The ecommerce industry is booming! In fact, all ecommerce business models are thriving. By 2021, online stores are expected to grow 78 percent. There’s opportunities everywhere across the industry and many trends to follow. Ultimately, it comes down to having a sound business plan and putting that plan into action.
New to ecommerce? Check out our guide: Ecommerce 101
Now, when it comes to the types of business models that are used in ecommerce, we generally see 6 core business models of ecommerce that businesses can categorized into:
Let’s look at each type of electronic commerce in a bit more detail.
1. Business-to-Consumer (B2C)
B2C ecommerce encompasses transactions made between a business and a consumer. When you think of ecommerce, this is likely what you first envisioned as it’s B2C that is the traditional retail model.
The Business-to-Consumer ecommerce business model is one of the most widely used sales models in the ecommerce context. When you buy shoes from an online shoe retailer, it is a business-to-consumer transaction.
2. Business-to-Business (B2B)
Unlike B2C, B2B ecommerce relates to sales made between businesses, such as a manufacturer and a wholesaler or retailer. While most B2B companies are service providers, you’ll also find software companies (SAAS), hosting companies, office furniture and other ecommerce businesses using this type of business model.
This type of ecommerce is not consumer-facing and happens only between business entities.
Most often, business-to-business sales focus on raw materials or products that are repackaged or combined before being sold to customers.
3. Consumer-to-Consumer (C2C)
One of the earliest forms of ecommerce is the C2C ecommerce business model. Some of the biggest retail giants in the world today owe their starts to the C2C business model.
Customer-to-customer relates to the sale of products or services between, you guessed it: customers.
4. Consumer-to-Business (C2B)
C2B reverses the traditional ecommerce model (and is what we commonly see in crowdfunding projects).
C2B means Individual consumers make their products or services available for business buyers.
An example of this would be a business model like iStockPhoto, in which stock photos are available online for purchase directly from different photographers.
5. Drop Shipping
The drop shipping business model is one that’s gained massive popularity over the last decade.
This model is one of the simplest forms as it allows you to set up a store and collect revenue. The rest of the process depends on your chosen suppliers. This means you don’t have to worry about inventory management, warehousing, packaging and shipping. That sounds great, right? Well, there’s another side to drop shipping.
The concern with drop shipping is product quality, delivery speed and customer service. After all, all of these are out of your hands but it’s your head on the chopping block if things go wrong. Sure, you can put out the fires but high quality customer service is a must in ecommerce. A few bad reviews, a few bad social media post and it can ruin your ecommerce business.
6. Subscription Business Model
Another popular growing ecommerce business model is subscription ecommerce.
Do you remember Dollar Shave Club? They were one of the first subscription ecommerce business models to make it big but there’s plenty of examples out there, such as Nature Box, Crate Joy and Blue Apron.
Today, these subscription business models are used in every imaginable industry, pets, cooking, art, baking, books, and many more.
Also referred to by subscription box, this model sends a box of product to customers once every month.
Another super popular ecommerce model merchants are using is affiliate marketing.
Affiliate marketing allows you to sell other people’s products for a commission. Affiliate marketing programs range from 1-2 percent commissions up to 60-70 percent commissions.
Affiliate business models are great for those who already have an established audience.
This also presents an opportunity for you to grow your ecommerce business. Adding an affiliate program to your company can help you immediately improve sales.
8. Business-to-Administration (B2A)
This model covers the transactions made between online businesses and administrations.
An example would be the products and services related to legal documents, social security, etc.
While this model is not as common as others, it does exist and can be used.
9. Consumer-to-Administration (C2A)
Same idea here, but with consumers selling online products or services to an administration.
C2A might include things like online consulting for education, online tax preparation, etc.
Both B2A and C2A are focused on increased efficiency within the government via the support of information technology.
The term “ecommerce” is widely used but it refers to selling services or products online. A business may have one product to sell or many products, that quantity doesn’t determine what model should be used. Rather, the business model you ultimately choose to use should be chosen based on the goals of your company.
Some of you may find that using a hybrid ecommerce business model will work best versus using one particular model. Many businesses do use hybrid models, such as using a B2B model with a subscription model.
What Model Fits Best?
We’ve covered many ecommerce business models you can use, which one is going to be the best fit for yours?