The way we shop has never been the same before. It was not much before that we had stormed the markets, fought, bargained, hassled while shopping in the market. As things started to change in terms of technology and globalization kicked in bringing in more information and trends from across the globe, people started moving from offline to online mode for almost each and everything. Hence the rise of different e-commerce business models has been formed.
What are the different types of e-commerce business models?
And retailers like Amazon and Walmart knew exactly how to leverage the situation and bring the most out of it. Blazing the trail, these eCommerce giants made shopping much easier than we could ever imagine.
The common and traditional eCommerce process has evolved over the years to reach great heights in product management, much-secured payment options, targeting the audience with the most relevant products and a lot more.
Each year, the eCommerce businesses are taking over local retails stores and it has been noticed that most of the well-known brands have inclined more Ecommerce business models of all kinds are today a throbbing market that is expected to reach out to 70% of the total retail operations by the next 5 years.
Not much to wait! Undeniably, e-commerce business models have brought a range of revolutionizing the approach to business in every sector, major to the Fast Moving Consumer Good (FMCG) sector.
- What are the different types of e-commerce business models?
- 1. B2B Ecommerce
- 2. B2C Ecommerce
- 3. C2C eCommerce
- 4. C2B eCommerce
- 5. Government / Public Administration Ecommerce
- 6. Drop-Shipping
- 7. Wholesaling and Warehousing
- 8. Private Labeling and Manufacturing
- 9. White Labeling
- 10. Subscription eCommerce
- What E-commerce Business Models Fits Your Business Best?
Ecommerce business circumscribes of all kind digital marketplaces over the internet. Whether you are having a payment gateway and allowing customers to browse and order goods online etc. All of them are often associated with online payment modes and sometimes other payment options as well. Now the basic of segregating the types of eCommerce business models are based on the seller and buyer.
Here is a list of major e-commerce business models that are currently been used and also have higher future potential. Number 6 is just what you need. Read more…
1. B2B Ecommerce
It cannot be denied that one business is always a greater customer for another business. The supply chain works on supplying raw materials and resources to other businesses to produce different business goods. A B2B or Business to Business eCommerce model focuses on delivering products from one business and supplying to another. They then use it as raw materials and resources as a fuel to operate for their business.
However, this niche business model is most common among service providers and especially into the IT sector. However, addressing to the rapid development of the reviewing and feedback structure over the internet and business being judged by their unmatchable presence over the internet, suppliers of raw materials and manufacturing products have paved their way through the internet as well. So to maintain their competitive edge and pull over their unique value proposition, it is crucial to develop a sustaining digital platform for any brand.
B2B eCommerce further branches into three categories,
- Volume Products
- Subscription Products
- Configuration Products
Much awaited, 40% B2B eCommerce utilized pricing algorithms, demand planning, and other such factors to collaborate mark up the pricing for their products in the market. The industry is projected to cross $1.1 million by 2020. The upcoming trends into the model have allowed businesses to come up with better strategic alignment to showcase their product and rise as the highest trading platform.
Business integrating and partnering up with prominent platforms has been a breakthrough since 2017. Companies like Uber integrating with Facebook Messenger gained a huge recognition driving additional traffic to both the businesses. Such conversational commerce, smart personalization of shopping experience, cart-to-cash schemes seems well facilitating the wheels of B2B eCommerce.
2. B2C Ecommerce
Here we come down to our next major eCommerce business model based on the supplier and consumer forms. The B2C or Business to Customer eCommerce business model is the traditional retail models where you as a customer shops through a digital platform of the brand or store. This is exactly what most of the people knows and comprehends eCommerce to be.
In simpler terms, B2C business models encompass all the transactions made between a company and the end-users of the product. Brands like Flipkart, Amazon, Snapdeal, Alibaba, Walmart, etc have their roots deeper in reaching to their target audience across the globe and deliver to their needs.
However, it would be vague to say that the existing giants are always the toughest competitions. The emerging digital market trades success for the most innovative and advanced users of technology. It is more likely to drive in your target audience with a unique selling proposition.
According to the recent surveys, B2C eCommerce retails stores will comply with about 21.9% of the total retail stores in the US alone. Considered to be the fastest-growing shopping experience and trends, eCommerce platforms selling a range of products to its end users is soon to reach $28 billion industry in the coming year.
3. C2C eCommerce
The idea of C2C is quite different from our usual understanding of eCommerce business models. A C2C or Customer to Customer or Customer to Consumer eCommerce model is based on transactions made from a customer to another consumer. Now, this transaction can be in many ways. Customers can trade, buy or sell any of the products through direct or third party platforms in return for small commissions or profit.
But don’t let this confuse with in terms of Affiliate marketing. The concept may seem similar but most of the major attributes are different. Most of the times it is the third party that takes care of the orders, sales, and all transactions that are being made. eBay, Etsy or Craigslist are well-known platforms facilitating C2C eCommerce business model.
However, the basic concept of the C2C business model was to reduce the additional cost customers pay while trading goods via any third-party platform. Normally, the C2C business way can be seen through auctions or classified sections in the newspaper. In all such cases, a consumer sells or trades a product to another customer.
4. C2B eCommerce
A Prevelantly rising eCommerce business model, C2B eCommerce is yet to reach the views of the common people. The model is based on transactions that are being made from a customer to a business. Here, a customer sells or trades his products with businesses who can utilize them to run their business product. Affiliate marketing, reverse auctions and Google Adsense falls into this category of eCommerce business model.
This unique relationship between the consumers and business is well relished through a bi-directional usage of the internet to reach out to each other. This model is a complete reversal of what we knew as the traditional eCommerce business model and the customer approaches business with a product that indicates value to the company and in return gets paid for the item.
With different forms of C2B deals that are being made up, customer can also come to promote a brand’s product through social media or blogging platform in return for an agreed price. Moreover, with the recent development in the field of data analytics and business intelligence, this model of eCommerce business serves greater potential that can be curated along with a unique value proposition.
5. Government / Public Administration Ecommerce
Apart from the basic eCommerce transactions that are made between businesses and consumers, there is yet another form of eCommerce business model that deals with the transaction made between the government or public administrative bodies and the people.
These transactions majorly consist of payments made for taxes, examination fees, processing fees, etc. Though not directly involved in selling or buying of consumer goods, this category of eCommerce business model is already a huge network facilitating daily government payoffs through official portals.
It wasn’t much before that the government has started adhering to the perks of advanced technology. Almost every service provided by the government has a digital presence and most of them do include the options for online transactions. They are safe, fast and reliable.eGovernance has been a trend, whose benefits are leveraged by both parties in the transaction making it easier for the government to keep a detailed record of every data they need.
eCommerce has blazed the trail for businesses over the internet. The idea has today branched into several categories that need to be classified into different segments.
Apart from these major business segmentation models, eCommerce businesses can also be classified based on their revenue models. Here is the list of 5 types of e-commerce business models based on the way revenues are generated through an eCommerce platform.
Dropshipping can be tagged as the simplest form of e-commerce business model. Here you just need to set up a digital storefront for safer and reliable financial transactions from the customers, while the supplier takes care of the rest. The idea is of a middleman providing an efficient payment gateway as a bridge between the remote supplier or customer. Once placed, the orders are then managed and handled by the supplier.
Now, how does freeing off from managing inventory and warehousing stock feels like? If it feels good to be just the middleman for monetary transactions, never forget the major caveat that remains. In case the supplier is slow or is unable to deliver the right product to the customer, you take a hit in terms of decreasing your brand image.
You being at the front of conversing with the customer, the responsibility of better customer service remains up to you. It is generally recommended to go with print on demand to tackle such inevitable situations.
7. Wholesaling and Warehousing
If you can manage the bulk of financial support to start an eCommerce business, wholesaling and warehousing can be of great potential. It will be your responsibility to manage the inventory, keep track of the orders, track shipping information and get yourself a warehouse space. Now the way of earning revenue is through partnering up with sellers and merchants.
As an example, DollarDays, an online wholesaler has managed to offer a massive catalog of products that are sold to both the general public and also the retailers. All goes to their strategic expertise towards providing both case price and piece prices. Warehousing and wholesaling is a great option to deal with handling the mass volume of products and advanced technologies, supply chain management, inventory management, etc. can be the only way to maintain a proper and sustainable chain of business.
8. Private Labeling and Manufacturing
Entering a market with a new product can be challenging. While the changing market demand can be the best situation to launch a new product idea, a budget can always stand as a concern. Making an entire business stand on a single product development doesn’t always come feasible. Private labeling and manufacturing business model comes in when an offsite manufacturing company sends out the blueprints and guidelines for the product to a third party or contracted manufacturer who then manufactures the final product as per the specifications.
The seller has the choice of selecting over the eCommerce platform from where to sell the product from or it can sell it to a different company who will then send the final product to the end-users branding on his name. Yes, you are right. This closely relates to on-demand manufacturing that brings an added advantage. That being said, this business model allows to launch your product through the eCommerce platforms at a much lower investment and can be best suited for initial starts while you have plans to expand the business facilities later.
9. White Labeling
Focusing on the current market trend can never go offbeat for any business niche. White labeling e-commerce business models illustrate selling of an already successful product but with a different white-label, and package design. In simpler terms, you can sell an eCommerce product under your brand name and gain your part of the profit.
Now the responsibilities do ensure that you manage your customer relationships, product development, supply chain, and distribution channel and most importantly at your own labeled price. Though the beauty of this kind of business is that you can outsource most of the business operations to contractors and manage the entire digital face of the business on your own.
Now when handled with the right strategic expertise, white labeling is driven to bring you results. However, this model limits its profit earning capabilities to the demand in the market. If demand falls, stocks of the products can end up piling up in the warehouse. So, it would be wise to select the product based on its shelf-life and market expectancy.
10. Subscription eCommerce
You must have heard of Dollar Shave Club and Blue Apron meal kits? In a subscription e-Commerce model, a customer pays to subscribe to business to receive a product on a recurring basis. Most of the times, these are tailored products that are delivered to subscribers based on their usage. Dollar Shave Club and Blue Apron meal kits are one of the famous names blazing the trail for this business model.
The current market revenue for subscription eCommerce has jumped up with a 100% rise since its inception in the eCommerce industry. The current market projection shows a huge potential for such a business where customer satisfaction and service is listed as a top priority. This strong growth has invited many prominent businesses like Walmart (Beauty Box), Sephora (Play!), and P&G. This business form becomes a reliable source for revenue where customers are easy to retain and approached for any upgraded subscription.
What E-commerce Business Models Fits Your Business Best?
Well, here we come to the bottom line of defining the types of the e-commerce business models that can be incorporated into your business while shifting from the traditional retailing to a much enhanced digital experience. While you have a list of the business models that are exquisite to bring your profit through online commerce, it’s time to have a look at your business plan and decide.
The current market for eCommerce business is more inclined towards the Personalization and enhancing the customer experience. Since, eCommerce business lacks the ability to facilitate face to face interaction, unlike the traditional retail shopping experience. The only way to mitigate such impacts on a brands image is through utilizing advanced technology.
This will in turn help in retaining the customer’s trust in the brand. Though having a digital face for the business is quite profitable, understanding and implementing the right business model is the trick. This trick can fail if you do not have a reliable supply chain and a good brand image of your business that has its word spread across different social media platforms.
The estimated market growth of eCommerce business is more than what the numbers show. Not only being restricted to these 10 eCommerce business models, but the industry also has a lot to offer with the upcoming technology and data analytics usage. It would rather be vague to expect a steady and steep result in the beginning.
Hopefully, this article can be a good guide to those who are looking forward to entering into the digital market with their unique selling proposition. Welcome to the digital market!