not only will it help you attract, engage, and retain customers, but it will also make you stand out among your competitors.
2. B2B Ecommerce Model
In the B2B Ecommerce Model, companies sell their products or services to another business. Examples can be an IT company providing services to other companies, a communications technology company selling its video conferencing tools to enterprises, or companies that supply office furniture.
We can further divide the B2B Ecommerce business model into two types:
- Vertically oriented businesses that only sell to customers from a specific industry. For example, a company that manufactures internal components of a laptop only sells to a computer manufacturing company.
- Horizontally-oriented businesses that sell to customers from different industries. For example, a furniture supplier company sells to all types of companies.
Each B2B Ecommerce approach has its pros and cons. While the horizontal process lets you focus on a large market, you can enjoy less competition in the vertical approach.
Upsides of B2B Ecommerce Model
- The B2B market is enormous, almost twice as big as the B2C industry.
- Customers trust B2B buyers more. You can build long-lasting relationships if you are a good product or service provider.
- Order values are more prominent, and conversion rates are higher in the B2B eCommerce landscape.
Downsides of B2B Ecommerce Model
- Establishing a reputation can be difficult if you are a small or medium B2B Ecommerce business just starting.
- Customers take time to decide whether to purchase your product or not.
Unlike B2C, where the purchase can happen even after a single interaction, you need much nurturing in the B2B landscape. Only after you interact with the consumer on multiple occasions will they be ready to buy your product.
3. C2C Business Model
In the C2C e-commerce business model, consumers can sell products/services directly to other consumers. It is the result of the rise of the digital landscape.
Here are a few examples of C2C Business models:
- Online auction platforms where consumers can bid on the items other consumers have listed.
- Ecommerce websites where consumers can sell products like artworks or used objects, and other consumers can buy them.
- Money transfer platforms that facilitate seamless payment transfer between two people.
Even social media platforms have started leveraging this e-commerce landscape. They now include online store features to sell used items or promote their original products.
Upsides of C2C Ecommerce Business Model
- You have easy access to both consumers and sellers.
- You can enjoy self-propelled growth with motivated sellers and buyers.
Downsides of C2C Ecommerce Business Model
- Quality control and technology maintenance are complex. There have been incidents when Ecommerce sellers were scammed.
- Opening a C2C business is complex and requires elaborative planning.
- Surviving the C2C business landscape is challenging. Despite the success of eBay and Craigslist, many stores opened and closed soon after.
The key to success in the C2C e-commerce business is to create a strong community. It would be best if you have legit people who trust each other. The goal of C2C e-commerce is to bring buyers and sellers closer, and it is possible only if people trust each other enough to buy and sell.
4. C2B Business Model
Individuals can sell their products and services to businesses in the C2B Commerce business model. A suitable example is Upwork which allows companies to hire freelancers. Paid testimonials, referral programs, and blog monetization strategies like affiliate marketing can be other examples of the C2B e-commerce business model.
This Ecommerce business model is suitable for you if you are an artist selling artworks online, a professional specializing in a specific niche, or an influencer with a great fan following.
Upsides of C2B Ecommerce Business Model
- As a service provider, you have the power to set a price and have businesses compete for your services.
- You can expand your reach by providing good services.
Downsides of C2B Ecommerce Business Model
- There is tough competition among service providers. Surviving it can be not easy.
- Your reputation entirely depends on the quality of your work and the ratings you receive.
- Some people are willing to work at lower prices. Maintaining a high rate becomes difficult as a result.
Marketability is the key to surviving the C2B market landscape. No matter how skilled you are as a service provider, you will struggle to market yourself. So, don’t only sharpen your core skills. Also, work on how you can communicate and sell value to clients.
5. B2B2C Ecommerce Business Model
Imagine you are a manufacturer of tennis rackets. You want to sell them into the market but don’t have enough time and resources for it. In that case, you can sell these tennis rackets to retail stores to sell them to end-users. The eCommerce model you’ll be following, in this case, is B2B2C.
The B2B2C e-commerce business model comprises three parts: Manufacturer (business who makes the product), intermediary (retail store), and the end-user.
Upsides of B2B2C Ecommerce Business Model
- You can use the services, customer base, brand credibility of the brand you’re partnering with to increase the reach of your products/services and boost your revenue.
- A B2B2C model can help you gain loyal and frequent customers by making your product or service easily accessible to them.
- You can reduce unnecessary overhead costs that you will spend on product delivery and storage.
- The brand reputation of your partner will also improve your brand credibility.
Downsides of B2B2C Ecommerce Business Model
- Since businesses must market to consumers and companies, marketing costs are higher in B2B2C.
- The intermediary controls the product price, service, and distribution.
- The negative reputation of the intermediary also tarnishes your brand image.
To survive the B2B2C landscape, always make sure you appeal to businesses and consumers. Also, ensure you partner with someone who consumers trust. Their reputation will also influence your brand image in some way. So, be careful.
5 Types of Ecommerce Business Delivery Models
You know about different e-commerce business models and which might work best for you. Next, you would also want to see how you can deliver products to users and earn money. After all, it’s the end goal of any e-commerce business.
Here are five eCommerce business delivery models you can choose from:
You have a third-party supplier stock, package, and deliver your product. While the approach rids you from the problem of having to manage inventories, stock warehouses, or handle shipping – the quality of service and the product are entirely dependent on your dropship supplier.
You Order goods directly from the supplier and then manage them on your own until delivery. You are responsible for managing inventories, stocking warehouses, tracking orders, and shipping products.
3. Private Labeling
You hire a third-party manufacturer to build a product based on your ideas and designs. The approach saves you from manufacturing your product while also giving you an exclusive right to sell your product.
4. White Labeling
You purchase products from third-party distributors and sell them under your name or logo. The approach can boost your brand visibility while sparing you from manufacturing your products.
5. Subscription-based Services
You continuously provide your product or service to customers over predetermined intervals in return for a fee. The pricing depends upon your business, products, or the consumption behavior of your target audience.
How to Choose a Suitable Ecommerce Business Model?
- Know your customers, their buying habits, pain points, purchasing behaviors. It will help you understand their needs and how you can fulfill them.
- Understand the value you are offering. Know what makes you stand out in the competition and where you lack.
- Learn how you can provide the best service/products to your customers.
All these things will help you choose an e-commerce business model that works best for you and your customers.
So, you learned about different e-commerce business models and various delivery tactics. You also learned how to choose a model that best serves your customers and maximizes your revenue. Now, it’s time to implement these learnings and layout a business plan for your e-commerce venture. Best of luck!
Would you please let me know in the comments if there’s anything else I can help you with regarding E-commerce?