5 Types Of E-Commerce Business Models To Know About
By: Yukta Debnath
E-commerce is a business model that allows businesses to sell their goods or services to customers and clients over the Internet.
Easy access to the internet has turned the world into a global village. It is now possible to communicate with people from various parts of the world and engage in business. And this has significantly contributed to the rise of online companies and stores. Such enterprises have adopted some of the most popular types of eCommerce business models to trade worldwide using the internet.
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What are eCommerce Business Models?
The purpose of ecommerce business models is to help you sell your products online. Products can be physical, like books, clothes, and electronics, or digital, like downloads and subscriptions. Some people even use these models as a way of promoting their services instead of selling their products directly.
Most importantly, the various types of eCommerce business models allow companies to sell or buy goods and services globally. So, as a business owner, you have the opportunity to access a broader customer base. You just are not restricted to customers in your country.
In the entire world, there are at least 1 billion digital consumers. Since the Covid19 epidemic, there has been an increase in eCommerce. Government policies encouraging social distance have led to most individuals purchasing goods online. And that greatly aided in the rise of eCommerce.
In this article, we’re going to tell you about some of the most popular ecommerce business models.
Types Of eCommerce Business Models
1. Business To Customers(B2C)
The Business to Customers (B2C) model is the most popular model of ecommerce. It is used by companies that sell products directly to consumers and has been around for decades.
This type of eCommerce Business model mostly takes place online, whereby the business owners who are selling do not necessarily need to have a physical shop.
There is no direct relationship between the business and its customers. In fact, there is a third party involved in between who helps both parties communicate with each other by providing a platform where they can interact with each other.
Their website can showcase goods and services that potential customers are interested in. So B2C is the retail eCommerce trade.
Amazon is one of the most successful companies that capitalize on the B2C eCommerce business model.
It started as a platform where readers could purchase books and have them delivered to their specific countries. Right now, Amazon supplies a wide variety of goods and services commonly used in various homes. Customers only need to visit the Amazon website, place their order, complete an online transaction and wait for their product to be shipped to them regardless of which country they hail from.
The Business To Customers (B2C) eCommerce Model has three main advantages over other models:
- The price of goods and services can be easily changed based on market demand;
- You can use customer feedback to improve your products and services; and
- Customer information can be used to target specific marketing campaigns.
Although it can be argued that all businesses are B2C in nature, there are certain businesses that have been designed specifically for B2C. These are mostly online stores that sell products through an eCommerce website, mobile app, or both.
2. Business To Business(B2B)
B2B or Business-to-Business refers to the sale of goods or services from one business to another business. In this case, the seller (company A) and buyer (company B) are two separate entities.
It’s similar to the C2C model, but it’s used by a business selling to other businesses.
An aspect of B2B ecommerce that differentiates it from consumer-focused websites is the way transactions are conducted. While consumer sites may offer free shipping or free returns, when selling to other businesses this isn’t always possible because companies often have specific needs for their purchases. This means that for you to be successful in this type of ecommerce, you must be able to provide value to your customers by offering high-quality products at competitive prices.
Another major difference between consumer-focused websites and B2B sites is how they charge for their services. B2B sites tend to charge clients per transaction instead of offering monthly subscriptions as most consumer sites do. This means that if someone orders five items from your store.
There are many advantages to B2B ecommerce:
- You don’t have to deal with shipping costs and returns. You only have one customer, so you don’t have to worry about fulfilling orders yourself or dealing with returns.
- Most clients aren’t price-sensitive since they only buy what they need when they need it, so you can charge a premium.
- You can offer more complex products and services than traditional retailers because you’re not limited by shelf space or inventory management issues.
3. Customers To Business(C2B)
C2B eCommerce is a relatively new model that combines the best of B2B and B2C eCommerce. The C2B model is a customer-to-business (C2B) eCommerce platform that allows businesses to find, manage, and collaborate with their customers.
Businesses and companies have needs, which might be in the form of goods or services that ought to facilitate their operations.
For instance, a company might need a website to create an online store. Also, the company might need a logo, business plan, or related freelance services. As a result, they will have to hire freelance content writers.
Sites such as Upwork and Fiverr offer such services. So the C2B eCommerce business model ensures that companies can easily source products or services from consumers, who are now experts in this juncture.
There are many benefits of this model such as:
- You can reach out to a wider range of customers who want wholesale prices on your products;
- It provides an opportunity for small and medium companies that do not have enough budget for advertising campaigns;
- It helps you get more customers from different industries;
- You can increase your sales volume without increasing your advertising budget
4. Customers To Customers(C2C)
The C2C model, also known as the customer-to-customer model, is a network of online marketplaces that allow buyers and sellers to connect directly without having to go through a middleman. C2C model is most often associated with peer-to-peer commerce platforms like Etsy and eBay.
The customer buys from a seller’s website or app directly. As there’s no middleman involved; instead, transactions occur directly between buyers and sellers via the platform’s messaging system. Paying fees is usually optional in this model since both sides often negotiate directly with each other
eBay, Etsy, and Craigslist are the most popular sites that utilize this eCommerce business model. These third-party companies will only focus on facilitating business transactions between private customers. Company will not take part in any part of the sale. Its sole purpose is to guarantee seamless transactions for goods and services.
There are several benefits to using the C2C model:
- It allows you to sell directly to customers without having to pay fees or commissions.
- You don’t need an inventory or warehouse; you just need a computer and some storage space for shipping materials.
- You can avoid paying for expensive marketing campaigns that target customers with no guarantee of conversion.
5. Direct To Consumer (D2C)
Direct to consumer (D2C) eCommerce model is a new trend in the ecommerce industry. The term D2C is used to describe the retail business model where a company sells directly to the consumer instead of using a third-party retailer or wholesaler to sell its products.
Therefore, it gives you control of the supply chain. Besides, you do not have to deal with the frustrations likely to arise from outsourcing some functions such as delivery services. You will be in charge of that. Hence you can avoid delays because of using an incompetent logistics company.
This model has increased rapidly over the past few years and has been adopted by some of the biggest brands including Amazon and Alibaba.
The main advantage of this model is that it saves a lot of money as compared to traditional eCommerce models. In traditional ecommerce models, companies have to pay high commissions and fees for selling their products through third-party sellers or retailers which can significantly increase the cost of goods sold (COGS). However, when you use the Direct to Consumer eCommerce Model, there are no additional charges because you sell directly to your customers so there is no need for any middleman.
This model has been gaining popularity over the past few years as it provides several advantages for both consumers and businesses alike.
- Customers can purchase products at lower prices, as there are no middlemen involved.
- Businesses can keep more profits from each sale because of reduced costs from eliminating third-party sellers.
- Customers get higher quality products, as businesses can afford to focus on quality rather than quantity (i.e., they can spend more time testing their product).
Choosing Your eCommerce Business Model: What to Look for?
Now that you are aware of the different models, you can lay the framework for selecting your model. Three important factors will determine how you proceed.
1. Recognize your clientele
They, who? What shopping patterns and habits do they exhibit? What are the problems they face? Using this data to create your ideal customer profile (ICP) is a terrific first step in selecting the best eCommerce company strategy.
2. Recognize the value you offer.
What sets you apart from the competition and where do you excel in comparison? Is it your product choices, pricing, or customer service? What are you not good at, you should also ask yourself? Being honest with potential customers about where you thrive and where you don’t fit can only help to build trust and brand loyalty.
3. Make sales of your goods in a method that benefits your clients.
Here, you get to choose the delivery method. Consider this from the perspective of a manufacturer as opposed to a distributor. If you produce your goods, you should probably consider going wholesale or joining a subscription service. Building your brand and consumer base is more important if you’re selling someone else’s products.
To Sum up..
One of the great benefits of eCommerce is the amount of freedom it can give business owners. With no physical storefront, no employees, and no inventory management to buy or keep track of, many new options are open to business owners in comparison with brick-and-mortar businesses.
As you can see there are several different options to choose from and you need to carefully consider which one best matches your business goals.
They include C2C, B2C, C2B, C2C, and D2C eCommerce business models. Depending on the nature of your business, you can always have a model that suits you very well.
It will be important for you to carry out market research before choosing an eCommerce business model so that you can maximize your profit-making potential.
For instance, if you do not want to deal with an intermediary during your business transactions, the D2C eCommerce business model will be ideal. If you intend to source goods and services from your consumers, the C2B eCommerce business model will help you realize that dream.
So, for an Ecommerce business model to be successful, there is a need for an appropriate Ecommerce software solution like BusinessOnBot and a very well-thought-out understanding of the Ecommerce needs, problems, and solutions that your prospective customers are going to require.
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