Ecommerce has revolutionized the way people shop allowing consumers to purchase goods and services online from anywhere in the world. For entrepreneurs and business owners, this has created a golden opportunity as well. Now, a business owner can sell to anyone in the world 24 hours a day, 7 days a week. All, without having to set up a storefront.
As a result, there are now several types of ecommerce business models to choose from. Ecommerce has opened up new opportunities for businesses and consumers alike, and it has completely changed the way we do business. In this article, we will explore the different types of ecommerce business models and their unique features.
What is Ecommerce Business Model?
The ecommerce business model is an internet-based version of traditional commerce. The very first ecommerce store was called Boston Computer Exchange and was launched in 1982. However, ecommerce would not go mainstream until the mid-’90s. With the launch of companies like Amazon, eBay, and Book Stack (later acquired by Barnes & Noble), the general public became aware of the power of buying and selling online.
Today, ecommerce operates in a variety of sectors. This includes retail, hospitality, digital products, and professional services. What started as a way to just sell books and computers online is now a $5.7 trillion industry.
Just like any business model, some key elements make the model successful. For the ecommerce model, however, there are a few that are unique.
- Platform-The platform through which the product or service is sold is also an important part of the ecommerce business model. Ecommerce businesses can sell products through their own website, third-party platforms such as Amazon or Etsy, or a combination of both.
- Pricing Strategy-The pricing strategy of an ecommerce business is another important element of the business model. Ecommerce businesses need to price their products competitively to attract customers. However, they also make sure that prices are high enough to make the store profitable.
- Customer Acquisition Strategy– This involves attracting customers to the website or platform and converting them into paying customers. Traditional marketing is not as effective for most ecommerce businesses. Instead, they must rely on digital marketing such as paid advertising, content marketing, influencer marketing, and mobile marketing, just to name a few.
Now that you have a better understanding of how the ecommerce business model works, let’s look at the different types of business models available.
Types of Ecommerce Business Models
Business-to-Consumer Model (B2C)
The B2C model is the most people think of when it comes to the ecommerce business model. It involves businesses selling products or services directly to individual customers. This is because major corporations like Walmart and mom-and-pop small businesses utilize this model.
For anyone looking to start an ecommerce store, this is considered one of the easiest models to use. This is because selling directly to customers can be done on your platforms such as a website or a social media account. Businesses can also sell on platforms like eBay and Amazon.
There are several types of B2C models. Here are just a few:
- Direct-to-customer model
- Online intermediaries
- Advertising-based B2C
- Fee or a subscription-based model
- Marketplace Model
Business-to-Business Model (B2B)
The B2B model involves businesses selling products or services to other businesses. In this type of ecommerce model, transactions often involve large volumes of products or services. Prices are typically negotiated between the buyer and seller. B2B ecommerce platforms, such as Alibaba or ThomasNet, facilitate these transactions.
Businesses often have long-term relationships with their customers and focus on building trust and providing high-quality customer service. B2B businesses may also offer additional services such as technical support and training to help their customers use their products or services effectively.
Consumer-to-Consumer Model (C2C)
Of all of the models on this list, this is the only “business model” that can help non-businesses make money.
The C2C model allows individuals to sell products or services directly to other individuals. This model is commonly used in online marketplaces such as eBay, Craigslist, Etsy, and Poshmark. The platform acts as an intermediary between buyer and seller.
The platform using this model usually does not sell anything in itself. Instead, they typically charge a fee for transactions.
A common feature of this model is the use of peer-to-peer ratings. Most platforms use user reviews and ratings to help buyers make informed purchasing decisions.
Consumer-to-Business Model (C2B)
In the C2B model, users can sell products or services to businesses or other individuals.
This business model helped usher in the age of the freelancer and the gig economy. This model was first made popular by sites like Elance and oDesk. These two companies later merged and rebranded as Upwork.
The freelancing website Fiverr also propelled this model by introducing low-cost “Fiverr gigs”. These gigs grew in popularity because of a low starting price of $5.
C2B platforms typically charge a commission or service fee for facilitating the transaction.
The B2G model involves businesses selling products or services to state, national, or local government agencies. This model is common in industries such as defense, technology, and healthcare.
B2G businesses often have to navigate complex procurement processes and regulations to win government contracts. Typically, an agency will request a proposal for a particular project, and ecommerce businesses will need to bid for that project.
B2G businesses may also provide additional services such as training and support to help government agencies use their products or services effectively. One of the challenges for this model is the possibility of losing a contract. Many B2G companies rely on one or two large contracts as primary revenue sources. The loss of a contract can put a business in a tough financial position.
The G2B model involves noncommercial online interactions between the local and central government and businesses. This model is common in industries such as transportation, utilities, and healthcare. This type of ecommerce is also used for trade business licensing applications.
Another similar type of ecommerce is the government-to-citizen model. The G2C model involves government agencies providing services directly to citizens. This model is commonly used in areas such as healthcare, education, and social services.
Many times this model is used to help citizens pay speeding and parking fines as well as things like vehicle registration fees. G2C services are often delivered through online platforms, such as healthcare portals or online tax filing systems.
The dropshipping model allows retailers to sell products without holding inventory. In this model, the retailer sources products from a supplier who ships the product directly to the customer. This eliminates the need for the retailer to hold inventory or manage shipping logistics. Dropshipping is popular among ecommerce businesses that sell products with low-profit margins. Things like electronics or clothing, for example.
White label model
The white label model allows businesses to sell products or services under their own brand name. All without having to manufacture or develop the product themselves.
In this model, businesses partner with a manufacturer or developer who provides the product or service under the business’s brand name. White-label products are very common in industries such as cosmetics and supplements.
The brick-and-click model is used by retailers such as Walmart and Target. These retailers have both physical stores and ecommerce websites. This allows customers to shop in whichever way is most convenient for them.
The brick-and-click model offers several advantages. One major advantage is increased customer convenience. Another is the ability to leverage physical stores for online orders with in-store pickup options.
As you can see, there are several types of ecommerce business models available. Each ecommerce business model has its advantages and disadvantages. Businesses need to carefully consider which business model to choose for their needs and resources. Ecommerce businesses need to focus on providing high-quality products or services, building trust with customers, and providing excellent customer service to succeed in today’s competitive marketplace. If you want to learn more about business models, check out our article 21 Types of Business Models with Examples.