The rise of the internet has revolutionized the way businesses sell their products and services.
With the advent of eCommerce, companies are now able to reach a global audience with ease, opening up new opportunities for growth and revenue.
However, as the eCommerce industry continues to evolve, it’s becoming increasingly important for businesses to understand the different types of business models available.
If you want to start an eCommerce business first you need to select which type of business you want to do. Once you select an eCommerce business model then you need to build an eCommerce website.
From the traditional brick-and-mortar retail model to the more modern drop-shipping model, each type of eCommerce business model has its own set of benefits and challenges.
In this article, we’ll take a closer look at the different faces of eCommerce business models and helping you determine which one is right for your business.
General eCommerce Business Models
Business to Business (B2B)
Business-to-Business (B2B) eCommerce refers to the electronic exchange of goods and services between businesses.
B2B eCommerce models differ from Business-to-Consumer (B2C) models in that the transactions are typically larger and involve a more complex buying process.
B2B eCommerce business provides services or products to other companies. Usually the products and services for other companies like office accessories, HR firms, software firms, etc.
B2B eCommerce can be divided into three main categories: Direct Sales, Online Marketplaces, and Electronic Data Interchange (EDI).
Business to Consumer (B2C)
Business-to-Consumer (B2C) eCommerce refers to the sale of goods and services directly from businesses to consumers through the internet.
They sell products for daily use, clothing, groceries, etc. It’s a very popular eCommerce business model.
Consumers visit the eCommerce website and select the product they want to purchase.
Business to Government (B2G)
Business-to-Government (B2G) eCommerce refers to the sale of goods and services from businesses to government organizations.
B2G eCommerce models can vary widely depending on the nature of the goods or services being sold and the regulations surrounding government procurement.
However, there are a few common B2G eCommerce models, including:
Electronic Procurement: This model involves the use of electronic systems to manage the procurement process between businesses and government organizations.
Electronic procurement systems allow businesses to submit bids, view contract awards, and receive payment electronically, making the procurement process more efficient and transparent.
Online Marketplaces: Some government organizations have established online marketplaces that allow businesses to sell their products and services directly to government agencies.
These marketplaces provide a centralized platform for businesses to showcase their products and services and to receive payments from government agencies.
Electronic Data Interchange (EDI): EDI is a form of B2G eCommerce that involves the electronic exchange of standard business documents, such as invoices and purchase orders, between organizations.
EDI is often used by larger organizations and helps to streamline the procurement process, reducing the need for manual data entry and increasing efficiency.
Consumer to Consumer (C2C)
Consumer-to-Consumer (C2C) eCommerce refers to the sale of goods and services between individual consumers through an online platform.
C2C eCommerce business also known as an online marketplace connects consumers to purchase products from another consumer in exchange for money.
C2C platforms allow their users to buy and sell products. For every sale, the platform receives a small amount of commission.
The C2C business model is more complex and risky than any other business model. Because of legal issues many platforms break down.
There are some frauds and scams that try to take advantage of these platforms. Purchasers must be careful of these types of people.
Consumer to Business (C2B)
Consumer-to-Business (C2B) eCommerce refers to the sale of goods and services from consumers to businesses through the internet.
In a C2B model, consumers offer their products or services to businesses and businesses pay for these products or services.
There are several different C2B eCommerce models, including:
Crowdfunding: Crowdfunding is a form of C2B eCommerce where consumers provide financial support to businesses or individuals in exchange for a reward.
Crowdfunding is often used to fund new products, projects, or startups, and provides businesses with a way to access funding from a large number of consumers.
Online Surveys: Online surveys allow businesses to pay consumers for their opinions and feedback.
Consumers are typically paid for completing surveys, providing feedback on products or services, or testing new products.
Freelance Platforms: Freelance platforms, such as Upwork and Fiverr, allow consumers to offer their skills and services to businesses.
Consumers can use these platforms to find work and businesses can use them to find talent for short-term projects or tasks.
Stock Photos and Videos: Consumers can sell their photos and videos to businesses through online platforms, such as Shutterstock and iStock.
Businesses can use these photos and videos for marketing and advertising purposes.
Government to Consumer (G2C)
Government-to-Consumer (G2C) eCommerce refers to the sale of goods and services from government organizations to individual consumers through the internet.
The main aim of G2C eCommerce is to provide citizens with easy and convenient access to government services and information.
Some common G2C eCommerce models include:
E-government portals: E-government portals are websites that provide citizens with a centralized location for accessing government services and information.
Through these portals, citizens can apply for government benefits, pay taxes, and access government information, among other things.
Online Bill Payments: Many government organizations allow citizens to pay their bills, such as utility bills and tax bills, online.
This allows citizens to manage their payments from the comfort of their own homes and reduces the need for in-person visits to government offices.
E-health Services: E-health services provide citizens with access to healthcare information and services through the internet. This can include appointment booking, telemedicine, and access to health records.
Business to Business to Consumer (B2B2C)
Business-to-Business-to-Consumer (B2B2C) eCommerce refers to a model in which businesses sell their products or services to other businesses, which then sell the products or services to end consumers.
B2B2C eCommerce is a multi-layer model that combines both B2B and B2C eCommerce models.
Some common examples of B2B2C eCommerce include: Wholesale Marketplaces, Distributor Networks, Dropshipping, Affiliate Marketing etc.
Revenue Ecommerce Business Models
Drop Shipping
Drop shipping is a business model in which a retailer doesn’t keep goods in stock but instead transfers customer orders and shipment details to either the manufacturer, another retailer, or a wholesaler, who then ships the goods directly to the customer.
It’s a type of business where you don’t need to manage inventory, production, or shipping.
In a drop shipping business, the retailer acts as a middleman, taking orders from customers and forwarding them to the supplier, who then ships the products directly to the customer.
The retailer doesn’t need to invest in inventory or handle any of the shipping logistics, which reduces the financial risk and complexity of the business.
Wholesaling
Wholesaling is a business model in which a company sells goods in bulk to other businesses, typically retailers, at a lower price than they would sell the same goods to individual consumers.
Wholesalers serve as middlemen between manufacturers and retailers, buying large quantities of products and reselling them to retailers who then sell the products to end consumers.
It requires a large amount of investment for startups. You need to manage the inventory, stock, and keep track of orders, and shipping information.
You also need a warehouse to stock products. For starting you need a warehouse and an eCommerce website.
Subscriptions
A subscription business model is one in which customers pay a recurring fee for access to a product or service.
The fee is typically charged on a monthly or annual basis, and the customer is entitled to receive the product or service for as long as they continue to pay the fee.
One of the well-known subscription eCommerce brands is Dollar Shave Club. It delivers razors and shaving accessories to its customers on a monthly basis.
This type of eCommerce business model is more successful than any other model. Once you have built a customer relationship there’s a high chance that they will subscribe for a long time.
It would be best if you kept the sign-up process easy for customers.
White Label
White labeling is a business model in which a company produces a product or service and allows another company to put their own brand on the product or service.
The company that puts their brand on the product or service is known as the “white labeller.”
The white label typically sells the product or service under their own brand, but the product or service is actually manufactured or provided by the original company.
One of the main benefits of this business is that you can choose any profitable product that offers white-label options.
Private label
Private labeling is a business model in which a company creates and sells products under their own brand name, but the products are actually manufactured by another company.
The company that manufactures the products is known as the “contract manufacturer.”
The private labeller contracts with the contract manufacturer to produce products specifically for them, and the private labeller sells the products under their own brand name.
The company will take control of the product’s materials, functions, packaging, etc.
The advantage of private labeling is when a company takes control of the products it becomes unique from the rest of the market.
First, you need to find out if the manufacturer is ready to meet your demands or not.
Freemium
The freemium business model is a pricing strategy in which a company offers a basic version of its product or service for free, but charges for advanced features or additional functionality.
The idea behind the freemium model is to attract a large number of users with the free version, and then upsell them to the paid version.
The free version of the product or service can attract a large number of users, which can help the company acquire more customers.
The company can collect data and insights on the usage of the free version, which can be used to improve the product or service and develop new features.
By offering a free version of the product or service, the company can reduce its customer acquisition costs, as users can try the product before they pay for it.
On-Demand Manufacturing
On-demand manufacturing is a business model in which products are manufactured and delivered only when there is a customer order for them.
This is in contrast to traditional manufacturing, in which products are manufactured in bulk and stored in inventory until they are sold.
On-demand manufacturing allows companies to quickly respond to changes in customer demand, as they can manufacture products as needed.
By not having to manufacture and store large quantities of products in inventory, on-demand manufacturing can reduce the cost and complexity of managing inventory.
On-demand manufacturing can improve a company’s cash flow, as it only pays for production when there is a customer order, rather than having to pay for production up front.
Types of eCommerce Websites
Single Brand Website
A single brand website is a type of e-commerce business model in which a company only sells its own products through its website.
This model is in contrast to multi-brand websites, which sell products from multiple brands.
Single brand websites allow companies to have complete control over the customer experience and to showcase their products in a way that aligns with their brand identity and values.
Additionally, by only selling their own products, companies can better control the pricing and availability of their products, and they can develop a closer relationship with their customers by offering a more personalized and tailored shopping experience.
Single brand websites are commonly used by companies in a wide range of industries, including fashion, electronics, beauty, and home goods, among others.
These websites can be a great way for companies to reach a wider audience, as they can be easily accessed by customers from around the world.
This websites can be a cost-effective way for companies to sell their products, as they do not have to pay for physical retail space or pay commissions to third-party sellers.
Retail Website
A retail website is an e-commerce website that sells a variety of products directly to consumers.
This type of website is similar to a traditional brick-and-mortar retail store, but with the convenience of being accessible online.
Retail websites can offer a wide range of products, including clothing, electronics, home goods, beauty products, and much more.
Retail websites are designed to make shopping easy and convenient for customers.
They often feature user-friendly interfaces, detailed product descriptions, and high-quality images to help customers make informed purchasing decisions.
Retail websites also typically offer multiple payment options, fast shipping, and easy returns and exchanges to enhance the customer experience.
In terms of operation, retail websites can be run by a single company or by a group of companies.
Some retail websites are owned and operated by a single brand, while others are multi-brand websites that sell products from a variety of brands.
Retail websites can also be run by traditional brick-and-mortar retailers, who are looking to expand their reach and reach new customers through the online channel.
Affiliate Websites
An affiliate website is a type of e-commerce business model in which a website promotes and sells products from other companies, and earns a commission for each sale made through its site.
Affiliate websites typically do not hold any inventory or handle the shipping and handling of products.
Instead, they simply act as intermediaries between customers and the companies whose products they promote.
Affiliate websites can be run by individuals or by companies and can be focused on a wide range of products and services, including clothing, electronics, home goods, beauty products, and much more.
They typically feature product reviews, product comparisons, and other information to help customers make informed purchasing decisions.
To participate in an affiliate program, a website owner must apply and be approved by the company whose products they want to promote.
Once approved, the affiliate website can start promoting the company’s products and earn a commission for each sale made through their site.
Multi Vendor Websites
A multi-vendor website is a type of e-commerce platform that allows multiple vendors to sell their products through a single website.
This type of website provides a marketplace where vendors can offer their products to customers, and the website operator handles the processing of orders and payments.
In a multi-vendor website, each vendor has their own seller account and can list their products for sale on the site.
Customers can browse and purchase products from multiple vendors, making it a one-stop-shop for a wide range of products.
The website operator typically earns a commission or fee for each sale made through the site.
Multi-vendor websites can be focused on a specific product category, such as electronics or clothing, or they can offer a wide range of products from various categories.
They can be run by a single company or by a group of companies, and can range in size from small, niche websites to large, highly trafficked marketplaces.
How to Choose an E-commerce Business Model?
Now you know all the types of eCommerce business models. Which one is suitable for you? Here we will discuss how you can choose an eCommerce business model.
Know the pros and cons of each model: Every eCommerce business model has its own features. Not all models are beneficial or suitable for you.
Before you get started in an eCommerce business research market. Know its pros and cons. People are accepting these businesses or not. Know the limitations.
Know your value proposition: When you are about to start a business ask yourself why consumers will purchase products from you. What makes your products better than others?
Analyze your competitors and make it clear why your products are best. Be honest with your potential customers. This is how you can achieve customer loyalty.
Who is your target audience: Getting started as a business finds out who your target audience is. Know the expectations of your customers.
Understanding customers’ behavior and improving them is one step ahead of choosing the right eCommerce business model.
What are you selling: When you are about to start an online store you need to find out which product you need to select. Do market research properly. Which product has demand online?
Digital products or physical products. Physical products are the most commonly sold products online which achieve the best sales.
On the other hand selling, digital products is often more challenging than physical products. You can sell services through an online marketplace.
Wrapping up
E-commerce business models come in many forms and offer opportunities for entrepreneurs. Any model you consider for business carefully chooses the one.
Know its pros and cons, its market demand, investment, etc. With proper planning and preparation, the right eCommerce business model has the potential to be successful.
Identifying the right model for your eCommerce store can get more sales.
