Choosing the right business model is crucial when starting an eCommerce business.
Your eCommerce model is key to your business’ success: the model determines customer reachability and how to stand out in the business world.
Discover the right eCommerce model for your business in this article. Or, if you would like more insights from experienced entrepreneurs, sign up for our EWOR Platform and gain access to over 17 courses and a plethora of resources.
What is an eCommerce Business Model?
When we say eCommerce, we’re referring to the exchange of goods or services using an electronic network like the internet. All the trading activities such as selling, ordering, and paying happen via a virtual medium and are part of eCommerce.
Commerce is simply the exchange of goods with money. What makes eCommerce different from traditional commerce is that eCommerce carries out traditional commerce electronically via the internet. The transaction happens automatically. While traditional commerce is face-to-face, eCommerce involves screen-to-face interaction.
Major eCommerce Business Models
A business model is a structure to reach customers and sell your service or products. There are several kinds of eCommerce business models. All of them help you position your business in the market.
There are 6 major eCommerce business models, and it is significant to understand each business model to decide what works best for your business.
- Business-to-Consumer (B2C): When the company produces/serves directly to the end customer, it is called B2C. B2C is a direct method of eCommerce. The company has a retailer between the manufacturer and the customer.
- Business-to-Business (B2B): In this type of eCommerce, a business sells to other businesses. The important thing to know about this type of business model is that there are two types: horizontal and vertical.
The horizontal approach applies to businesses which sell to a variety of businesses from different industries.
On the other hand, the vertical model refers to the businesses which sell only to customers within the same industry.
- Business-to-Government (B2G): B2G model is when a company sells products and services to a government agency. This agency can be local, state or federal. Every business model has to follow some rules. But the B2G model might have more strict business laws to follow. Some examples of B2G models can be as small as IT services, but some are air missiles, surveillance craft etc.
- Business-to-Business-to-Consumer (B2B2C): This eCommerce model combines B2B and B2C models. It is essentially when a business develops a product, then partners or sells to another business which sells to the consumer.
Some of the well-known B2B2C examples are Intracart and grocery stores. Instacart offers an online grocery shopping experience for customers who often lack time to go to actual supermarkets. This eCommerce site offers a quick and easy grocery shopping experience.
- Consumer-to-Business (C2B): Consumer -to-business model is where the end-user creates a product or service for a business. C2B is different from other eCommerce business models, and the most known example of this model is the social media business.
In the C2B model, a consumer provides a business with a fee-based opportunity to market a product or service on the consumer’s website or blog.
- Consumer to Consumer (C2C): This business model arose with platforms like eBay, Craigslist, and Etsy. Using this model, consumers sell products and services directly to other consumers without using other companies or services.
Certainly, small businesses use these platforms to sell their goods, but with a C2C model, the business determines its own prices.
Delivery Methods of eCommerce
You now know the eCommerce business models. The next important step is to decide which delivery method you will use to serve your customers in the most efficient way possible. Naturally, not every business needs a warehouse or inventory. Virtual products are offered by some businesses, while others do not produce their own products.
Regardless, there are commonly used delivery approaches for eCommerce businesses. We collected the 5 most preferred delivery methods for you.
- Drop-shipping: This approach is one of the least risky delivery methods for an eCommerce business. Basically, a third party handles the stocking, packaging, and delivery for you.
- Subscription: This model of delivery is becoming popular. It is like a magazine subscription where the customer gets their magazine dropped at a certain time of the month, year, or week. Same idea! Your products are being delivered with the subscription method.
- White Labelling: This delivery method is for businesses that sell a product under their label, but do not produce the product. A third party is responsible for production, whereas your business uses its own name and label. This method is popular in the cosmetic industry. It is great for brand visibility!
- Wholesaling: Businesses that use wholesaling are responsible for everything except manufacturing. You will order from the supplier, and then the rest (warehouse, labelling, shipping) is under your business’ label.
- Private Labelling: This method of eCommerce delivery is when you buy from third-party manufacturing and sell under your label. If you prefer, you can also have the manufacturer ship your product for you.
The eCommerce business is booming, and it is easy to get lost in so much information. Or, it is possible to start an eCommerce business just because it is popular, and not be successful. How can you avoid an unsuccessful eCommerce business? The answer is simple: by finding the right eCommerce business model for you. Once you decide which model is right for you after this article, take a look at How to Start a Booming eCommerce Business.