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Types of E-commerce Business Models Explained

Types of E-commerce Business Models Explained

Stephen Paul 890 10-Jul-2020

Imagine how you used to shop 5 years ago, or even go further back, and imagine your shopping destination and preference 10 years ago. It was largely different from where we are today.

The world of online shopping and E-commerce has expanded and changed the shopping business altogether. From stepping out to buy a small item to purchasing pieces of furniture online, the vastness of E-commerce is just showing us the tip of the iceberg. There's plenty of opportunity for anyone who wishes to innovate and explore this channel.

When you plan to set up an Ecommerce business for yourself, it is always recommended to have a broad view of the field and also a good amount of knowledge about the business models. Only when you understand the many kinds of e-commerce business organizations available and the various types of internet business accessible to you, can you make an informed and correct decision.

Let's dive into the everyday jargon of the e-business world and get to know the different business models.

1. B2B - Business to Business

Types of E-commerce Business Models Explained

This type of E-commerce business model works when one business supplies the other business with any service or good. The second business can be the end customer or resell it to the final customer.

B2B business is not very startup-friendly and requires a longer sales cycle, a larger order value, and of course, recurring purchases. The market for B2B is growing with the introduction of e-commerce and targeting through the search engines.

A study from 2015 states that almost 50% of the B2B buyers are millennials, which is almost double the amount from 2012 data. This clearly states that while it is not the general e-commerce idea that most people have, it is expanding and more accepted by the newer generations.

Examples: Flexfire LED, Atlanta Light Club, CleanAir, BulkBookstore, etc.

2. B2C- Business to Customer

Types of E-commerce Business Models Explained

This is the most sought-after and understood e-commerce model. B2C is what we, as a customer, have mostly indulged in, whether it is buying a pair of socks, or grocery, or even the local wifi connection. Many of these online stores also have a physical store, giving this type of e-commerce model several layers.

The course of action is typically the same as when you buy through an offline store, except here, the entire transaction is online. From selecting the product/service to payment to the delivery method, you get everything within the comfort of your house.

Though this type of e-commerce model is largely celebrated by entrepreneurs everywhere since it involves less investment to make a sale, it also entails lower average order value and less recurring orders when compared to B2B model of business. It is also easier to market this type of business with mobile apps, social media and search engine targeted ads, and retargeting to get sales.

3. C2B- Consumer to Business

Types of E-commerce Business Models Explained

Reversing the relationship we discussed above, we get the Customer to Business E-commerce model which is not considered generally but is still leveraged by some who know its advantages.

The type of e-commerce happens between a business who needs a particular good or service, and an individual serving the needs of the business. Affiliate marketing is also considered to be a part of C2B.

The reason for its popularity is that you get the freedom to name the price for the good or service while the businesses directly compete for your good/services. The competitive edge makes the field more profitable. The model has also been used to connect business with social media influencers who then market their products.

4. C2C - Customer to Customer

Types of E-commerce Business Models Explained

A C2C model is innovative and unique and expands the horizons of the e-commerce business. In the early days of the internet, eBay was a very talked-about company. From celebrities' clothes to general everyday appliances, you would find customers selling a plethora of items on the platform. This model has been upscaled, made more quality-assured, and the acceptance of online shopping by the public has made it clear that the C2C business model can thrive and grow.

You make a profit by charging transaction or listing fees and benefit from the motivated buyers and sellers. However, you need to have some quality control and technology maintenance to keep the road bump-free.

Types of E-commerce Business Revenue Model

E-commerce, on the forefront, is online, but you always have to maintain inventory, take account of the orders, ship them, cater to the general customers, and so on. For this reason and more, many e-commerce businesses make use of digital marketing agency, to fully expand their reach and sales online while they concentrate on the offline part.

Here are a few of the types of business revenue models from which you can decide your preference.

  • Wholesale and Warehousing

Wholesale and warehousing are the type of e-commerce revenue model where you have to go all out and invest a bit more than other models. This is the type of business that most of the online stores that you shop from use.

In this, the online store orders a bunch of products from a supplier, who then ships them to the warehouse. Naturally, you will need to invest in a warehouse space. Once the supplier sends the products to the warehouse, you will list them on your website. When a customer orders from you, the product will be shipped by you. This entails quite a lot of work as you will have to keep a track of the orders, shipping information, etc.

  • Dropshipping

Dropshipping is when you remove the additional work of managing a warehouse, orders, etc and directly give the customer's order to the supplier who then ships it to the customer. In this way, your business will be limited to being the intermediary between the supplier and the customer.

Though it removes the problematic area of management, it also adds the hindrance of your seller. If your seller is slow or does not provide good-quality products, you will be bearing the burn of it.

  • White label & Private labelling

This is the best option if your start-up cost is minimal. White label means to apply your name and branding to a generic product purchased by a manufacturer.

On the other hand, in private labelling, a retailer will find a manufacturer who can make the required goods exclusively for the retailer. In both cases, you save on design, production, technology, etc.

  • Subscription

Limited by industry, this revenue model has its own sets of benefits. In this, your customer subscribes to a product that it needs regularly, and you charge them for the same while delivering the products on a decided time cycle. This allows your e-commerce business to have a reliable income stream, wkihile also encouraging the customers to buy additional subscriptions.

Here we come to an end of the Types of E-commerce business and revenue models. Hope this was able to solve the doubts you have. Feel free to comment below with your questions.

Stephen Paul

Stephen Paul

Stephen Paul is a Social Media Manager at King Crescent, a digital marketing agency based out of India. He is updated with all the latest trends in the digital marketing field with along soft writing skills. He writes articles on social and technology related topics which are helpful for businesses owners.

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