Looking to start eCommerce but don’t know what types of eCommerce business models there are? Or looking to extend your eCommerce business to a different business model so you can expand and diversify your customer base?
Electric commerce, or eCommerce, is an online selling and buying process for various services and products. In our modern digital world, eCommerce has become very popular due to improved logistics and technology allowing various eCommerce platforms. eCommerce has never been more convenient, quick, and easy.
eCommerce gets the benefits of various technologies, such as:
- Internet marketing
- Electronic funds transfer
- Online transaction processing
- Supply chain management
- E-data interchange (EDI)
- Automated-data collection systems
Note: To know the detail of types of eCommerce business and its pros & Cons, Read the exclusive article on How to Start eCommerce Business [2019 Pros and Cons].
Different ways of approach
The purpose of eCommerce is to conduct business among different organizations and individuals. When you’re launching an eCommerce business, don’t be limited to the traditional Business-to-Consumer (B2C) model in which the business is selling to the end users. Instead, consider these 4 most common types of eCommerce business models to decide which ones might fit your business or brand.
Also, you don’t have to be limited to only one business model at a time. If you’re already running a successful B2C eCommerce business, you may consider adding another business model so you can reach other types of customers. This will not only help you grow your customer base but also protect your business by diversifying.
Four Types of eCommerce Business Models
If you are new to eCommerce, you will probably fall into one of these common types of eCommerce business. Each type has its challenges and benefits, and various organizations or businesses are using more than one type simultaneously.
Let’s review each category in detail to help you understand what they are and consider the opportunities of each.
1. Business – to – Business (B2B)
In a B2B model, both the seller and buyer are business entities. This type of eCommerce transactions are held between businesses such as between a wholesaler and a manufacturer or between a retailer and a wholesaler.
According to Forrester, US B2B eCommerce will reach $1.8 trillion by 2023. It certainly is no small market.
Compared to the traditional, non-eCommerce B2B model, B2B eCommerce model makes transactions much quicker with lower cost, easier to capture more sales opportunities by cross- and up-selling, and better to analyze customers, retarget them, and automate the marketing processes. B2B model also enjoys a higher order values in general.
The volume of transactions and order value also tend to be higher in the B2B model as compared to other types of eCommerce business.
Here is a general cycle to understand the B2B model of e-commerce:
Examples of B2B e-commerce platforms:
- Amazon Web Services (AWS)
- Hewlett-Packard Enterprise
- Staples Advantage
B2B model: Pros
- It is a quick, easy, convenient way of doing business online for busy business customers
- The import and export of products are easily done, allowing you to promote more products with low maintenance
- By making processes easier, you have a higher chance of repeat business at a higher volume
- Ability to lower the operations cost by selling and shipping in large bulk
2. Business – to – Consumer (B2C)
The most common type of eCommerce business is business to customer, also known as the B2C model. This is one of the more widely known eCommerce in which individual customers are given the option of online buying in this model. So, anything that you purchase as a customer such as household supplies, clothes, entertainment services, and more are done as part of a B2C transaction.
Customers can use shopping carts for their desired products and place an order by credit card payment or PayPal. Various eCommerce platforms offer B2C transactions such as Amazon, eBay, or any direct website.
This model offers direct interaction between the customer and the business. The basic idea behind this model is to sell services or products directly to end user. This allows sellers to own the customer data which gives them the opportunity to upsell/cross-sell, do retargeting or remarketing, and other marketing activities to maximize their customer lifetime value.
Examples of B2C eCommerce platforms
- Any other brand website offering online purchases or subscriptions directly to end users
B2C Model: Pros
- It can be launched with much less investment capital
- B2C typically requires less staff than its equivalent B2B
- You can grow your new business very fast by using some B2C eCommerce platforms such as Amazon or Ebay
- Business via the B2C eCommerce platform is easy to manage.
3. Customer – to – Customer(C2C)
C2C type of eCommerce business links customers to exchange services or goods. In this model, C2C platforms make their money by listing or transaction fees. eCommerce platforms such as eBay and Craigslist initiated this model long ago when the internet initially started evolving.
C2C eCommerce involves a third-party platform to run electronic transactions between individuals. For example, an individual posts his/her products for sale and another individual bids or buys it.
The eCommerce platforms which support C2C businesses are simply middle-men to match the consumers. They don’t run a quality check on the products or services being offered. However, with the rating or review system in place, a seller or buyer may be penalized with so many bad reviews or ratings. They have the ability to suspend or block your account.
Examples of C2C e-commerce platforms
Here are a few platforms that support C2C model:
- Online Ad/ Classifieds
C2C Model: Pros
- The availability is 24/7 and can reach distant or remote buyers
- This model can include both new and used products
- Customers can contact the seller directly without an intermediary.
- The transaction cost is most likely the lowest as compared to other ways of selling as the seller is not a business
4. Customer – to – Business (C2B)
As the name suggests, this type of eCommerce business allows individuals to sell services directly to organizations and companies. To support this type of eCommerce, an eCommerce platform will allow an individual to post his products or services. Any organization or company that is interested in that product or service can search, contact, and purchase online. In return, such eCommerce platform will charge a fee either as a flat-rate or a percentage of total charged.
For exmaple, Upwork, previously known as Elance, was an early innovator to support the C2B model. This eCommerce platform is still helping businesses hire freelancers. Individual freelancers or consultants are hired for a job for a business and Upwork takes a specific percentage from their rate.
In this model, its platform is responsible for any issues or problems during the purchasing of services. They withhold the cost of the service until the buyer is satisfied with the purchase.
Examples of C2B e-commerce platforms
- Adobe Stock
C2B Model: Pros
- Businesses can get their jobs done without spending time looking for an internal hire
- Businesses can find last-minute resource quickly at a reasonable rate
- The eCommerce platform secures the transactions and quality of services by its terms of service.
- The rate of productivity is higher as compared to other types of eCommerce business.
These four are the most commonly and widely used business models for eCommerce: B2B, B2C, C2C, and C2B.
If you’re planning on launching a new eCommerce business, you can consider and choose one of the models that best fit your goals and requirements. Also, if you already run a successful eCommerce business, consider expanding to a different model to help you diversify the customer base.
Do you have any experience in one of these eCommerce models? If so, what was your pros/cos about it? Comment below!