Table of Contents
- What is E-commerce?
- The Most Common Types of E-commerce Business Models
- B2C (Business-to-Customer)
- B2B (Business-to-Business)
- B2B2C (Business-to-Business-To-Customer)
- B2G (Business-to-Government)
- C2B (Customer-to-Business)
- D2C (Direct-to-Customer)
- C2C (Customer-to-Customer)
- Selecting Your E-commerce Business Model
- Conclusion
Are you interested in starting an e-commerce business but don’t know where to start?
It can be overwhelming to decide which type of e-commerce business model is the best fit for your company. There are many e-commerce options to choose from and each has its own benefits and drawbacks.
E-commerce is a business concept that allows businesses and consumers to buy and sell products or services online.
There are numerous e-commerce business models for consumers and businesses to enable online transactions globally with a variety of ecommerce platforms.
- B2C (Business-to-Customer),
- B2B (Business-to-Business)
- B2B2C (Business-to-Business-To-Customer)
- B2G (Business-to-Government)
- C2B (Customer-to-Business)
- D2C (Direct-to-Customer)
- C2C (Customer-to-Customer).
In this article, we’ll explore the different types of e-commerce business models so that you can make the right decision for your business.
Key Statistics:
- Ecommerce sales are expected to reach $6.3 trillion by 2024. In comparison, the worldwide sales from ecommerce were $4.28 trillion in 2020. (Statista)
- The B2B e-commerce market is close to $8 trillion (US).
If you’re launching an e-commerce business, you’ll almost certainly fall into one of these broad groups. Each has advantages and disadvantages, and many businesses operate in more than one.
Knowing which bucket your concept belongs to might help you think imaginatively about your possibilities and risks.
PROS can position your business to maximize its potential regardless of its growth stage or business strategy. If you want to learn more, contact us.
B2C companies sell directly to their customers. Anything you buy as a consumer in an online business, from clothing and household necessities to entertainment, is a B2C transaction. Walmart and Amazon are some of the exapmples of B2C e-commerce business model.
A B2C purchase has a far shorter decision-making process than a B2B buy, particularly for lower-value items. Because of the shorter sales cycle, B2C companies often spend less money on marketing to achieve a sale while having a lower average order value and fewer recurring purchases than their B2B counterparts.
B2C encompasses both products and services. To promote directly to their customers and make their lives easier, B2C innovators have used technologies such as mobile apps, native advertising, and retargeting.
A business sells its product or service to another business in a B2B business model. The buyer is sometimes the end-user, but more often than not, the buyer resells to the consumer. On average, B2B transactions have a longer sales cycle, but larger order value and more recurrent purchases. Prominent B2B e-commerce companies include Shopify, Amazon’s Web Services (AWS), Microsoft, Salesforce, Slack, Cisco, Qualtrics, FedEx, etc.
Recent B2B entrepreneurs have carved out a niche for themselves by replacing catalogs and order sheets with e-commerce portals and boosting niche market targeting.
By 2021, 60% of B2B purchasers are millennials, nearly doubling from 2012. B2B selling in the web realm is growing increasingly significant as younger generations enter the age of completing business transactions.
B2B2C is an abbreviation for Business-to-Business-to-Consumer. It is a business strategy in which a corporation offers its product or service to an end client in collaboration with another organization. Amazon, Alibaba, eBay, Etsy are good examples of B2B2C models.
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Unlike when a corporation white labels a product to promote it as its own, the end customer realizes that they are purchasing a product or using a service from the original company.
Business-to-government (B2G) e-commerce is a business model in which a company sells and distributes its products to government bodies or public administrations – whether local, county, state, or federal. Ariba SAP, Skycatch, ProtectBox are some of the exapmples of B2G business model.
This approach is dependent on successful government contract bidding. Typically, a government agency will issue a request for proposal (RFP), and e-commerce enterprises will be required to bid on these projects.
B2G varies from other businesses or consumers while being a more secure business model. Government agencies’ bureaucratic character typically results in a considerably slower speed, which might limit possible revenue streams.
Individuals can sell goods and services to businesses through C2B firms. A site in this e-commerce model may allow clients to publish the job they want to be done and have firms bid on the opportunity. C2B services would also include affiliate marketing. Google Adsense, Commission junction, and Amazon are good examples of C2B models
The competitive advantage of the C2B e-commerce business is in pricing for goods and services. This strategy empowers consumers to set their prices or have businesses compete directly to suit their requirements.
Recent innovators have ingeniously leveraged this concept to connect businesses with social media personalities to sell their products.
A direct-to-consumer company sells its product to its clients directly, without the assistance of third-party distributors or internet merchants. Warby Parker, Dollar Shave Club, etc. are some examples of the D2C business model.
Unlike other business models, such as B2B2C, there is no intermediary between the consumer and the enterprise.
Consumer-to-consumer e-commerce enterprises, often known as online marketplaces, connect customers to exchange goods and services and typically make money by collecting transaction or listing fees. Some of the prominent C2C businesses include Craigslist, Facebook Marketplace. etc.
C2C businesses gain from self-propelled expansion by motivated consumers and sellers, but quality control and technology upkeep are major challenges.
In the early days of the internet, companies like Craigslist, Walmart, Alibaba, and eBay pioneered this strategy.
As previously said, there are numerous e-commerce business models and value delivery techniques to choose from. It can be tough to choose a business model, so here are a few questions to help you design a business plan that will set your company apart:
What are you selling?
The internet marketplace has the advantage of always having a market for anything you want to offer – you simply need to know what that is.
Before you can start a business, you must first understand what is currently being sold online and what you want to tap into.
Physical Products
Physical goods are the most often offered commodity in e-commerce businesses, and they frequently record the highest sales.
Your introduction to the web market will be simple if you know what product you want to manufacture, which can range from vehicle components to novels to electronics and gadgets.
Digital Goods
Selling digital goods and products has never been easier as the globe goes farther towards a digital marketplace.
Because of the nature of digital commodities, what and how much you may sell is virtually entirely determined by your business. Do you want to sell an eBook? What about web design? As long as you don’t violate any copyrights, the world is your oyster.
Services
Another effect of the greater shift to the digital economy is how much easier it is to sell services.
Before online marketplaces, most services were sold through newspaper ads or word of mouth. Service-based firms can now build their websites to sell themselves.
Furthermore, the prevalence of marketplaces such as Facebook Marketplace, Etsy, and Amazon makes advertising outlets more accessible. It only takes a few clicks to find a group looking for the services you have to offer.
Who is your customer?
Consider your customers’ expectations when acquiring the type of new product you intend to offer. You’re more likely to succeed if you understand their habits and behaviors and identify ways to improve or save money on them.
To do so, you’ll need to identify the key areas in how things are currently done at your organization. This is a chance for innovators to carve out a niche to boost client interactions and overall happiness.
What are you capable of?
Build on your present strengths and the aspects that excite you. Be realistic about what you can do yourself and what you will need to hire someone to do. Finding your limits can be difficult, but it can help you make better long-term decisions.
What is best for your product?
Different models will serve you better than others depending on your goods. If you manufacture your items, for example, you may want to try wholesaling or subscriptions to assist cover production expenses and break even faster. If you are a distributor of other people’s products, you should invest more extensively in direct marketing and customer acquisition techniques.
What is your positioning?
You know what makes your product superior, but will your customers? Examine your competitors and make it obvious why your product is the best option. Your distinctive value should be evident in your back-end procedures, warehousing, marketing, and the shopping experience on your website.
The e-commerce business has grown in popularity and inventiveness in recent years.
Understanding what business models to use and how to leverage them might mean the difference between a successful firm and one you never hear about again for companies trying to take the next step into the digital realm.
You won’t have to worry about the second option if you use PROS. Our solution is intended to assist organizations in the building, innovating, and growing – without the bother and with the assistance of industry professionals.
FAQ's
An e-commerce business model is a way of conducting business online through the use of the internet and digital technology. E-commerce businesses can range from large-scale retail sites to small-scale digital services. E-commerce businesses typically offer customers a way to purchase goods and services online, as well as providing customer service, marketing, and payment processing.
1. B2B (Business-to-Business): This type of e-commerce business model is a transaction between two companies, such as a manufacturer and a wholesaler.
2. B2C (Business-to-Consumer): This type of e-commerce business model is a transaction between a company and a consumer, such as an online retail store.
3. C2C (Consumer-to-Consumer): This type of e-commerce business model is a transaction between two consumers, such as an online marketplace for buying and selling goods.
4. Marketplace: This type of e-commerce business model is a platform where multiple vendors offer their products, such as Amazon and eBay.
5. Subscription: This type of e-commerce business model is a recurring payment for goods or services, such as a streaming service.
6. Dropshipping: This type of e-commerce business model is where a retailer does not keep goods in stock but instead passes on customer orders and shipment details to a third-party supplier.
7. Affiliate Marketing: This type of e-commerce business model is a performance-based marketing in which a retailer rewards one or more affiliates for each customer brought about by the affiliate’s marketing efforts.”
Each e-commerce business model has its own advantages. B2C models offer a wide consumer reach, while B2B models can lead to larger-scale sales. C2C models provide opportunities for individuals to monetize assets, and C2B models allow businesses to tap into specialized expertise. Subscription-based models offer recurring revenue and customer loyalty.
Yes, it is possible for an e-commerce business to employ multiple models simultaneously. This is known as a hybrid or multi-channel approach, where businesses combine different models to cater to diverse customer segments and maximize revenue opportunities.
C2B e-commerce reverses the traditional buyer-seller relationship. In this model, individual consumers offer products or services to businesses. It includes freelancers, influencers, or content creators who sell their expertise, services, or content to companies.
B2C e-commerce involves businesses selling products or services directly to individual consumers. It is the most well-known and prevalent e-commerce model, with examples like online retailers and marketplaces.
Meerashri Thakar is a Digital Marketer and Content Marketing specialist with experience in generating SEO-optimized content and has made content on Product, Shopify, Drupal, Digital Marketing, etc.