Remember how different shopping was a decade back when we walked into a brick and mortar store to purchase items? Today, the innovative eCommerce business models have changed the way we shop. eCommerce contributes 6% to retail sales of a business. As a seller, if you want to innovate and exceed expectations, you must learn about these revolutionary business models.
What are the Types of Ecommerce Business Models?
Ecommerce business models depend on who is selling and who is buying. Customers don’t have to be only individual consumers. Companies or government administrations can also be your customers. This also applies to sellers. Since sellers aren’t necessarily a business and they sell items to each other all the time. Some businesses may use more than one eCommerce model to thrive in the competitive marketplace. For an instance, a model that sells products/services simultaneously to both B2C and B2B consumers. However, you must carefully select an eCommerce platform to sell, as their services can make or break your brand identity and customer satisfaction.
B2C stands for Business to Consumer, this is the most popular type of business that involves a retailer and a customer. In both offline and online models, B2C is the most common business model. All kinds of retailers engage in this model, subsequently, B2C eCommerce has witnessed exponential growth over the last decade. Businesses can easily build their stores online and sell their products to a much larger audience. Online shopping also allows local brands to easily grow and expand their potential beyond boundaries.
The greatest advantage of B2C eCommerce is that there is room for growth, for any industry. With the right brand content targeted at the right audience, businesses can expand globally in a shorter time frame. Hence, identifying your audience or cohort groups before engaging with them is critical to your business/brand success.
B2B is a short form of Business to Business. A B2B seller provides its products/services to other businesses. B2B products can be industrial in nature like raw materials for a manufacturing industry or software for banking. However, B2B eCommerce services also include wholesale suppliers who sell their products to other retailers and suppliers. Products could range from office supplies to branded employee clothing.
The B2B sales model is popular among companies, unlike B2C. A single B2B business can supply a plethora of customer-facing retailers, limited only by the inventory which it can produce. B2B commerce also provides the largest revenue generation opportunity because it focuses on a market in constant need of products due to high customer demand.
The main disadvantage of a B2B sales model is that the prospective market is much smaller and larger the scale the more complex operations there are.
Similar to B2B, Business to Administration (B2A) provides services and products to not another business but to a government agency. For instance, software that offers effortless interaction between consumers and government agencies or assists seamless information exchange among government agencies is the backbone of this model.
C2C means Consumer to Consumer. This instance of eCommerce involves individuals who sell their products directly to other consumers. A garage sale is a good example of such a business. Large marketplaces like eBay are online garage sales. Sites like eBay streamline the C2C business process for a large number of sellers.
C2C is the initial gateway to an eCommerce business. Using this method consumers can sell off unwanted items and they can also learn how to grow their business properly. C2C helps a lot in understanding how to list a product and how to direct it towards the correct market. People also develop a lot of logistical help as C2C helps you to understand how to properly pack and ship a product. A person can do C2C business and test the waters to see if proper eCommerce businesses are for them. Most of the large eCommerce companies began as a C2C businesses handled by a single individual.
An inherent disadvantage of C2C is that it is not scalable. This is the reason why successful C2C sellers often start and then grow their business into a B2C model. C2C sellers are also confined in the rules and regulations of the marketplace they are using to sell their products. These rules can include strict returns or industries to meet or pay the listing or selling fees of the platform being used.
You cannot build a brand selling C2C since you don’t even have a brand at that point. C2C is done by individual sellers and not a brand. C2C can be a good way to earn some reputation and recognition however that is not a substitute for business.
C2B stands for Consumer to Business. This business model involves an individual consumer providing services or goods to an organization. Any freelance work comes under this model. Freelance artists, writers, designers and software developers all follow the C2B business module. Even bloggers who sell advertising real estate on their website also engage in a C2B transaction.
C2B business modules can be unreliable since many freelancers can have difficulty finding work. Manufacturers who follow this module may not have been able to provide the quantity of the products needed by their business customers. This is why most C2B businesses are service-oriented.
C2A or Consumer to Administration is similar to C2B except that the consumer is selling their service or product to a government agency.
Mixed Business Models
The massive technological advancement of eCommerce has streamlined almost all types of business management tasks. This also helps businesses to follow multiple business models at the same time. They can combine B2C and B2B sales on a single site. It’s very possible for an online store to offer an end-consumer shopping experience for general customers and offer bulk wholesale services or goods in a different section of the site. All factors of both models can be different but they come under the same umbrella. B2B and B2C can have completely different pricing, options, and even products but such a module relies heavily on the functionality of the eCommerce software used by the seller.
Types of Ecommerce Business Revenue Models
An eCommerce business revenue model is as unique as the company. Here are some types…
D2C – Direct to consumer
When you cut out the middleman the consumer brands can build loyal followings with rapid growth. Warby Parker and Casper are online retailers which set standards for vertical destruction however brands like Glossier show us how to see can continue to be an area for Innovation and growth.
White Label and Private Label
White label means to apply your name and brand to a generic product purchase from any distributor. Here a retailer hires a manufacturer to create a unique product that the retailer will sell exclusively. With private labelling, you can still lean on your investments in production and design and find the edge in technology and marketing.
Wholesaling approaches the most common where retailers offer their products in bulk at a discount. It is traditionally a B2B practice but some retailers have offered it to budget-conscious consumers within a B2C context.
Dropshipping is one of the fastest-growing methods of eCommerce. Fulfilled by a third-party supplier dropshippers market and sell items examples include Aliexpress and Printful. Dropshippers help connect buyers to manufacturers acting as a middleman. There are many easy-to-use tools that allow BigCommerce Users to integrate inventory from suppliers all around the world for the storefronts.
Subscription service is a very old model which began as early as the 1600s. It was mainly used to deliver books monthly to the loyal readership. Nowadays every industry has in the arrival of substitution services bring conveyance and savings to customers.
Types of Ecommerce Stores
We know about business models and revenue models. Now let’s understand the different types of eCommerce websites that exist for the ever-growing internet shopping world.
Vendor-Specific (Single Seller)
E-Commerce websites that are vendor-specific follow their business models and sell their products. This is the most common type of online eCommerce website. A single seller eCommerce website belongs completely to a single company using it as an online storefront. Almost all businesses today if they sell a product maintain a vendor-specific eCommerce website that lets their customers shop remotely.
Online Retailers (Selected Sellers)
When a website includes products from a vendor who actually owns the site but will also include products from other sellers with permission these are called online retailers. A great example of this is Amazon. Amazon has its own plethora of products as well as third-party sellers which pay the site a minimum amount to list their products on their website gaining viewership and revenue.
Online Marketplace (Variety of Sellers)
An online Marketplace is where individuals to large companies, anybody can sell a product. One of the most well-known examples is eBay. Sellers do not need to go through any kind of selection criteria and setting up an account and start using the marketplace is very easy. This gives the seller of youth exposure to potential customers. Businesses who already have the websites ready prefer selling on such platforms due to the popularity of the platform itself. The businesses benefit by placing their products for sale on the market place which the customers already know about.
Types of eCommerce Platforms
An eCommerce platform is an actual software that helps in running a business website. The most obvious example of a feature to be found in an eCommerce platform is Shopping Cart functionality. An eCommerce platform can also include other useful tools for managing the other aspects of a business.
Features are important to an eCommerce platform however features are not everything. E-commerce platforms are different in many other ways other than just their feature sets. The main difference is the overall type of the platform. This can include the details like infrastructure, procedures, and cost needed to set it up.
SaaS (Software as a Service)
Software as a Service (SaaS) refers to the software which is made available for end-users through the Web. This software is not hosted on your computer, instead, it is stored on the Cloud (Azure, Google Cloud, IBM Cloud, etc.) and is accessed through your web browser. To use SaaS, you need only a robust internet connection and an e-mail account with a SaaS eCommerce provider. Software installation and maintenance is handled by the SaaS provider.
SaaS doesn’t just sound easy, it is easy! It is the easiest way to build an online store. Many other eCommerce platforms require you to install different software or code to operate your online store successfully. However, the SaaS platform is simple and versatile and offers greater flexibility to consumers to use the available tools at hand.
An open-source is software that has its source code released for free public use and reviews. It thus allows re-development of the software and ensures its functionality is the latest. Also like any other open-source software, eCommerce open-source software is available in many forms and versions. This means that plugins and addons from third-party developers can be added to the base software by the user.
There are several open-source eCommerce platforms available today. They all have different advantages and disadvantages. The most lucrative advantage of open-source software is that it is free. This makes them a great option for business owners on a budget. Such software is very flexible too since developers end up creating their versions without any limitations. Search software once made can be expanded greatly without the help of the primary developer.
The cons of open source eCommerce software are quite major. The support aspect of the software once you install it can be a bit bad. Open the original developers are not available to help you so you need to turn to the community if you face any problems. Such software has issues with plugins. Since there are various versions of the same software, not all plugins can be used with them. You will have to get the support for the plugins separately from their developers. Any support you might want might end up costing you as much as the software. You will also need to find a compatible web server that can host the software. The compatibility issues between the software and the plugins can be quite frustrating and take a lot of time to figure out the correct combinations. This can often require development knowledge which not everybody is equipped with.
Once an update is released for the software or the plugin you will have to install them. Also, the open-source aspect of the software brings in a lot of security issues. Hackers may seek to exploit the issues for vulnerabilities of the software. This means that you always have to keep the software and the plugins updated or else face security breaches.
When you purchase software for your business it’s called a licensed software. Essentially the license lasts forever however there are sometimes limitations. E-Commerce software that is licensed usually has updates for a limited time for example a year. They also have a support package included. Licensed software is similar to open-source software in regards to finding the hosting and performing the installation yourself. The main differences between the two are that the source code isn’t available and license software costs a lot. Depending on the resources the software provider releases, plugins may or may not be available.
Some major disadvantages of license software are time cost and support. Some licensed eCommerce platforms carry price tags that may reach thousands of dollars. And when the update period ends you have to again pay to extend its uses. This means that you have to keep paying to maintain the security of your online store. Sometimes support is included for the same limited period or you might have to purchase a separate package. The time it takes also becomes a factor since you’ll have to handle the hosting and the installation.
Proprietary eCommerce software is developed by a business for its own uses. Large businesses also control their own data centre where the online stores’ Web Services are kept. Proprietary software can be built to meet a business’s exact needs but they tend to be expensive and even large retailers often go for other solutions. In these cases, the businesses also become fully responsible for the security including PCI compliance. With so many eCommerce platforms available today it is not necessary to build one from scratch.
PaaS (Platform as a Service)
Platform as a service (PaaS) is a software platform on which your own software can be built as well as be connected to other business systems. PaaS is an advanced option that is meant to handle very complex aspects of a large business or company. This software is very suited for large B2B businesses which have sufficient resources to expand their market infrastructure.
Top 5 Examples of Ecommerce Businesses
Companies have flourished with the growth of eCommerce over the years. By combining classic business models with new ones these companies are innovative leaders in the field.
Larq – D2C
In 2018 the first self-cleaning water bottle was launched by LARQ. The reusable and rechargeable water bottle uses UV-C technology eliminating bacteria and viruses in the water. The company was the largest Crowd funded effort for the clean water initiative. It has raised 1.7 million dollars. Nowadays LARQ donates one percent of its total proceeds towards efforts for clean drinking water.
Due to its eco-friendly factors, buyers were attracted to this reusable water bottle. People could also save money sleeping on single water bottles. They also didn’t need to clean it every time since it was self-cleaning. These factors lead to LARQ’s revenue increasing by 400 percent year over year.
Beer Cartel – Subscription Service
Beer Cartel is Australia’s longest-running beer subscription service. The service provides expertly crafted beers from around the globe delivered straight to the subscribers’ doorstep every month. The company’s popularity lies in the fact that it provided customers with a unique selection of beers at a price that was better than what they get at any store. The company offers various subscription options to serve all kinds of customer needs.
Berlin Packaging – B2B
Berlin packaging is a Fortune 500 company and a family-owned startup. It is a company for sourcing, designing, and distributing containers and closures. Berlin packaging helps in increasing efficiency and lower cost for their customers at every level of the supply chain.
The company is over eight years old but has kept up with the time by innovating its business every step of the way. After adopting an eCommerce business model, they kept their competitors at bay making it easy for their customers to procure from their large selection of containers which are sourced from more than 200 different partner vendors. The company also makes it very easy for customers to see their credit limits balances and past due balances on the website.
Atlanta Light Bulbs – B2B
When it comes to Innovative eCommerce Atlanta Light Bulbs is very popular. ALB in 1999 giving them ample time to create huge head starts on their business model. After the market shifted to the millennial generation ALB has kept its focus on adding more to the online website which sets them apart from the competition. for example, using apps like their BigCommerce storefront.
ALB has grown primarily through their mobile shopping app but even their commercial lines have come out and said they enjoy the convenience of ordering from their mobile devices. ALB is also known for other creative tactics like making the buyers name their quantity and price and submit an offer. pricing rules are used to auto calculate the lowest price the company can give. Customers are then told if their proposal has been accepted and they can check out or if it is not working out a different deal is offered.
Mountain Crest Gardens – Wholesaling
Beginning as a family-owned and operated business in Northern California in the mid-90s, Mountain Crest Gardens relaunched its website in 2012. This helped them attain 10x revenue and the 400% increase in orders. Mountain crest Gardens are known for their aesthetically beautiful succulents. The user-generated content amplifies the plants and increases orders. Also, the company caters to different customers individually offering succulents wholesale options and even subscription boxes.
Important Factors to Consider to Select Your Ecommerce Business Model
Here are the specific factors to consider when selecting an eCommerce business model. The main factors include honesty and research. You need to spend time learning about your prospective market and being honest about what you bring to the table.
Who is your customer?
Who are you looking to sell? Considering your customers’ expectations when purchasing your product is the key to selling. You will most likely sell more products if you understand your customers’ behaviour and habits. You also need to find ways to improve on them.
What are you capable of?
You need to understand what you are capable of. Building around your strengths I will give you confidence. Try to be realistic about the elements you can do yourself and what you will need help for. Knowing your limitations can be challenging but it will help in the long-term business.
What is best for your product?
Which model you should go for depends on your product. For instance, if you are manufacturing your products you probably should go for wholesaling or subscription-based services. This will help cover the production cost and break-even quicker than other business models.
If you distribute other people’s products you want to think of direct marketing strategies which will grow your customer base.
What is your positioning?
Evaluate your competition and make it clear why your product is the best choice. understand what you are competing against for example price, selection or convenience. In every aspect of your business, the unique value should be clear. You might understand why your product is better but unless your customers do, your revenue will not increase.
So, With Which Ecommerce Business Model You would Start Your Business?
We covered the most common types of eCommerce business models that have grown exponentially over the years. We hope now you will have a suitable model that will facilitate your brand recognition, growth, and expansion. Planning is important but innovation is equally important. Now is the time to get your solution out into the world and verify your business based on the feedback you receive. Want to get started with your own eCommerce Business? Ask the eCommerce experts for further consultation.