The Different Types Of Ecommerce Business Models

Every type of business has some kind of ecommerce today. Whether you’re serving products to consumers or other businesses, the models used to bring these products have changed.

Online retailers have started to optimize their ecommerce platforms for greater returns over the past several years through emerging business models. Knowing what these models are and how to take advantage can set your business apart from competitors who aren’t yet savvy.

Take a look at the different types below:

Traditional Ecommerce Business Models

1. Business-to-Consumer AKA B2C Ecommerce

The most used ecommerce business model is B2C. The B2C ecommerce model is when businesses sell directly to their customers, also known as their end-users. While there are many approaches to this platform, B2C encompasses any products or services purchased by consumers typically for private use.

For example, clothing, household products, home furniture, iPhones, home computers and other goods that a consumer would use for their lifestyle, entertainment or personal betterment. It’s a much shorter transaction than a business-to-business (B2B) transaction as well.

Consumers have a need and seek out a product generally within their budget or for exceptional value. The purchase decision is often within the same day, especially for something that costs very little.

B2C businesses don’t always have big marketing budgets (especially small businesses) because they rely on word-of-mouth, social media or even their own apps to keep customers coming back to their online stores. In fact, when B2Cs leverage technology like mobile apps or remarketing campaigns, they see greater return.

It’s important that B2C models have fast, secure checkouts and visually stunning product imagery to sell their goods quickly, while also keeping customers happy. Fast shipping, product packaging, warranty information and customer communication channels are key to being more successful.

2. Business-to-Business AKA B2B Ecommerce

Unlike B2C, B2B ecommerce is all about selling a product or service that another business needs. In many cases, a business needs machinery, software, or materials that help them sell its products and services to consumers.

When a company discovers a B2B product, it can be very lucrative, especially if it’s an innovative product that will save time and money. Perhaps it’s a product that streamlines their inventory management or offers a high-quality product for a lesser cost. For example, a company that makes carbon fiber epoxies may sell its products to businesses offering fortified cement services because it’s a higher quality material that lasts longer.

The whole point of the B2B model is figuring out what other businesses need in a specific industry. However, sales aren’t always immediate. You will likely spend weeks trying to get a contract, but the higher-order value and repeat contracts lead to greater returns overall.

In the past, B2B ecommerce was slow to develop due to the unique sales processes involved for different industries, particularly in manufacturing. However, even these industries now have online ordering, shipping, and order management to improve sales.

One of the key components of a B2B business is an excellent sales team, lead generation and targeted marketing. This means that you’ll likely need to invest in a customer relationship manager (CRM) such as Salesforce, Hubspot, or ZoHo.

3. Consumer-to-Consumer AKA C2C Ecommerce

Does this seem unfamiliar? You probably have heard of eBay and Etsy. These are two examples of consumer-to-consumer ecommerce stores, also known as an online marketplace. Amazon is another example, but businesses can also use that platform to sell with other consumers.

In a C2C, you set up a platform that helps consumers connect and sell their goods to each other. While eBay and Craigslist were early platforms, Facebook and Instagram now offer ways to set up your own store as a consumer, selling secondhand items on Facebook Marketplace or creating handmade goods to sell through Instagram.

Most online marketplaces charge a listing fee or subscription fee. These fees may be assessed and taken out as a percentage of the sale of the consumer’s goods.

The biggest issue is that online marketplaces have little control over the products being sold, and it takes a lot of technology and maintenance to create marketplaces that can handle the number of transactions from consumers every day.

However, these businesses also empower everyday people to set up their own shops and make money, and by doing so, online marketplaces earn money just by having a platform for them.

4. Consumer-to-Business AKA C2B Ecommerce

The rise of freelance in the digital world is inevitable. People realize they can set their own rates and advertise their services on gig websites, such as Fiverr or Upwork.

In a C2B business model, freelancers advertise and sell their own goods or services to businesses.

For example, on Fiverr, gig workers post their jobs and rates for each one. Companies can hire them for individual projects, paying through Fiverr to receive those goods and services.

In other new examples, Heepsy.com lists influencers for companies to hire to market and advertise their products on social media channels.

This approach keeps prices of services and goods competitive for businesses, but it doesn’t have very much control over quality. While rating and review systems offer a way to measure the gig worker’s performance, these websites also have to maintain policies that prevent gig workers from going private with clients met through the websites. This equates to stealing customers away from the C2B website.

New, Innovative Ecommerce Platforms To Try

5. Dropshipping

If you have ever wanted to quickly start an online store but don’t have any space for inventory, why not try dropshipping? It’s one of the fastest ways to set up your business without the need of worrying about inventory.

The dropshipper market started picking up in 2016 and continues to dominate as an ecommerce trend. With dropshipper ecommerce, you conceptualize and advertise your products. Once an online transaction takes place, you then pass that order through to your vendor who handles the product sourcing, manufacturing and shipping to your customer.

Basically, your ecommerce store is a showroom that uses SEO and marketing to capture consumers looking for goods that are then created by other manufacturers.

There are a number of service providers out there that can help with dropshipping, such as Aliexpress. Because of how many startups have flooded this model, it can be difficult to get started if you don’t have a great niche, SEO knowledge, or the time to spend promoting your product.

6. Direct-to-Consumer AKA D2C Ecommerce

Many brands want to get placement in large retail stores. For example, beauty product brands often want to get on sites like Sephora or Ulta to sell to that store’s audience.

However, with D2C, brands cut out this retail store middleman to sell directly. This is why so many brands have started their own websites and online stores to build loyal followings with their customers without relying on larger retail stores. For example, Purple sells mattresses from their own online store with very little need for a physical retail location.

Most brands today have websites that sell their own goods, but these websites don’t always have the lowest prices or fastest shipping (which is typically beaten by Amazon).

D2C online businesses need to focus on brand visibility, word-of-mouth, better offers and customer satisfaction in order to compete.

7. Wholesaling

There are a number of wholesale platforms emerging online. This type of ecommerce business sells products in bulk for a discount to consumers. For example, WebstaurantStore is an online wholesaler for restaurant supplies, including silverware, janitorial supplies and more.

Wholesaling is mainly used in B2B, but thanks to innovative shipping and online stores, wholesaling is now offered to online consumers regardless of their place in the market.

8. White Labeling/Private Labeling

Manufacturers who create a generic product for another retailer to place their own branding on is known as a white label or private label company. Essentially, the retailer uses the generic item with a unique factor to sell exclusively.

These models work best for companies that excel at an aspect of their production (whether that be the pricing or quality of their own products or the efficiency of their manufacturing).

9. Subscription Services

Subscription services have always been around, but these monthly services have exploded in popularity over the past decade.

From the Dollar Shave Club that sells weekly and monthly shaving subscriptions to HelloFresh meal subscriptions to Netflix to Amazon Prime, consumers have become tethered to subscription services.

These revenue models provide convenience and savings to customers in exchange for regular goods and services that customers frequently want.

It’s important to have all the necessary backend processes in order before starting this. This includes account management, inventory management, streamlined shipping and customer support systems. It can be costly if you mess up a customer’s order who expects the same monthly subscription or expects a certain quality each week or month.

What’s The Best Business Model For You?

For business owners, it’s important to stay savvy and up-to-date on the latest trends and business models out there in the digital world. Times have changed, and it’s time to make sure that your business stays ahead of the competition.

For those that are getting started with their business or trying to adapt, work with a dedicated team of marketing professionals. Our team can build an ecommerce website for your business and advertise your product through a strategic approach. Connect with us today to receive an initial consultation.