E-Commerce Business Guide: Discover Common Models

At the end of the year, it is estimated that ecommerce sales will be $6.02 trillion.

It's not surprising that many entrepreneurs are examining the market and are looking to start an e-commerce company.

You can also add an e-commerce component to your existing company to take advantage of potential opportunities this space could offer.

Another important thing to consider when contemplating beginning a new e-commerce venture is the model of business that you'll employ.

E-commerce has become a highly competitive area, and new entrepreneurs must understand the many types of business models available there.

This will allow them to choose the right model for their requirements and provide long-term sustainable growth in their business.

If you're in the same situation, you've been described in or fascinated by the potential of e-commerce companies. Then, this article is for you.

We'll examine some of the most traditional and modern businesses that you can apply to your current project for your startup or business.

What is e-commerce business model?

Before looking into different business models for e-commerce, it's important to know the definition of 'e-commerce' that you can work from.

The simplest form is:

E-commerce is a business model that permits companies or individuals to purchase and sell items on the internet.

Common business types of e-commerce

The most commonly used types that you will come across of revenue model for e-commerce you might have encountered are:

Dropshipping

A business or individual can create an online store and accept payment via credit cards or other online payment systems. Then, the retailer will wrap and ship the merchandise using e-commerce shipping boxes to the buyer directly from their fulfilment center.

Warehouse and wholesaling

The online store purchases the items they sell from a source. They then get the supplier then ship products to the store's warehouse. The consumer places an order online, and the retailer fulfills the order via the warehouse's inventory.

Private labeling

An original product is required. These products are then produced to meet the specifications of the customer. The items are then put on an online storefront to allow buyers to place orders.

White labeling

A company acquires the rights to sell an item from another company. The product is then modified with its logo and sold under its business name.

Subscription

E-commerce subscription companies send out items to their customers, often monthly. The most well-known examples of e-commerce subscription-based businesses include dollar shave club, nature box, and hello fresh.

When you're starting an e-commerce company, it is important to understand what kind of business you're working with.

This can benefit legal requirements, like business insurance or dealing with sales tax laws in various states.

E-commerce business process

The revenue models above describe how various e-commerce business processes work. However, conventional e-commerce business models concentrate on the person selling the product and buying a particular item or service.

Let's look closer at these models and see what they are.

Business-to-consumer model

The most well-known and most traditional kind of model for e-commerce is known as the one that is a business-to-consumer model.

B2c companies market their services and products directly to the customer.

The most well-known example of a business that has made its name in the b2c market is amazon.

If you've ever bought something from amazon or another online retailer, you've been involved in a b2c transaction.

B2c transactions are generally less valuable than b2b transactions. Additionally, they have shorter sales cycles and are not likely to become recurring.

The most popular kinds that are used in the b2c model of revenue are:

Online retailers

These are the places where consumers buy items and services from online retailers.

Online intermediaries

Online intermediaries are online companies that bring consumers and sellers together. They take a portion of the transactions they make. Some of the most famous examples of an online intermediary include travel websites like Tripadvisor and marketplace like Etsy.

Subscription services 

This model involves businesses selling content or information to customers in exchange for a payment. The fee will often be regular, like an annual or monthly subscription.

Re-commerce

Re-commerce is the practice of selling second-hand items in a different store. The origin of your product is typically other customers that repair, you restore or upgrade, and then offer to your own, independent online store.

Business to business (b2b)

Businesses to business (b2b) is an approach to business that is focused on transactions that take place between companies. The businesses do business with one another without involving the end consumer.

For instance, when a company offers a piece of software to a different industry, it is considered a b2b transaction.

B2b sales cycles are longer because the contracts and transactions involved are usually of significant value and can be repeat orders.

Marketing b2b, client satisfaction and loyalty are completely different.

Business to government (b2g)

A business-to-government (b2g) concept where a business markets and sells its services directly to an agency of the government.

This could happen at the local level, regional, or even at a national level.

A great example would be the business that supplies software to local governments. Unfortunately, because of governments' bureaucratic nature, b2g deals tend to be slow to move and are generally long in their time frame for sales.

Direct to customer (d2c)

A variant of b2c that is the d2c model does away with intermediaries. Instead, a brand seller sells direct to the customer. For instance, wineries sell their wines via their separate online store.

It doesn't even have retail stores; there are no third-party retailers, marketplaces, or wholesalers. The advantage is that the company itself holds complete control over the product at all times.

Business to business to consumer (b2b2c)

A business to business to consumer model (b2b2c) is a model where a business sells a product to a second company. The second company then sells the product to a customer.

There are many different ways the b2b2c model could be employed in e-commerce.

One example would be a business a partnering together with company b. Company a will then be able to promote its product to the audience of company b and customers. In addition, company b will receive an amount of money each when a sale is made.

The b2b2c model could benefit e-commerce companies seeking to reach new markets. Also, they can increase their customer base through partnerships with other businesses.

Rush Custom Boxes, that sells packaging materials to businesses that sell online, is a great illustration of b2b2c.

Consumer to consumer (c2c)

The model is known as the customer-to-consumer, where consumers exchange products online. The most well-known examples of consumer-to-consumer platforms include Ebay and Craigslist.

Consumer to business (c2b)

The business model involves people selling their products and services to businesses.

Some of the most popular platforms running such a business model are freelance platforms like fiverr and guru.

Q-commerce, also known as quick commerce, is another kind of c2b. Delivery drivers/couriers take orders on behalf of somebody other than themselves and then deliver them.

These platforms allow users can market their services.

People or companies looking for a particular task or job to be accomplished can place bids or purchase someone's services to fulfill this job.

Common services that are available on these platforms include:

• Development of apps and software
• Services for copywriting, content writing and content creation
• Packaging Boxes and graphic design
• UX/UI design