What is an Ecommerce Business Model?
An eCommerce business model refers to how a business operates to sell goods and services online. There are 6 main types of eCommerce business models, namely Business-to-Government (B2G), Business-to-Business (B2B), Business-to-Consumer (B2C), Consumer-to-Consumer (C2C), Consumer-to-Business (C2B), and Business-to-Business-to-Consumer (B2B2C).
In order to find the right eCommerce model for your business, you need to define two things. Firstly, you will have to define who you will sell to, and then define how you will position what you have to sell. Then, figure out your eCommerce business plan. This will define how you will attract customers and how they will engage with your product. Lastly, figure out your delivery framework, by assessing what will work best for your eCommerce business.
What do You Want to Sell?
The beauty of online commerce is that you can sell pretty much anything. However, it is always a good idea to start with a small range of products. Your store can sell physical products (clothing or shoes), digital products (ebooks are a good place to start), or services such as babysitting.
Let’s see what types of products are currently being sold online and how you can tap their market.
This is the most commonly sold commodity in eCommerce stores. Physical products (pretty much anything that requires packing, shipping, and delivery) often achieve the highest sales.
But, how do you decide which products to sell?
Discover what you are passionate about. Do you love cars? How about selling car parts and accessories then? Do you love books? Why not start an online bookstore? Online commerce gives you the perfect opportunity for converting your passion into a viable business.
Analyze your chosen niche and find the opportunity gaps. This covers all the aspects of the industry that are underserved. Similarly, try to analyze the pain points of the target customers.
Next, conduct keyword research on the product you wish to sell. This way, you can pinpoint the demand for your product which will help you plan your inventory and order placements.
There are many products that can be delivered to a customer online. Are you a web designer, content writer, or drawing artist? You can create an eCommerce store around digital products. Piracy and Copyright infringements are a serious challenge for such stores. Another important requirement is the FAQ and Legal sections that cover the mechanism of product delivery and the copyright status of your offerings.
If you have a crew of skilled carpenters or house cleaners, or you are an expert hair stylist who offers to visit the customer’s residence, why not create a website to sell these services online? You can significantly increase the demand for your services by creating a comprehensive FAQ section and a Legal section detailing exactly what you are offering and what the customers can expect.
6 Types of Ecommerce Business Models
Ecommerce is a global phenomenon and as such support several models. The good thing about eCommerce is that you could choose one or more models for your venture.
1. Business-to-Business (B2B)
If the nature of your products or services is geared towards meeting the needs of businesses, setting up a B2B strategy is your best bet. Networking and reaching out is a bigger part of this strategy. A big advertising budget is not of much help. The most important challenge you would face is convincing established businesses that your products/services are a great fit for their processes.
The advantage of this business model is that order sizes are usually large, and repeat orders are very common if you maintain the quality of your products and services. An example of a great B2B model is Media Lounge.
2. Business-to-Consumer (B2C)
This is the model you should adopt if your products/services are targeted primarily toward individuals. The potential customer finds your website and determines whether your product could address their pain points.
After browsing the store, the customer may decide to place an order. An example of a successful B2C business is Portugal Footwear.
3. Consumer-to-Consumer (C2C)
While B2B and B2B business concepts are familiar, Customer-to-Customer (C2C) is a concept unique to eCommerce. This is mainly due to the sheer demand for the platforms such as Craigslist, OLX, and eBay.
These platforms allow their users to trade, buy, sell, and rent products and services. In all transactions, the platforms receive a small commission. This business model is complex and requires careful planning to operate. Many platforms have failed, generally due to legal issues.
4. Consumer-to-Business (C2B)
Customer-to-Business (C2B) business model is another great concept that is popular mainly due to platforms that cater to freelancers. In C2B, freelance workers work on tasks provided by clients. Most of these clients are commercial entities and freelancers are often individuals. In simpler terms, consider C2B is a sole proprietorship serving larger businesses.
Reverse auction websites, freelance marketplaces, and affiliate marketing all form part of this business model. Again, this model requires planning due to the legal complexities involved.
5. Business to Government (B2G)
Business to Government (B2G) is an eCommerce business model where a business markets its products to government agencies. If you want to choose this eCommerce business model, you will have to bid on government contracts. Governments usually put up requests for proposals and eCommerce businesses then have to bid on government projects. In most cases, a government agency would not come to place an order on your eCommerce website. However, some local government agencies are exceptions to the rule, depending on their needs.
6. Business to Business to Consumer (B2B2C)
When a business sells products to another business, and then that business sells to the consumers online, this is what is defined as B2B2C eCommerce.
There are three parties involved in this type of eCommerce business model. For example, if you choose to go with it, you will have to partner with another business, and only then can you sell its products and offer the partner a commission for each sale.
Ecommerce store owners choose this business model mainly for new customer acquisition. This happens because even though customers are already familiar with the partner’s products, they can’t order from them online, due to obstacles such as geographical location, hefty shipping costs, and others.
Hence, this eCommerce business model is most suitable for new eCommerce store owners who want to expand their customer base.