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6 Types of E-Commerce Business Models: Which Is Right for You?

Rosalie Murphy

Many or all of the products featured here are from our partners who compensate us. This influences which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here's how we make money .

An e-commerce business model explains whom your online business is selling products or services to, whether that’s other businesses, individual consumers or government agencies. Most types of e-commerce businesses — dropshippers, subscription services, wholesalers and many others — fall into one of those categories.

Here’s what e-commerce business models are and how to figure out which one is right for you.

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What are some e-commerce business models?

A business model defines whom you’re selling products or services to. There are several types of business models that can work for an e-commerce business, brick-and-mortar operation or both. Choosing one can help your e-commerce business position itself in the market and reach customers in an effective way.

Here are six common options:

1. Business-to-consumer (B2C)

Business-to-consumer, or B2C, is the most common type of business model and what people generally think of when they think of e-commerce . A B2C business sells products or services to end users, not other businesses or manufacturers. Most retailers are B2C businesses.

It can be easier to get started with a B2C business compared with other business models, since your potential customer base is so large. But dealing with a large number of customers can mean addressing a large number of complaints and returns. And it may be hard to convince buyers to come back for additional purchases when there are so many other sellers out there.

2. Business-to-business (B2B)

B2B, or business-to-business, is a model in which one business sells to another business. For instance, you might sell raw materials or parts that manufacturers use to build B2C products (this is called a B2B2C model). Or you might offer a service, like bookkeeping , that caters to businesses instead of individuals.

One of the upsides to a B2B business model is that you often receive repeat orders or — for service businesses — collect recurring revenue from a client. However, you may have a smaller customer base, since you’re selling a more niche product. Your business clients may also want to negotiate on prices and payment methods.

» MORE: Best B2B e-commerce platforms

3. Consumer-to-consumer (C2C) or peer-to-peer (P2P)

Peer-to-peer sales are often facilitated by e-commerce platforms. Those might be websites like Poshmark, Facebook Marketplace or eBay, where sellers list products they already own or have sourced from specialty retailers. P2P businesses can also sell services, as in the case of rideshare drivers.

Generally, peer-to-peer e-commerce business models work with a site or platform that helps sellers find customers but also takes a percentage of their sales. These can be less stable business models than more traditional ones, like B2B or B2C sales.

4. Business-to-government (B2G)

Business-to-government e-commerce businesses are rare. This model is for vendors who sell their services directly to the government. You’ll generally need to be a well-established business to compete for government contracts. But if a majority of your company is owned by people of color or people meeting other demographic requirements, you may be eligible for the SBA 8a program , which can give you a leg up.

5. Direct-to-consumer (D2C)

A direct-to-consumer business model eliminates a traditional intermediary. Mattresses, for instance, have historically been sold from manufacturers to department, furniture and mattress stores; then, those stores have sold the mattresses to the people who'll actually sleep on them. But in the last decade, D2C mattress companies have used e-commerce channels to start selling these products directly to individual customers.

A direct-to-consumer business model hinges on small-business marketing , since your customers will need to find out about your products in a new way. You’ll also likely need to work with a fulfillment center to store inventory and get orders shipped out to buyers on time. 

6. Consumer-to-business (C2B)

In a C2B business model, businesses rely on individual consumers not just to use their products, but to produce value. An example might be a social video company that doesn’t produce its own content. Instead, when digital creators upload videos to the platform for free, the company places ads on them — generating revenue for itself and perhaps sharing some with the creators.

If your business plan involves affiliate marketing or user-generated content, it may contain some elements of a C2B business model.

What are some types of e-commerce revenue models?

Your business model defines who your customers are. On top of that, you’ll need a revenue model — a plan for how your business will make more money from those customers than you spend on inventory, warehousing, shipping and other costs.

Here are some common types of revenue models for e-commerce businesses.

» Looking for more inspiration? 41 online business ideas to help you get started

Subscriptions

With a subscription e-commerce business, customers sign up to receive products in regular intervals. Subscriptions can help businesses develop recurring revenue streams and maintain longer customer relationships than businesses that rely on one-off purchases.

Subscriptions have worked for many different types of businesses — from toothbrushes and razors to cleaning products, meal kits and clothing. If your product is something that customers will use frequently and need to replace, reuse or may run out of, a subscription e-commerce business model could work for you.

White-labeling

With white-labeling, you buy wholesale products and then brand them with another logo, label and packaging. This can be a good B2B business — you might apply another company’s branding to your products to create employee gifts or trade show giveaways. It can also be a B2C business if your products can be customized for specific celebrations, like bridal parties or baby showers, or with sentimental colors, like school colors.

However, when you white-label goods, you may have to buy in large quantities and maintain inventory . This can increase your startup costs and introduce additional complexities, like maintaining warehouse space.

» MORE: Best inventory management software

On-demand printing or manufacturing

With an on-demand e-commerce business, you create a product at the time the customer orders it. This way, you’re not stuck with stock that you're not sure you can move. You can also potentially offer lots of customization for your customers.

On-demand manufacturing — also called print-on-demand — can sometimes mean orders have a longer lead time to get to customers, because they’ll have to wait for their product to be made instead of simply being shipped from your warehouse. It’s important to be upfront about your timeline, although you may be able to charge customers more for rush orders.

Dropshipping

Dropshipping is an e-commerce business model in which you don’t actually keep any inventory in stock. Instead, you list goods for sale, then work with warehouse partners who keep your goods in stock and manage all of the operations once the orders have been placed.

Dropshipping can allow you to experiment with what you sell without having to pay upfront for stock that may not end up getting traction with your customers. But when you don’t manufacture products or manage shipping yourself — dropshippers may sell products they haven’t even seen — quality control can become challenging. Make sure you have a plan to address customer complaints, returns and exchanges.

Wholesaling and warehousing

Wholesaling and warehousing is typically a B2B or B2G business model. With wholesaling, you often keep a significant amount of inventory on hand and require buyers to purchase from you in bulk. You may manufacture these products yourself or act as the intermediary between manufacturers and niche buyers.

How to design an e-commerce business model

Writing a business plan can help you define your e-commerce business and revenue models — or, in other words, who you’re selling to and how your business will make money. Here are a few questions to get you started:

Who are your customers? You should know your audience, but it doesn’t have to be narrow. Developing multiple revenue streams can help your business weather industry downturns or changes in consumer behavior — just don’t overextend yourself trying to sell to everyone.

How often will they buy your products and services? Are you selling something that customers will need on a recurring basis, or will most of your sales be one-offs? If you’re pursuing a subscription business, make sure you have the resources to order enough inventory and pack shipments on a regular basis.

Will you keep inventory? If you want to sell high volumes of goods without keeping inventory on hand, print-on-demand and dropshipping may appeal to you.

How much control do you want? If you want to be heavily involved in quality control and the production of your products, dropshipping may not appeal to you.

How many products will you offer? Do you want to provide customers with many color, size and package options? The more options you offer, the more you’ll have to manage your suppliers.

How much bandwidth do you have? If your e-commerce business is a side gig, you may not be in a position to take on government contracts or large B2B orders.

A version of this article was first published on Fundera, a subsidiary of NerdWallet.

On a similar note...

Ecommerce business models and how to take your business online

ecommerce business owner

Ecommerce is booming, but many business leaders are still unsure whether it’s a fit for their business model or what it looks like to make the leap. Between the tight competition, cybersecurity concerns, and wondering if your customer experience will still be up to par, it’s important to make sure ecommerce will work for you before jumping in.

And if your business is just getting started, it’s important to know the basic types of business models and how they work in ecommerce. This understanding will help guide some basic business decisions you’ll have to make, especially at the beginning.

The truth is, ecommerce is the future for every business model. Knowing how it works best with yours can help you continue to outperform the competition and continue driving growth long-term. This article will help get you started as we explore:

  • Business-to-consumer (B2C) models
  • Business-to-business (B2B) models
  • Consumer-to-business (C2B) models
  • Consumer-to-consumer (C2C) models
  • Consumer-to-government (C2G) models
  • Business-to-government (B2G) models
  • Business-to-business-to-consumer (B2B2C) models
  • Government-to-business (G2B) models
  • Government-to-consumer (G2C) models

Ecommerce delivery models

  • Examples of ecommerce business models
  • Ecommerce business FAQ

Six common business models in ecommerce

Traditional business models haven’t changed, but when it comes to ecommerce specifically, each one has a unique fit.

B2C — business-to-consumer

Business-to-consumer is a business model in which businesses sell directly to the consumers who purchase the goods for themselves. No third party, such as a wholesaler, is involved. A B2C example might look like a clothing company that sells bathing suits to women.

The B2C buyer journey is short and simple. The consumer becomes aware of a need or want, they consider their options, and they make a purchase.

B2C business models may be the easiest to translate into the ecommerce space, and B2C businesses have been many of the first types of businesses to do so. The buyer journey doesn’t need to change at all in a digital environment — the last two stages simply happen online rather than in a physical store.

B2C ecommerce brands are meeting their audiences online in dozens of ways. Because the model adapts so seamlessly to digital marketplaces, many B2C brands are at the forefront of ecommerce technologies and trends. They are engaging audiences and increasing sales through social media selling, personalized ecommerce experiences, mobile apps that bridge digital and physical spaces, and more.

B2B — business-to-business

In a B2B model, businesses sell to other businesses — such as SaaS brands that sell productivity software to other companies. The buyer is an employee (or an entire department) purchasing a product or service on behalf of their company. Retailers, producers, and agencies are all examples of B2B companies.

B2B businesses aim to create relationships through a marketing and sales process that is more complicated than most B2Cs’. The B2B sales funnel typically includes awareness, interest, evaluation, engagement, and purchase stages.

That added complexity is why B2B ecommerce growth has been slower than that of B2C ecommerce. B2B buyer cycles often require more nurturing, and pricing models are sometimes more complicated — and all those nuances have become digital.

B2B sellers reach online buyers using robust content strategies that deliver case studies, thought leadership content, PDFs, and more to target audiences at every stage of the funnel. Account-based marketing (ABM) strategies have emerged and matured in a B2B ecommerce environment to help these brands reach audiences effectively.

C2B — consumer-to-business

In C2B business models, consumers create value and businesses benefit from that value. Think about your company hiring a freelance writer or simply reading customer reviews that share ideas for innovation. That’s consumer-to-business. C2B flips the traditional business model on its head to focus on value (not necessarily a physical product) that originates with the consumer.

Often this ecommerce model uses an intermediary to meet audiences online, such as a platform where businesses can browse consumer profiles and choose whom to hire — like Upwork, Fiverr, or an influencer marketing platform. Even online review platforms count as C2B ecommerce because they provide both data for businesses to use and feedback on how the business could improve.

ecommerce C2C examples

C2C — consumer-to-consumer

C2C transactions don’t involve a business at all. Instead, C2C business is between two consumers, with a third-party company enabling the purchase. Consumers will publicly share items for sale. Then other consumers can browse the listings or postings, decide what they’d like to buy, and contact the seller.

While newspaper classifieds could be considered C2C, today this business model is primarily online. Examples of C2C ecommerce include:

  • Auction platforms like eBay
  • Exchange of services platforms such as dog walking app Rover
  • Exchange of goods platforms like Etsy
  • Payment platforms such as PayPal

C2C platforms are convenient for both buyers and sellers, and the platforms earn their share by charging a small amount for each transaction — like a seller’s fee to list items.

C2G — consumer-to-government

In C2G business models, consumers conduct transactions with the government, such as a citizen paying taxes. These transactions might also be related to education or Social Security.

A C2G business model fosters communication between consumers and the government. It gives consumers a direct line to share feedback or information with public sectors, making it easier for citizens to use government-sponsored services.

B2G — business-to-government

Business-to-government is a complex business model in which a government buys products, services, or information from companies. This might look like a telecommunications company or engineering business offering its services to a government agency.

B2G can apply to local, state, federal, or international governments. The process works a little differently than other business models — in most cases, the government does not go directly to an ecommerce website to purchase. Instead, a government agency looking for a product or service will put out a request for information (RFI) and request for proposal (RFP) so relevant businesses can share what they have to offer. The administration will then decide which company to work with. B2G comes with lots of laws, regulations, and documentation to govern transactions and business relationships.

However, B2G ecommerce transactions do sometimes take place on websites with a marketplace model, where businesses share their products or services and government entities can choose whom to work with at their leisure.

Three additional ecommerce business models

While the six previous business models are the most common, other business models are transitioning to ecommerce spaces too.

B2B2C — business-to-business-to-consumer

In the B2B2C business model, companies work with other companies to reach new customers. For instance, if you’re creating a new product you might join forces with another business to use a service like an ecommerce website. Together, both you and this other business will be able to increase your respective customer bases.

A good real-world example is Instacart. Grocery stores partner with Instacart to reach more customers together, with Instacart enjoying the stores’ existing customer bases and grocery stores profiting from the digital experience Instacart provides.

B2B2C ecommerce utilizes marketing campaigns on various digital platforms to reach its audience, just like B2C businesses. This model is scalable and flexible.

G2B — government-to-business

G2B models are government agencies that offer services to businesses. This might look like business licenses, electronic forms, or registering a startup online. Businesses act as the customer in G2B purchase cycles. It’s the government’s job to offer valuable and convenient digital services and information.

Typically, digital government portals are used to carry out this ecommerce business model. The government provides helpful business services that companies can use online. From business permits to government contracting to taxes, government agencies seek to make processes available online to their business audience.

G2C ecommerce site

G2C — government-to-consumer

In the government-to-consumer model, a government sells to consumers. This setup describes the relationship between public administration and residents.

For example, the consumer might need official documents or simply information from the government. Other examples include educational services, employment help, and voting. Whatever the case may be, the G2C model delivers value from a government agency to the residents it represents.

With G2C ecommerce, all communication and transactions take place online. Similar to G2B models, the government provides federal and regional websites and e-platforms where consumers can make payments, access helpful information, and find resources.

An ecommerce delivery model is the process or system by which goods and services get to the buyers. Some delivery models lend themselves well to specific types of ecommerce businesses. It’s important to choose the best kind of delivery for your ecommerce business model, so the process will run as smoothly as possible and your customers will be happy.

D2C — direct-to-consumer

Direct-to-consumer delivery does not use any third parties like retailers or distributors. Instead, brands send their products straight from their warehouse to customers. For example, if you sell directly to consumers via your own website, this is a D2C delivery model.

The D2C delivery model works well for B2B, C2C, and some B2C brands (although many B2C businesses use a retailer, which is the opposite of D2C). Brands using D2C models are able to control the entire buying experience, which often leads to happier customers and higher revenue.

White label

White label delivery is when a brand uses a third-party platform that doesn’t look like a third-party platform to buyers — the platform does not use its own branding or logo. Meanwhile, customers have full visibility into details such as shipping cost and delivery time.

White label apps are easy to integrate with your brand. White label shipping is often used for online retail.

Private label

A private label is an ecommerce delivery method companies use to take third-party products, package them as their own, and ship the items out to customers. Brands that use private label delivery do not have to stock inventory themselves, and they enjoy extra flexibility in how they fulfill orders. This is a type of D2C business model with no intermediary.

Because private label delivery is a type of D2C, it’s a good fit for the same types of business models.

Wholesaling

Wholesaling occurs when a brand sends large quantities of its product to another company for resale. Large commercial orders might be sent via freight shipping or international wholesale shipping. Wholesaling often involves ecommerce platforms.

Wholesaling is a common delivery model among B2B brands. Individual customers rarely need to order a large quantity of a product, and you usually can’t place a wholesale order from a business unless you meet a high minimum order quantity (MOQ).

ecommerce business owner

Dropshipping

Dropshipping is a delivery model where a shopper places an order with a retailer, the retailer processes the order, and the retailer sends that order to a wholesaler who then ships the items to the customer. Dropshipping is used exclusively for ecommerce. It doesn’t work for brick-and-mortar stores because these retailers don’t keep inventory on hand.

The dropshipping delivery model is most commonly used by B2C businesses because it’s an easy way to sell small quantities directly to consumers. But B2B dropshipping is possible too — especially for seasonal or especially expensive items that the seller does not want to stock.

Subscription

In a subscription model, customers pay a regular, recurring fee and receive items on a set schedule — such as once a month or once a week. Customers choose the products they’d like to auto-ship and how often they want to receive their purchases, and they pay a set amount based on the frequency they chose.

Subscriptions work well for ecommerce models such as B2C, B2B, and C2B. In many cases, a business that purchases a subscription is subscribing to a service or resource (such as a premium membership to a digital tool or a budget of freelancer hours) rather than a product.

Ecommerce model examples

Check out how these ecommerce models and delivery models play out in the real world.

1. Virgin Atlantic Airlines — B2C business, D2C delivery

Virgin Atlantic Airlines is a B2C brand. Since the airline’s services are provided directly to customers, Virgin Atlantic uses a D2C delivery model.

And Virgin Atlantic does B2C ecommerce well because the company creates outstanding customer loyalty. With a goal of being the most-loved travel company, Virgin tapped into the power of ecommerce to build a better website and design a strong digital experience. The success of that ecommerce customer experience has helped the company thrive online.

2. Norfolk County Council — G2C business, D2C delivery

The Norfolk County Council helps run the town of Norfolk, England, where it serves 900,000 residents. The council operates as a G2C business to provide residents with information and services, such as legal documents.

During the COVID-19 pandemic, Norfolk County had to turn to an entirely ecommerce model. The agency struggled to keep its operations and services running, so the council streamlined its offerings via automation. Norfolk saved 4.5 days each month and reduced the time it took to prepare legal documents from 45 minutes to just 12 minutes, proving that even government bodies can succeed with ecommerce.

3. RCS MediaGroup — B2C business, subscription delivery

RSC MediaGroup has over 70 brands across Italy and Spain, including newspapers, magazines, television, and more. The brand’s subscription model is a major source of revenue.

RCS wanted to improve its ecommerce model and boost revenue by sending customers the right messages at the right times, so the media group turned to customer data to improve brand engagement . RCS mined information from its CRM solution, ecommerce solution, and customer website behavior to create detailed customer profiles. This enabled the company to deliver more personalized, cross-channel experiences as an ecommerce brand.

E-business model FAQ

Here are a few fast facts about ecommerce business models.

What is ecommerce?

Ecommerce is any type of commercial transaction that takes place over the internet. Sellers list products and services on ecommerce platforms, and buyers purchase the goods. The first ecommerce transaction took place in 1994. Now, Statista reports total ecommerce revenue is projected to reach $1.3 trillion by 2025.

What are the four traditional types of ecommerce?

Some consider business-to-consumer (B2C), business-to-business (B2B), consumer-to-consumer (C2C), and consumer-to-business (C2B) the “four traditional” types of ecommerce. Business-to-government (B2G) is often grouped into B2B, but brands that sell to governments understand there are big differences in this kind of ecommerce model. Ecommerce models that involve the government are often more complex, dealing with more regulations, laws, and documentation.

Which ecommerce business model is most successful?

B2C is a highly successful business model for ecommerce because the traditional sales process is undisturbed and because the short purchase cycle has moved easily to digital environments. It’s also the most common ecommerce model. However, almost every basic business model can be adapted to work well for ecommerce.

Are there different tools and software for different e-business models?

At the core, all ecommerce business models need the same types of tools — a content management system (CMS), a digital payment processing system, and a way to track analytics. However, there are certain tools that may lend themselves better to one model or another, like a payment solution designed specifically for government offices or a CMS that’s set up for B2B businesses.

Choose the right business model for ecommerce success

Any business model can work in ecommerce, which is good — because ecommerce is the future.

Discover how other brands with your business model are winning in ecommerce. Then consider where you can make tweaks to bring your own company up to speed and succeed in ecommerce too.

As the leader in digital commerce, Adobe Commerce can help you build multichannel ecommerce experiences for B2B and B2C from a single platform. From segmentation to advanced experience management to visual merchandising tools, all aspects of ecommerce are made easy. To learn more, take an interactive product tour or watch this overview video .

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Moving Your Brick-n-Mortar Store Online: An Evergreen Guide

12 steps to move your brick and mortar store online, types of ecommerce business models: definition & examples, how to sell food online: wait, it is this easy (2021 tutorial).

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Last updated: June 18th, 2021

When was the last time you purposefully purchased something in a brick-and-mortar store? My guess is at least a few years ago. Why? Because online shopping, or eCommerce, has changed the way we consume forever.

It was projected that eCommerce sales would make up 15% of total purchases in the US by 2021. And here we are, witnessing a whopping 21.3% in 2020 . Considering the many, many types of eCommerce business models surfacing still, we can safely assume the percentage will just keep on rising.

And if you’re a business owner/founder, it’s now easier than ever to turn your ideas into reality. Businesses are constantly defying the old ways and moving on to make the big bucks .

But before you try to innovate and exceed expectations, you have to learn the ropes and know your types of eCommerce models. So, in this article, we’ll guide you through the key types of ecommerce business models as well as give you examples of each type, including some innovators. Let’s start!

I. Traditional eCommerce business models

01. c2c – customer to customer.

C2C is an eCommerce model where consumers are free to trade goods and services with one another in an online environment. Most popular examples include Craigslist and eBay – the pioneers of this model in the early days.

The way C2C businesses make a profit is through charging transaction fees or listing fees.

This eCommerce model benefits a lot from motivated buyers and sellers, who help it grow while earning for themselves. But that is not to say operating a C2C business is easy, for you will have to face the big competitors since this model has been around quite a while. And to attract the most consumers, you will have to pay extra attention to tech maintenance as well as quality control; the last thing you want is a PR nightmare.

02. B2C – Business to Customer 

This is the utmost wide-known and traditional type of eCommerce model. B2C businesses sell their products and services directly to their customers. Traditional brick-and-mortar stores are the perfect examples of this business type. And regarding eCommerce, have you ever ordered anything from Amazon?

Anything you buy in an online store, literally anything, can be considered a B2C transaction. B2C businesses don’t have to spend as much on marketing when compared to B2B since most services and goods they offer have much less value. Think about it, it’s much easier for you to decide you want to buy a new pair of headphones than for a company to make a decision to purchase service from a new water caterer.

But a shorter sales cycle means B2C businesses will have to make the extra effort at maintaining good relationships with their customers. Since Word of Mouth marketing has become more and more important in brand advocacy, it’s wise to invoke positive emotional responses from consumers.

A large majority of eCommerce businesses use B2C models, like this one:

b2c ecommerce example

or this one

B2c commerce examples

Read more: Best B2C Online Stores For Inspiration  

03. B2B – Business to Business

B2B is a form of transaction between businesses, typically involving manufacturers and wholesalers, or wholesalers and retailers. In the context of eCommerce, it usually comes down to buying and purchasing services. One of the most popular examples is, you guessed it, Amazon, offering businesses a platform accessible to customers.

Another example is Samsung, which plays an important role in Apple’s production of the iPhone (ironic, right?)

B2B transactions have a longer sales cycle since they deal with higher-value services, often with recurring orders. Careful planning and effective communication help this type of eCommerce business succeed. Such interactions rely on a company’s account management personnel, ensuring professional business relationships.

B2B innovators are aiming to improve their eCommerce storefronts and targeting niche markets. You can find all sorts of niche businesses like CRM software and animation for eLearning. If you are planning to enter this playing field, do keep in mind that the decision-makers are getting younger, with 73% of millennials are involved in the tech purchasing process for their companies, and a third is actually the decision-maker. Stay up-to-date if you want to succeed.

Another example of B2B eCommerce is Lair Superfood . They sell to both consumers (B2C) and businesses (B2B). A B2B eCommerce website typically requires more resources and larger investment than B2C, since you need a more powerful backend management system to handle wholesale order management, warehouse and inventory management, etc, or to create an automated wholesale portal that customers can access anytime they like.

B2b ecommerce example

04. B2B2C – Business to Business to Customer 

This type of eCommerce business model is a bit funny, for it is actually a combination of B2B and B2C, instead of its own standalone. In essence, B2B2C is a collaboration between 2 businesses that create mutually beneficial service and product delivery channels.

To further clarify this model, Business A who is developing a product, partners with Business B who provides a specific service – an eCommerce website. Business B has access to many consumers and therefore provides Business A with many leads and sales, making Business A’s product accessible to many customers. What does Business B remind you of? Yes, Amazon again. And Business A is just any other vendor on Amazon like Samsung or Apple.

05. P2P – Peer to Peer

A P2P service is a decentralized platform where consumers can interact directly with one another without the middleman. This enables them to transact directly with one another.

Without the presence of a third party, there’s a greater risk that the service provider/seller may fail to deliver, or the buyer may not pay. The risk is to replace added transaction fees. Hence, P2P platforms offer services to ensure quality of the transactions like payment processing, information about buyers and sellers, and quality assurance to their users.

Popular examples of P2P services are online marketplaces like that of Facebook’s, cryptocurrency and blockchain like where you might trade Bitcoin, file sharing like Napster, etc.

Facebook Marketplace is a prime example of P2P model

P2P ecommerce example

II. Innovative eCommerce Business Models

01. dropshipping.

Dropshipping is a retail method where a store doesn’t keep the products in stock. There is no inventory for the store to extract goods from. Instead, when receiving an order from a customer, an eCommerce entrepreneur using dropshipping model will purchase the product from a third party, or the supplier, who will then handle the shipping. Dropshipping, in short, is an inventory-free retail model where your suppliers take care of most of the manual work for you – the inventory management and delivery.

Dropshipping is currently the fastest growing type of eCommerce business model. Many entrepreneurs are opting this method for there are many benefits. Less capital is required to start a dropshipping business, low overhead expenses, you’d have a wide range of products to sell, and it’s easier to test and scale.

That said, dropshipping is certainly not without its flaws. Since it’s a fast growing business model, you’d have a handful of competitions, resulting in lower margin profit. You also don’t have control over the products since you’re just sending orders to the suppliers themselves, and if they make a mistake, you’ll be the one to take responsibility.

Meowingtons is one of the most successful Droshipping stores – specializing in selling cat goodies.

dropshipping examples

02. White label and Private label

These 2 terms can be used interchangeably. White labeling is when the supplier/manufacturer removes the brand or logo from their end products and instead uses the branding requested by the purchaser. The supplier in this case is usually the third party.

Private labeling can be considered an exclusive version of white labeling, as a retailer hires a manufacturer to create a unique product for them to sell. White label and private label products don’t always need to be tangible items, they can also be services, as usually seen in banking.

The most apparent examples of white labeling include companies like Whole Foods and Walmart, who benefit from selling their own branded products that have been created by other manufacturers.

This business model offers discounted sales and quality, generating a larger profit for companies, but can lead to monopsony and copycatting, which can prove to be troublesome sometimes.

03. Print-on-Demand

Print-on-demand is a retail fulfillment method that’s similar in nature to dropshipping. Basically, a customer buys a product on a retail site (like Shopify) and the order is immediately sent to the print provider who stocks the physical product, prints the design, and ships the product to the customer.

No more need for storage space, expensive local printers, or dealing with large-scale shipping. The store owner eliminates the demand for bulk inventory and instead focuses on the actual design and marketing of the product. Products can range from customized t-shirts to tote bags or even books.

This eCommerce business model is somewhat a derivative from dropshipping, since printing and shipping is carried out by your supplier. That said, Print-on-Demand is a helpful model with many advantages. If you have an established social media presence, i.e you’re a Youtuber, cartoonist or an influencer, it’s easy to monetize the audience you’ve already built since PoD doesn’t require too much capital to start. This also means you can create original products for a niche of customers, and easily test your ideas.

Notable mentions of this business model include Printful . Printful is a POD platform that allows you to create and sell your own custom-designed product online, whether on a marketplace like Etsy, Amazon, or on your own online store integrated with Printful.

POD example

03. Subscription Model

This business model has been around since as early as the 1600s within the printing and publishing market. With the advent of eCommerce, we have seen countless services surfacing using this method. Most streaming services like Netflix, Hulu, HBO Go, etc. fall into this category.

Companies don’t just offer only monthly subscriptions like old newspapers, but went a few steps further as to offer daily, semi-annual and annual subscriptions that you can cancel anytime you want.

Some examples of popular subscription business products include:

  • Protein powder
  • Baby supplies
  • Organic food

The list goes on, but beauty and consumables have shown to be the heavy-hitters, while books, plants, and other collectibles also make effective choices.

The best way to get your head around Subscription box businesses is to look at some successful stores that use the business model. One of our favourite examples is Snacknation

Subscription example

Snacknation sells delicious and healthy snacks boxes. Every month, you’ll receive 8 snacks from their specially curated selection of tasty bars, nuts and seeds, chips, jerky, and sweets.

04. Wholesaling

Simply put, this type of eCommerce model involves selling products in bulk to retailers, who in turn sell them to customers. Wholesaling has been around for as long as anyone can remember, and eCommerce just innovated it. Traditionally, wholesaling is a B2B practice, but many retailers have shifted it to a B2C model.

eCommerce wholesaling enables you to increase your sales without increasing your marketing budget, since the retailers will do most of the job for you. It also makes new markets more accessible by reducing the risk in expansion. Lastly, eCommerce wholesale can reduce your storage needs, since either the wholesaler or retailer can accept to store the goods in their inventory.

III. How to choose the right eCommerce business model?

Before starting your eCommerce business, you have a few questions to ask yourself. The choices you make can heavily affect your success, so do keep in mind that this is just a brief entry-level guide to help you kickstart your eCommerce business. To choose the right type of eCommerce model, further research is greatly recommended.

01. Who is your customer? 

Customer is the first and foremost pillar of building your eCommerce business. So who do you plan to sell to? What are the demographics?

This question is to determine whether your business is going to deploy the B2B model or the B2C model; only after you’ve decided on this can you go further and choose the niche market.

02. What type of products do you want to sell? 

Do you plan to sell products or services? What type of products are you keen on?

If you plan to sell ready made products, you might want to consider traditional models as well as dropshipping or wholesaling.

If you plan to sell customized products, go for white/private label or Print-on-Demand.

If you’re offering services, you might want to consider a subscription business type.

03. How much capital are you willing to put into your business? 

If you’re running low on capital, dropshipping and Print-on-Demand is going to be the optimal types of eCommerce model. In case you want to pursue the more conventional types, do keep in mind that you will suffer some loss when you first start, and profit can only be expected after a few months, or even longer.

04. How do you want to acquire your products? 

This will help you decide how you distribute your products. Do you have a storage with plenty of inventory slots lying around? Or can you only afford to distribute the products straight from your supplier to your customers?

05. Who might you compete against? 

eCommerce has been around for a few years, and thus you can be fairly sure that there is already a giant in your niche market. A B2B business might be a safer bet if your product or service is super niched, but it won’t be easy to run. Dropshipping or Print-on-Demand, for example, offers you a wider variety of goods to sell, and might give you a safety net to fall back on in case you can’t compete against the big guys.

We’ve covered the common types of eCommerce business models, as well as some tactics to kickstart your business. We sure hope this gives you the main idea of what you need to do.

That said, planning is no joke, and innovation is seriously needed to survive in this shark tank. Prepare yourself, get out there and get yourself some customers. We believe in you!

Learn more:

  • The Art Of Selling Clothes Online: An Ultimate Guide
  • Selling Food Online Made Simple: Step-By-Step Tutorial
  • How To Sell Art Online & Finance Your Creativity

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Understanding eCommerce Business Models: A Guide

  • by Alexandria Flores
  • October 11, 2023
  • 6 minutes read

what is a business model in e commerce

The landscape of online retailing encompasses everything from drop-shipping and wholesaling to subscription and white-labeling, allowing entrepreneurs to choose the optimal business model to align with their brand’s vision and capabilities.      

Choosing the right eCommerce business model can significantly impact a brand’s success, and it requires a comprehensive understanding of each model’s nuances. Key factors to consider include the brand’s target audience, product offerings, pricing strategy, and scalability. The chosen model should align with the brand’s long-term growth strategy and customer satisfaction objectives.  

This guide aims to delve into the intricacies of various eCommerce business models, shedding light on their pros and cons. The goal is to empower brands with the knowledge necessary to make an informed choice that will fuel their online store success and foster sustainable growth.  

The Fundamentals of eCommerce Business Models  

An eCommerce business model is a strategic business plan, outlining how an online business will generate revenue, identify the targeted customer segment, and deliver value to said customers. It encapsulates everything from the type of goods or services sold, to the pricing strategy and marketing tactics employed.    

The role of eCommerce models in online businesses is multifaceted. Primarily, they provide a framework that guides business operations, decision-making, and goal setting.  

Not to mention, a well-defined business model aids in attracting investors and stakeholders by providing a clear depiction of how the business intends to make a profit and grow over time. eCommerce business models help in establishing a strong customer base and fostering loyalty by clearly identifying the target market and how to cater to their needs.

what is a business model in e commerce

Types of eCommerce Business Models   

There are several eCommerce business models prevalent in today’s digital landscape. Below, we’ll delve into the detail of each model, highlighting their unique features, advantages, and drawbacks.  

  • Key Features: Personalized marketing, direct interaction with customers, diverse product offerings.  
  • Pros: Large customer base, higher sales volume, greater market share.  
  • Cons: Intense competition, high customer acquisition costs, need for continuous innovation.  
  • Key Features: Relationship-driven, bulk orders, contract-based pricing.  
  • Pros : Stable profits due to long-term contracts, higher average order values, repeated business.  
  • Cons: Longer sales cycles, complex decision-making process, demand variability.  
  • Key Features: Peer-to-peer transactions often used goods, community-based.  
  • Pros: Opportunity for individuals to make profit, wide range of products, flexible pricing.  
  • Cons: Difficult to regulate, potential for fraud, lack of customer service.  
  • Key Features: Individual-centric, project-based work, competitive bidding.  
  • Pros: Flexibility for consumers, access to a global talent pool for businesses, cost-effective.  
  • Cons: Quality control issues, inconsistency, potential for non-payment.  
  • Key Features: Control over brand, price, and customer experience, direct customer feedback, no retailer margins.  
  • Pros: Higher profit margins, direct relationship with customers, quicker time to market.  
  • Cons: Significant investment in marketing, logistics, and customer service, intense competition, brand reputation management.  

Understanding these eCommerce models is key for those looking to venture into the online business realm, as each comes with its own set of challenges and opportunities.  

How to Choose the Right eCommerce Business Model   

When choosing the right eCommerce business model for your enterprise, several factors must be considered. Start by conducting a comprehensive market analysis to gauge the demand and competition in your chosen niche. Knowing your target audience and understanding their needs can guide you to decide which model to opt for.  

Next, consider your product or service type. If you’re selling physical goods, a retail or wholesale model might be suitable, while digital goods or services may align better with a subscription or advertising model. The choice of product or service also influences whether you should go for a drop-shipping model, minimizing inventory costs, or a white-label model, enhancing brand recognition.    

Your financial resources are another key determinant. Setting up a marketplace model, for example, would require substantial initial investment compared to affiliate marketing or drop-shipping models. It’s also essential to gauge the operational complexity and scalability of each model, considering your capabilities and growth aspirations.      

Lastly, aligning the eCommerce model with your business goals is paramount. If you aim for quick expansion and high profitability, a B2C model with aggressive digital marketing strategies might serve you well. Conversely, if your focus is building long-term client relationships and steady growth, a B2B model might be more appropriate. It’s about finding a balance between your business objectives, market realities, and the inherent advantages and constraints of each eCommerce model.  

what is a business model in e commerce

Impact of Emerging Trends on eCommerce Business Models       

The advent of technology has undeniably shaped the landscape of eCommerce, permeating every aspect of the industry from transaction processing to customer service.    

AI-powered chatbots, for example, can handle a myriad of customer service tasks, allowing for round-the-clock support and instant response to customer queries. Meanwhile, blockchain technology promises enhanced security and transparency for online transactions, bolstering consumer trust in eCommerce platforms.   

In parallel, consumer behavior is also evolving in response to these technological advancements. The modern shopper is not only digitally savvy but also values convenience and personalization. This shift has necessitated that eCommerce businesses tailor their business models and strategies to cater to these preferences.   

From offering a wider array of payment options, including mobile wallets and buy-now-pay-later, to harnessing data analytics for personalized marketing, businesses are continually innovating to meet the changing needs and expectations of their customers. This dynamic interplay between technology and consumer behavior continues to drive the evolution of eCommerce business models.    

How Wiser’s Market Awareness Solution Can Help You    

Wiser’s Market Awareness solution is a game-changer for companies seeking to gain a competitive edge in the dynamic world of eCommerce. With this solution, companies can analyze market trends, track competitive activity, and understand consumer behavior in real-time, thereby optimizing their eCommerce business models.    

Not only does this tool reveal what’s working for competitors, but it also identifies opportunities for differentiation, allowing businesses to carve a unique niche in the market. Wiser’s Market Awareness solution provides insights into many different aspects of your competition, including:  

  • Price Indexing: See how your prices compare across competitors and categories you care about with a visual heatmap.  
  • Catalog Intelligence: Compare your catalog to the competition at the SKU-level with a configurable dashboard.  
  • Competitive Pricing: Improve your understanding of the market with matrices that highlight pricing, promotions, ratings, and reviews.  
  • Live Price-Check: Clearly understand your market landscape and activities on retailer pages with an intuitive and easy-to-use plug-in.  

Don’t let a lack of eCommerce data stop you from selling more and increasing your profit margins. Instead, use Wiser’s dashboard to monitor your product catalog, compare prices to competitors, create custom filters, and much more.    

eCommerce business models help in establishing a strong customer base and fostering loyalty by clearly identifying the target market and how to cater to their needs.

Navigating eCommerce Business Models    

Choosing the right eCommerce business model is an essential step for any enterprise aiming to succeed in the digital marketplace. The chosen model should align with the company’s overall strategy, target audience, and product type. Whether it’s B2C, B2B, C2C, or a hybrid model, each has its unique features and advantages that can help a business thrive in a competitive environment.  

Opting for a suitable business model not only ensures profitability but also enhances the overall customer experience. This can ultimately lead to sustained customer loyalty, a larger market share, and increased long-term growth. Remember, eCommerce is not just about transactions, its about creating lasting relationships with customers.    

As companies evolve and grow, so should their business models. Adapting to changing market trends, customer preferences, and technological advancements can ensure that a business stays relevant and successful. A flexible, informed approach to eCommerce business models can pave the way to a prosperous digital future.  

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E-commerce Defined: Types, History, and Examples

Nearly any product and service is available through e-commerce transactions

what is a business model in e commerce

Katrina Ávila Munichiello is an experienced editor, writer, fact-checker, and proofreader with more than fourteen years of experience working with print and online publications.

what is a business model in e commerce

What Is Electronic Commerce (E-commerce)?

Electronic commerce (e-commerce) refers to companies and individuals that buy and sell goods and services over the internet. E-commerce operates in different types of market segments and can be conducted over computers, tablets, smartphones, and other smart devices. Nearly every imaginable product and service is available through e-commerce transactions, including books, music, plane tickets, and financial services such as stock investing and online banking. As such, it is considered a very disruptive technology .

Key Takeaways

  • E-commerce is the buying and selling of goods and services over the internet.
  • It is conducted over computers, tablets, smartphones, and other smart devices.
  • Almost anything can be purchased through e-commerce today, which makes e-commerce highly competitive.
  • It can be a substitute for brick-and-mortar stores, though some businesses choose to maintain both.
  • E-commerce operates in several market segments including business-to-business, business-to-consumer, consumer-to-consumer, and consumer-to-business.

Investopedia / Laura Porter

As noted above, e-commerce is the process of buying and selling tangible products and services online. It involves more than one party along with the exchange of data or currency to process a transaction. It is part of the greater industry that is known as electronic business (e-business), which involves all of the processes required to run a company online.

E-commerce has helped businesses (especially those with a narrow reach like small businesses ) gain access to and establish a wider market presence by providing cheaper and more efficient distribution channels for their products or services. Target ( TGT ) supplemented its brick-and-mortar presence with an online store that allows customers to purchase everything from clothes and coffeemakers to toothpaste and action figures right from their homes.

Providing goods and services isn't as easy as it may seem. It requires a lot of research about the products and services you wish to sell, the market, audience, competition, as well as expected business costs.

Once that's determined, you need to come up with a name and set up a legal structure, such as a corporation. Next, set up an e-commerce site with a payment gateway . For instance, a small business owner who runs a dress shop can set up a website promoting their clothing and other related products online and allow customers to make payments with a credit card or through a payment processing service, such as PayPal .

E-commerce may be thought of as a digital version of mail-order catalog shopping. Also called online commerce, e-commerce is the transaction between a buyer and a seller that leverages technology.

E-commerce has changed the way people shop and consume products and services. More people are turning to their computers and smart devices to order goods, which can easily be delivered to their homes. As such, it has disrupted the retail landscape. Amazon and Alibaba have gained considerable popularity, forcing traditional retailers to make changes to the way they do business.

But that's not all. Not to be outdone, individual sellers have increasingly engaged in e-commerce transactions via their own personal websites. And digital marketplaces such as eBay or Etsy serve as exchanges where multitudes of buyers and sellers come together to conduct business.

The U.S. Department of Commerce recognizes e-commerce businesses such as transactional sites, static content sites, online marketplaces, and auction sites.

History of E-commerce

Most of us have shopped online for something at some point, which means we've taken part in e-commerce. So it goes without saying that e-commerce is everywhere. But very few people may know that e-commerce has a history that goes back to before the internet began.

E-commerce actually goes back to the 1960s when companies used an electronic system called the Electronic Data Interchange to facilitate the transfer of documents. It wasn't until 1994 that the very first transaction . took place. This involved the sale of a CD between friends through an online retail website called NetMarket.

The industry has gone through so many changes since then, resulting in a great deal of evolution. Traditional brick-and-mortar retailers were forced to embrace new technology in order to stay afloat as companies like Alibaba, Amazon, eBay, and Etsy became household names. These companies created a virtual marketplace for goods and services that consumers can easily access.

New technology continues to make it easier for people to do their online shopping. People can connect with businesses through smartphones and other devices and by downloading apps to make purchases. The introduction of free shipping, which reduces costs for consumers, has also helped increase the popularity of the e-commerce industry.

Advantages and Disadvantages of E-commerce

E-commerce offers consumers the following advantages:

  • Convenience : E-commerce can occur 24 hours a day, seven days a week. Although eCommerce may take a lot of work, it is still possible to generate sales as you sleep or earn revenue while you are away from your store.
  • Increased Selection : Many stores offer a wider array of products online than they carry in their brick-and-mortar counterparts. And many stores that solely exist online may offer consumers exclusive inventory that is unavailable elsewhere.
  • Potentially Lower Start-up Cost: E-commerce companies may require a warehouse or manufacturing site, but they usually don't need a physical storefront. The cost to operate digitally is often less expensive than needing to pay rent, insurance, building maintenance, and property taxes.
  • International Sales: As long as an e-commerce store can ship to the customer, an e-commerce company can sell to anyone in the world and isn't limited by physical geography.
  • Easier to Retarget Customers: As customers browse a digital storefront , it is easier to entice their attention towards placed advertisements, directed marketing campaigns, or pop-ups specifically aimed at a purpose.

Disadvantages

There are certain drawbacks that come with e-commerce sites, too. The disadvantages include:

  • Limited Customer Service : If you shop online for a computer, you cannot simply ask an employee to demonstrate a particular model's features in person. And although some websites let you chat online with a staff member, this is not a typical practice.
  • Lack of Instant Gratification : When you buy an item online, you must wait for it to be shipped to your home or office. However, e-tailers like Amazon make the waiting game a little bit less painful by offering same-day delivery as a premium option for select products.
  • Inability to Touch Products : Online images do not necessarily convey the whole story about an item, and so e-commerce purchases can be unsatisfying when the products received do not match consumer expectations. Case in point: an item of clothing may be made from shoddier fabric than its online image indicates.
  • Reliance on Technology: If your website crashes, garners an overwhelming amount of traffic, or must be temporarily taken down for any reason, your business is effectively closed until the e-commerce storefront is back.
  • Higher Competition: Although the low barrier to entry regarding low cost is an advantage, this means other competitors can easily enter the market. E-commerce companies must have mindful marketing strategies and remain diligent on SEO optimization to ensure they maintain a digital presence.

Owners can generate revenue semi-passively

Consumers can easily browse for specific products

Greater earning potential as there are no limitations on physical location as long you can ship there

Reduced costs assuming digital presence costs less than building, insurance, taxes, and repairs.

Greater marketing control, including data extraction from customers, targeted ads, and pop-up placement

Limited customer service opportunities as there is little to no face-to-face opportunities

Lacks instant gratification as customers must believe in a product before seeing it in person

Products can't been seen or handled until delivered (can't try before they buy)

Loss of revenue or income when websites go down

High reliance on shipping constraints

Higher competition due to lower barriers of entry and greater customer potential

Types of E-commerce

Depending on the goods, services, and organization of an ecommerce company, the business can opt to operate several different ways. Here are several of the popular business models.

Business-to-Consumer (B2C)

B2C e-commerce companies sell directly to the product end-user. Instead of distributing goods to an intermediary, a B2C company performs transactions with the consumer that will ultimately use the good.

This type of business model may be used to sell products (like your local sporting goods store's website) or services (such as a lawn care mobile app to reserve landscaping services). This is the most common business model and is likely the concept most people think about when they hear the term e-commerce.

Business-to-Business (B2B)

Similar to B2C, an e-commerce business can directly sell goods to a user. However, instead of being a consumer, that user may be another company. B2B transactions often entail larger quantities, greater specifications, and longer lead times. The company placing the order may also have a need to set recurring goods if the purchase is for recurring manufacturing processes.

Business-to-Government (B2G)

Some entities specialize as government contractors providing goods or services to agencies or administrations. Similar to a B2B relationship, the business produces items of value and remits those items to an entity.

B2G e-commerce companies must often meet government requests for proposal requirements, solicit bids for projects, and meet very specific product or service criteria. In addition, there may be joint government endeavors to solicit a single contract through a government-wide acquisition contract .

Consumer-to-Consumer (C2C)

Established companies are the only entities that can sell things. E-commerce platforms such as digital marketplaces connect consumers with other consumers who can list their own products and execute their own sales.

These C2C platforms may be auction-style listings (i.e. eBay auctions ) or may warrant further discussion regarding the item or service being provided (i.e. Craigslist postings). Enabled by technology, C2C e-commerce platforms empower consumers to both buy and sell without the need for companies.

Consumer-to-Business (C2B)

Modern platforms have allowed consumers to more easily engage with companies and offer their services, especially related to short-term contracts, gigs, or freelance opportunities. For example, consider listings on Upwork.

A consumer may solicit bids or interact with companies that need particular jobs done. In this way, the e-commerce platform connects businesses with freelancers to enable consumers greater power to achieve pricing, scheduling, and employment demands.

Consumer-to-Government (C2G)

Less of a traditional e-commerce relationship, consumers can interact with administrations, agencies, or governments through C2G partnerships. These partnerships are often not in the exchange of service but rather, the transaction of obligation.

For example, uploading your federal tax return to the Internal Revenue Service (IRS) digital website is an e-commerce transaction regarding an exchange of information. Alternatively, you may pay your tuition to your university online or remit property tax assessments to your county assessor.

Investopedia / Sabrina Jiang

The U.S. Census Bureau conducts estimates of retail e-commerce sales in the United States. In the first quarter of 2023, retail e-commerce accounted for 15.1% of total sales in the country, totaling roughly $272.6 billion. These figures are adjusted for seasonal variation.

Types of E-commerce Revenue Models

In addition to crafting what type of e-commerce company a business wants to be, the business must decide how it wants to make money. Due to the unique nature of e-commerce, the business has a few options on how it wants to process orders, carry inventory, and ship products.

Dropshipping

Often considered one of the easier forms of e-commerce, dropshipping allows a company to create a digital storefront, generate sales, then rely on a supplier to provide the good. When generating the sale, the e-commerce company collects payment via credit card , PayPal, cryptocurrency , or other means of digital currency.

Then, the e-commerce store passes the order to the dropship supplier. This supplier manages inventory, oversees the warehouse of goods, packages the goods, and delivers the product to the purchaser.

White Labeling

White-label e-commerce companies leverage already successful products sold by another company. After a customer places an order, the e-commerce company receives the existing product, repackages the product with its own package and label, and distributes the product to the customer. Although the e-commerce company has little to no say in the product they receive, the company usually faces little to no in-house manufacturing constraints.

Wholesaling

A more capital-intensive approach to e-commerce, wholesaling entails maintaining quantities of inventory, keeping track of customer orders, maintaining customer shipping information, and typically having ownership of the warehouse space to house products.

Wholesalers may charge bulk pricing to retailers or unit prices for consumers. However, the broad approach to wholesaling is to connect to buyers of large quantities or many smaller buyers of a similar, standardized product.

Private Labeling

Private labeling is a more appropriate e-commerce approach for companies that may not have large upfront capital or do not have their own factory space to manufacture goods. Private label e-commerce companies send plans to a contracted manufacturer who makes the product.

The manufacturer may also have the ability to ship directly to a customer or ship directly to the company receiving the order. This method of e-commerce is best suited for companies that may receive on-demand orders with short turnaround times but are unable to handle the capital expenditure requirements.

Subscription

E-commerce companies can also leverage repeating orders or loyal customers by implementing subscription services. For a fixed price, the e-commerce company will assemble a package, introduce new products, and incentivize locking to a long-term agreement at a lower monthly price.

The consumer only places an order once and receives their subscription order at a fixed cadence. Common subscription e-commerce products include meal prep services, agriculture boxes, fashion boxes, or health and grooming products.

Example of E-commerce

Amazon is a behemoth in the e-commerce space. In fact, it is the world's largest online retailer and continues to grow. As such, it is a huge disrupter in the retail industry, forcing some major retailers to rethink their strategies and shift their focus.

The company launched its business with an e-commerce-based model of online sales and product delivery. It was founded by Jeff Bezos in 1994 as an online bookstore but has since expanded to include everything from clothing to housewares, power tools to food and drinks, and electronics.

Company sales increased by 9% in 2022 from the previous year, totaling $513.98 billion compared to $469.82 billion in 2021. Amazon's operating income dropped from $24.88 billion in 2021 to $$12.25 billion in 2022. The company posted a net loss of $2.72 billion in 2022, compared to net income of $33.36 billion in 2021.

How Do You Start an E-commerce Business?

Make sure you do your research before you start your business. Figure out what products and services you're going to sell and look into the market, target audience, competition, and expected costs.

Next, come up with a name, choose a business structure, and get the necessary documentation (taxpayer numbers, licenses, and permits if they apply).

Before you start selling, decide on a platform and design your website (or have someone do it for you).

Remember to keep everything simple at the beginning and make sure you use as many channels as you can to market your business so it can grow.

What Is an E-commerce Website?

An e-commerce website is any site that allows you to buy and sell products and services online. Companies like Amazon and Alibaba are examples of e-commerce websites.

What Is the Difference Between E-commerce and E-business?

E-commerce involves the purchase and sale of goods and services online and is actually just one part of e-business. An e-business involves the entire process of running a company online. Put simply, it's all of the activity that takes place with an online business.

What Is an Example of E-commerce?

Dollar Shave Club offers customers personal grooming, health, and beauty products. Customers can opt for what product(s) they want shipped to them and can sign up for long-term memberships to have products sent to them on a recurring basis. Dollar Shave Club procures goods in bulk from other companies, then bundles those products, maintains membership subscriptions, and markets the products.

What Are the Types of E-commerce?

An e-commerce company can sell to customers, businesses, or agencies such as the government. E-commerce can also be performed by customers who sell to businesses, other customers, or governments.

E-commerce is just one part of running an e-business. While the latter involves the entire process of running a business online, e-commerce simply refers to the sale of goods and services via the internet. E-commerce companies like Amazon, Alibaba, and eBay have changed the way the retail industry works, forcing major, traditional retailers to change the way they do business.

If starting an e-commerce site is something you're considering, make sure you do your research before you start. And make sure you start with a small, narrow focus to ensure that you have room to grow.

EcommerceCEO. " What Is Ecommerce? "

Shopify. " Ecommerce ."

Cyberchimps. " What Is An E-commerce Website & How to Build One (2021) ."

International Trade Administration. " eCommerce Website Types ."

United States Department of Commerce. " Quarterly Retail E-commerce Sales ."

Amazon. " 2022 Annual Report ," Page 37.

Dollar Shave Club. " How It Works ."

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Jun 28, 2023 | 13 minute read

Take a Deep Dive Into the 6 Types of eCommerce Business Models

written by Kirsten Aebersold

top ecommerce business models

Editor’s Note: The post was originally published in 2018. It was most recently updated in 2023 to reflect the current state of eCommerce business models

Today, no matter your industry, you’re probably doing business online. Whether you’re brand is B2B, B2C, B2B2C , or some other configuration, your business success is affected by your eCommerce business strategy.

In 2023, eCommerce is projected to make up about 20% of overall global retail sales.Decades ago, it would have seemed unfathomable for one in five retail sales to occur online,, but with online shopping becoming more common, the share of eCommerce sales is expected to grow even more.

The shift to digital is real, and businesses not already selling online will need to break into the eCommerce landscape sooner rather than later. Deciding on a suitable eCommerce business model is one of the first and most important steps.

Not taking the time to evaluate your business and understand your target market can lead to wasted money and unrealized revenue. On the other hand, digital advertising, SEO, and content marketing effectively drive traffic and revenue and help you realize a large ROI. Still, these tactics are best situated within t a well-planned eCommerce business strategy.

Whether you’re just starting to explore eCommerce models or already have an established digital commerce venture and want to expand your online presence, it’s important to know which model best fits your needs and requirements.

What is an eCommerce Business Model?

Electronic commerce, or eCommerce, is a business model that lets businesses and consumers buy or sell online. There are six major eCommerce business models:

  • Business to Consumer (B2C)
  • Business to Business (B2B)
  • Business to Government (B2G)
  • Business to Business to Consumer (B2B2C)
  • Consumer to Consumer (C2C)
  • Consumer to Business (C2B)

We’ll review each of these six business classifications in-depth. We’ll also explore the five primary delivery models that you’ll need to consider when launching or expanding your online store.

b2c_ecommerce_business_model

eCommerce Business Models: Business to Consumer (B2C)

As the name implies, business to consumer (B2C) is when a company markets its products or services directly to end users. It is the most widely known form of commerce. You complete a B2C transaction every time you purchase food from a grocery store, eat dinner at a restaurant, watch a movie at a theater, and get a haircut. You are the end user of the products and services these companies sell.

There are five different subsets of the eCommerce B2C business model:

  • DTC eCommerce is where manufacturers maintain full control of the eCommerce strategy to sell directly to consumers without a retailer or distributor in the middle.
  • Online intermediaries bring sellers and consumers together and take a cut of each transaction.
  • Advertising-based models are when Information is given away for free and money is made from advertising on the site.
  • Community-based sites make money from targeting ads to users based on their demographics and location. Facebook is a prominent example.
  • Fee-based models are when companies sell information or entertainment to consumers for a fee, such as Netflix or subscription-based newspapers.

In recent years, online B2C sales have increased. As a result, many traditional brick-and-mortar retailers have been incorporating digital channels to reach consumers where they shop.

This hybrid approach is when companies have both a traditional brick-and-mortar presence and an online shopping platform. Many companies integrate these approaches with an omnichannel eCommerce strategy to improve the customer experience. For example, many companies now let you order your products online and pick them up at one of their local stores. Many companies also allow customers to return products they bought online to local stores to ensure a quick and easy refund or exchange.

b2b_ecommerce_business_model

ITo successfully implement the B2C eCommerce model, businesses must have an eCommerce platform that can adjust to customer needs without service delays or runaway costs.

eCommerce Business Models: Business to Business (B2B)

As the name implies, business to business (B2B) is when a company markets its products or services directly to other businesses. B2B eCommerce can be broken down into two methodologies, vertical and horizontal.

Vertically oriented businesses sell to customers within a specific industry. With a horizontal approach, you are selling to customers across many industries. Each method has its own pros and cons, such as industry expertise and market depth (vertical) versus wide-spread market coverage and diversification (horizontal).

Both can be lucrative pathways, but your strategy will depend on your products and customers, so consider them carefully.

Historically, B2B businesses were behind their direct-to-consumer counterparts, especially when it came to commerce innovation and digital sales. The problem lay in price negotiation and collaboration, as many businesses were used to leveraging sales representatives as the primary revenue-generating channel.

The modern B2B buyer has become tech-savvy and now shares many of the same demands and buying habits as the average consumer. Convenience, flexibility, personalization, and integrated experiences are expected in B2B commerce – providing them is business-critical.

Despite the slow adoption of digital strategies, B2B brands have focused more and more on eCommerce to keep up with consumers. A recent report by Gartner uncovered a recent dramatic shift with B2B digital commerce initiatives surpassing B2C. Gartner predicts that "by 2025, 75% of B2B manufacturers will sell directly to their customers via digital commerce."

Check out more of the top trends in B2B eCommerce that you should consider for your 2022 strategy..

eCommerce Business Models: Business to Government (B2G)

Business to government (B2G) is when a company markets its products and services directly to a government agency. This agency could be a local, county, state, or federal agency.

An example of a B2G relationship is when an ammunition manufacturer sells ammunition to the US Army. An example of a local B2G relationship is when a private engineering company sells its engineering services to a county government to develop a new water and sewer system for the community. In B2G, companies typically bid on projects when governments announce requests for proposals (RFPs).

Interacting with government agencies differs greatly from working with other businesses or consumers. Due to having to deal with bureaucracies, business deals tend to move much slower than in other sectors. eCommerce companies can bid on government contracts, the same as other companies. Unlike many B2C transactions, however, many government agencies will not go directly to an eCommerce website and place an order.

Governments are more likely to place orders directly and quickly if the cost is low and the service is uncomplicated. An example of B2G eCommerce would be if a local government agency places an order directly from an online store for a part to repair a piece of equipment.

eCommerce Business Models: Business to Business to Consumer (B2B2C)

In B2B2C eCommerce, one business sells products, services, or goods to another company. The receiving business then sells to a consumer. An example of a B2B2C arrangement is when a wholesale distributor sells merchandise to retail stores that then sell the merchandise to consumers. The B2B2C model comprises three actors: the first business (the business of product origin), an intermediary, and the end user or consumer.

There are several different ways the B2B2C model can be used in eCommerce. For example, a company could partner with another company to promote its products and services, giving the partner a commission for each sale.

b2b2c_business_model_ecommerce_tablet_woman

The primary advantage of the B2B2C business model for eCommerce companies is the acquisition of new customers. This is an important consideration for new eCommerce companies that need a way to grow their customer base rapidly.

eCommerce Business Models: Consumer to Business (C2B)

Typically, commerce strategies are framed from the business’s perspective to start. However, models that start with consumers, including the consumer to business (C2B) model, are gaining popularity.

In the C2B eCommerce business model, individuals sell goods and services directly to companies. A common example are websites that allow individuals, such as contractors or freelancers, to share work or services they’re skilled in. Often, businesses will put in a request or a bid for that person’s time and will pay the person through that platform.

One of the most recognizable examples of a C2B business is Upwork , a freelancing platform that connects organizations directly with talent. Called a “marketplace for work,” Upwork gives businesses the ability to find and source project support, ranging from software development and content creation to UX design and even financial needs such as bookkeeping or filing tax returns.

A newer C2B eCommerce example is that of influencer marketing platforms such as Upfluence or GRIN . Similar to Upwork, both of these platforms connect businesses with individuals selling services. However, in this case, people are ultimately selling the ability to expand a brand's reach and visibility through promotion across their social media networks.

eCommerce Business Models: Consumer to Consumer (C2C)

Another eCommerce business model is consumer to consumer (C2C). The rise of digital commerce has turbocharged C2C, with companies such as eBay, Craigslist, and Esty offering notable C2C eCommerce marketplaces.

In C2C eCommerce, consumers sell goods or services directly to other consumers. This is most often made possible by third-party websites or marketplaces that facilitate transactions on behalf of buyers and sellers.

These eCommerce marketplaces allow smaller businesses, or even hobbyists, to sell their products at their own pricing without maintaining their own online storefront.

Top Five Delivery Frameworks for Your eCommerce Business

Once you determine which model best fits your business, the next step is to identify the delivery method that will meet your needs and requirements. After all,, only some businesses manufacture their own products or maintain their own inventory and warehouses.

Here are five of the most common approaches businesses are using today:

1. Drop Shipping

Drop shipping is an order fulfillment method in which a business’s products are stocked, packaged, and shipped by a third-party supplier.

With drop shipping businesses, the team that stands up the storefront doesn’t have to worry about managing inventory, stocking warehouses, or handling shipping. Instead, they can focus on their front-end customer experience and building their customer network.

One of the biggest caveats to this approach that you need to consider is that your business will have absolutely no control over the supply chain. If products arrive damaged or late, or the quality is lower than expected, it will reflect poorly on your brand. While the onus is on the drop shipper to deliver, you’re the one that is in direct contact with the end consumer and ultimately responsible for handling support requests and managing the relationship.

2. Subscriptions Services

With a subscription model, you commit to continue sending your products to customers over an extended period at consistent, predetermined intervals. There are different types of subscriptions , such as product discovery or unlimited services, so pricing, billing, and account management will depend on your business, your products, and your customer’s consumption behaviors.

Take ButcherBox , for example. ButcherBox is a subscription company that sends consumers farm fresh, organic meat and seafood products monthly. Customers can pick from a list of curated boxes or customize their own and can choose from different box sizes that will send higher or lower quantities of food.

Food is a category of consumer goods that tends to perform well with subscriptions, along with fashion, beauty, or even pet products.

3. Wholesaling

Businesses that leverage wholesaling manage all parts of delivery aside from the manufacturing of the product. With wholesaling, you order goods directly from the supplier and are responsible for warehousing, inventory management, stocking, tracking customer orders, and shipping. Wholesale eCommerce is most common in the B2B space, but can also be leveraged as part of a B2C eCommerce strategy.

4. Private labeling

In private labeling, a business will hire a third-party manufacturer to create products based on their own unique ideas and designs. Private labeling will save you from having to build your own factory and manufacture your products while also giving you exclusive rights to sell your own goods.

Once your goods are manufactured, you can either have the manufacturer ship directly to the customer, to an online marketplace, or back to you for you to handle. Initial costs can vary, so private labeling is best for brands with resources and specific product designs or ideas.

5. White Labeling

With white labeling, you brand and sell a product under your own name and logo, but it’s manufactured and purchased from a third-party distributor.

White labeling is common in the fashion and health industries, particularly with cosmetics, essential oils, and companies that sell CBD online.

White labeling can boost your brand visibility, keep you from having to manufacture your own products and allow you to take advantage of the knowledge and expertise of the distributor.

what is a business model in e commerce

Want to Learn More About the Top eCommerce Solutions?

Check out our guide comparing the top 4 eCommerce software solutions.

How Should You Choose Your eCommerce Business Model?

Now that you’ve familiarized yourself with various eCommerce business models, product management, and delivery methods, you can start the process of choosing your model. As you choose an eCommerce business model, you should:

  • Understand your customer: Who are they? What are their buying habits and purchasing behaviors? What are their pain points? Building your ideal customer profile (ICP) with this information is important to choosing the right eCommerce business model.
  • Understand your value proposition: What makes you different, and in what areas do you beat the competition? Is it your pricing, customer service, or product selection? Also, be honest about what you don’t do well. Knowing your strengths and weaknesses is vital to your business strategy. Being honest about them with potential customers will build trust and brand loyalty.
  • Create a strategy for selling your products: Sell your product in a way that makes sense for your customers. For example, if you create your own products, then you’ll probably want to consider wholesale or a subscription service. If you’re selling someone else's goods, you’ll need to focus more on building your brand and customer base.

Choose the Best eCommerce Business Model for Your Business with Elastic Path

Starting an eCommerce business can be an exciting and lucrative venture, but choosing the right business model can be challenging. First, you need to consider your target audience’s needs and preferences and choose the best model to support your target market.

Once you’ve identified your target market and the correct model needed to serve your customer base , you can focus on building and optimizing your eCommerce infrastructure and marketing tactics to fine-tune your business and maximize revenue.

Getting eCommerce right is essential but difficult. If you need support in deciding between aB2B, B2C, or B2B2C strategy, we’re happy to help. Talk to one of our experts today to learn what type of eCommerce business model is best for your business.

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10 Types of Ecommerce Business Models That Work Right Now

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Darren DeMatas

November 27, 2023

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In addition to receiving commissions generated through affiliate marketing, we are able to fund our independent research and reviews at no extra cost to our readers. Learn more.

Ecommerce business models of all types are thriving. Sales from online stores are expected to increase 385% this decade.

It’s easy to get caught up and excited in the latest ecommerce trends , but unless you know the fundamentals, you’ll hit a profitability wall without knowing it.

A booming ecommerce business takes intuition, knowledge of your market, a solid business plan , and careful research into products and business models. But one of the biggest hurdles most newcomers to the space face is easy to solve. Many would-be ecommerce business owners just don’t know how ecommerce businesses are set up and what different types of ecommerce are available to them.

If you want to ease into an ecommerce juggernaut, I’d suggest you start a hybrid ecommerce, affiliate store. More on that later.

Types Of Ecommerce Business Models

You’ll need to familiarize yourself with each type of ecommerce model before you start your ecommerce business :

You’ll also need to identify an ecommerce platform that suits your preferred business model’s needs. In this post, I’ll walk you through the jargon.

Major Ecommerce Business Classifications

Electronic commerce encompasses all online marketplaces that connect buyers and sellers. The internet is used to process all electronic transactions.

The first thing to think about is the type of business transaction you’re going for. When you think about how you want to sell online, who do you see yourself selling to? Is your business B2B, B2C, C2C, or C2B?

Do you have an idea for a type of ecommerce business that you’ve been thinking about for a while? Do those acronyms make your head spin? Let’s take a look at the most common ways online transactions occur or you can check out a ton of these ecommerce business examples to understand the type of business you’re going after.

B2B: Business to Business Ecommerce

A business-to-business (B2B) model focuses on providing products from one business to another . While many ecommerce sites in this niche are service providers, you’ll find software companies, office furniture and supply companies, document hosting companies, and numerous other ecommerce business models under this heading.

B2B: Business to Business Ecommerce

B2B ecommerce examples you may be familiar with include the ExxonMobil Corporation and the Chevron Corporation, Boeing, and Archer Daniel Midlands. These businesses have custom, enterprise ecommerce platforms that work directly with other businesses in a closed environment. A B2B ecommerce business typically requires more startup cash.

B2C: Business to Consumer Ecommerce

The B2C sector is what most people think of when they imagine an ecommerce business. This is the deepest market, and many of the names you’ll see here are known quantities offline, too. B2C ecommerce sales are the traditional retail model, where a business sells to individual online shoppers, but buying is conducted online as opposed to in a physical store.

B2c: Business to Consumer Ecommerce

Examples of B2C businesses are everywhere. Exclusively online retailers include Newegg.com, Overstock.com, Wish, and ModCloth, but other major B2C model brick-and-mortar businesses like Staples, Wal-Mart, Target, REI, and Gap.

C2C Ecommerce

B2B and B2C are fairly intuitive concepts for most of us, but the idea of C2C is different. What does a consumer-to-consumer ecommerce business look like?

Consumer To Consumer Ecommerce

Created by the rise of the ecommerce sector and growing consumer confidence in online business, these ecommerce websites allow customers to trade, buy, and sell items in exchange for a small commission paid to the site. Opening a C2C site takes careful planning.

Despite the obvious success of platforms like eBay and Craigslist, numerous other auction and classified sites (the main arenas for C2C) have opened and quickly closed due to unsustainable models.

C2B: Consumer to Business Ecommerce

C2B is another model most people don’t immediately think of, but that is growing in prevalence. This online shopping business is when the consumer sells goods or services to businesses, and is roughly equivalent to a sole proprietorship serving a larger business.

C2B: Consumer to Business Ecommerce

Reverse auctions, service provision sites like UpWork, and several common blog monetization strategies like affiliate marketing or Google AdSense also fall under this heading.

Government / Public Administration Ecommerce

The models listed above are the primary ecommerce retail structures, but they aren’t the only ones. Other types involve government/public administration conducting transactions with businesses or consumers.

  • B2G (also called B2A) , for businesses whose sole clients are governments or type of public administration . One example is Synergetics Inc. in Ft. Collins, Colorado, which provides contractors and services for government agencies.
  • C2G (also called C2A):  typically individuals paying the government for taxes or tuition to universities.

Two sectors that are closed for entrepreneur owners but are growing include G2B for government sales to private businesses, and G2C, for government sales to the general public.

Types Of Ecommerce Business Revenue Models

The next most important thing to think about is how you want to handle inventory management and sourcing products. Some people like the idea of making their own products and others hate the idea of their garage full of boxes.

1. Dropshipping

The simplest form of ecommerce, drop shipping lets you set up a storefront and take the customers’ money through credit cards or PayPal. The rest is up to your supplier. This frees you from managing inventory , warehousing stock, or dealing with packaging, but there are disadvantages. For example, quality control.

How Dropshipping Works

If your sellers are slow, product quality is lower than expected, or there are problems with the order, it’s on your head (and in your reviews).

Many dropshippers use Shopify and Spocket . Its quick and inexpensive to set up. A popular model is to set up a quick store and drive traffic with Facebook Ads. Margins are thin and if you can squeeze out some profit here, more power to you. I’m holding off on drop shipping for now, but you can make money with it.

2. Wholesaling and Warehousing

Wholesaling and warehousing ecommerce businesses require a lot of investment at the start – you need to manage inventory and stock, keep track of customer orders and shipping information, and invest in the warehouse space itself.

How Retail Works

DollarDays is an online wholesaler with a massive product catalog that includes more than 260,000 products. They employ a key strategy for retailers in this space – by offering case prices AND piece prices, they can sell to the general public and to retailers. This gives them a higher profit margin than a strictly wholesale model.

Solutions For Wholesalers

Wholesale businesses are all about volume. You’ll need to push products out to eBay, Amazon, Google, etc. BigCommerce includes all this in their Basic plan for $29 month. No tinkering needed. If you have dev skills, you can use X-Cart .

3. Private Labeling and Manufacturing

If you’ve got an idea for the perfect product, but don’t have the cash or desire to build your own factory, this might be the right business model for you. Companies that manufacture products offsite for sale send the plans or prototypes to a contracted manufacturer who produces the product to meet customer specifications and can either ship directly to the consumer, to a third party such as Amazon, or to the company selling the final product.

How private labeling works

On-demand manufacturing allows you to quickly change suppliers if you encounter problems with product quality. The startup costs are minimal, and if you’re interested in potentially opening your own production facilities later, this is a good way to test a new product or concept.

  • The Complete Guide To Finding The Best Private Label Manufacturers
  • 29 Private Label Product Ideas to Kickstart a $100K+ Brand

4. White Labeling

White labeling is similar. You choose a product that is already successfully sold by another company, but offers white label options, design your package and label, and sell the product. This is common in the beauty and wellness industries, but more difficult to encounter in other niches.

How White Labeling Works

One problem with white labeling is demand. You’re stuck with whatever you order, and most of these companies set a minimum production quantity. If you can’t sell it, you’ll have to live with it. Consider this option when you’re willing to work full time on your business and know your product is in demand.

A common type of white labeling is Print On Demand. Read more about how to start a print on demand business .

5. Subscription

One of the most popular and successful pure ecommerce brands is the Dollar Shave Club. Other examples of subscription services include Stitch Fix, Blue Apron, and Nature Box. On the local level, community-supported agriculture boxes are popular.

These companies rely on a subscription model that delivers customers a box of products at regular, scheduled intervals. Subscription companies have relatively reliable income streams and can easily incentivize customers to purchase additional subscriptions or encourage their contacts to subscribe.

Picking the right products and niches can be difficult . Successful subscription boxes tend to fall into a small handful of product categories: health and grooming, beauty, fashion, and food.  Outside of these areas, few subscription companies thrive.

Recurring Online Billing Software

I love the idea of a subscription based e-commerce model. Both Shopify and BigCommerce need additional, paid apps for subscription based ecommerce. So you’ll need something like WooCommerce Subscriptions (WordPress) or X-Cart to handle this.

  • 21 Product Research Tips To Uncover Legit Ecommerce Market Opportunities
  • How To Start Your Own Clothing Line (Tips From 14 Fashion Pros)
  • How to Sell Your Successful Ecommerce Business
  • How to Sell A Shopify Store (Free Guide)

What Model Fits Your Idea Best?

Now that you know what ecommerce businesses , product options, platforms, and business classifications exist, you’re ready to get started. Take a look at your business plan.

No matter what eCommerce business model you choose, chances are you are going to need outside funding at some point in order to scale your business . Funding solutions like  Payability  specialize in eCommerce businesses and offer both accelerated daily payouts when marketplaces pay on terms and capital advances based on future eCommerce sales.

If you found this article useful, please give it a share.  Keep reading the Ecommerce CEO blog for tips to help you succeed in ecommerce, from choosing your online platform to marketing your products and site. Maybe you want to know how to find your niche.

If there’s a topic you would like to see covered that you don’t see in our archives, leave a comment below.

What Is The Most Popular Type Of E-Commerce?

Business-to-consumer (B2C) is the most common type of ecommerce business model. This type of business is what most people generally think of when they imagine an ecommerce company. A B2C company sells its products to end users rather than manufacturers or other businesses.

What Kind Of Online Business Is Most Profitable?

Some types of online businesses that have been known to be profitable include e-commerce stores selling high-demand products, software-as-a-service (SaaS) companies offering subscription-based services, affiliate marketing websites promoting popular products or services, and online education platforms offering specialized courses or certifications. It’s worth noting that success in any online business requires a solid strategy, efficient execution, and continuous optimization based on customer feedback and changing market trends.

Which Hosting Company Should I Choose For My Ecommerce Website?

There are many hosting companies to choose from, and the best one for your ecommerce website will depend on your specific needs and budget. Some popular options for ecommerce websites include: 1. Shopify 2. Wix 3. ShopWired 4. BigCommerce Ultimately, the best hosting company for your ecommerce website will depend on factors such as your budget, website traffic, security needs, and preferred platform. It may be helpful to do some research and compare different options before making a decision.

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what is a business model in e commerce

6 different ecommerce business models you should be aware of

Learn the different types of ecommerce business models before building your business plan. Your chance of success is knowing which model is best for you.

what is a business model in e commerce

Choosing and applying the right ecommerce business model to your online store might be a bigger challenge than you thought. Especially if you’re new to the industry. Your greatest chance of success starts with knowing which model best fits your target niche, resources, and capabilities. Let’s take a look at the 4 major ecommerce classifications and 6 proven ecommerce business models.

People mainly still think of the B2C (business-to-consumer) private label model — selling privately branded retail products to individuals — when we talk about ecommerce. But ecommerce has more options than we realize. 

Here are 4 major ecommerce classifications and 6 proven models to consider before making a plan. 

4 major classifications of ecommerce

Let’s take a look at the 4 major classifications of ecommerce.

1. Business-to-business (B2B)

Business-to-business (B2B) ecommerce describes online transactions between businesses. Organizations involved in the B2B model are mainly wholesalers, manufacturers, and distributors. Despite not being the most prominent form of ecommerce, the global B2B ecommerce market is projected to reach 6.7 trillion USD by 2020 .

Here are 3 questions to ask yourself before launching a B2B business:

  • Does your target market prefer bulk ordering?
  • Do your clients require specific sizes, materials, or other specifications?
  • What are your competitive advantages? 

Potential competitive advantages can be uncovered by asking yourself more questions about your business model, including:

  • Do you control the manufacturing? 
  • Can you offer competitive pricing while maintaining efficient ROI?
  • What are your inventory and supply chain management capabilities?

2. Business-to-consumer (B2C)

B2C ecommerce is a more traditional ecommerce model that most are familiar with. In B2C, online retailers market and sell products directly to end consumers. While B2B can be more complex, B2C business is as simple as ordering a book or camera online. 

B2C online retailers serve a wide audience and prioritize modern marketing and sales strategies like ads-based marketing, influencer marketing, and social media. B2C ecommerce business owners spend more time on optimizing traffic, promoting campaigns, and sales conversions than on negotiating quotes and terms or managing order production and fulfillment.

3. Consumer-to-business (C2B)

C2B is less well-known and intuitive than B2B and B2C. In the C2B model, individuals (consumers) sell products or services to a business. 

Most typical C2B businesses are freelancer platforms like Upwork and Fiverr . In this digital and social age, influencer-matching marketplaces like Ifluenz are on the rise as new, innovative forms of C2B.

Ifluenz's website

4. Consumer-to-consumer (C2C)

C2C ecommerce businesses facilitate transactions between consumers. In C2C platforms, individuals can sell, buy, and exchange goods or services. Consumer-to-consumer connecting platforms earn profits by charging listing and transaction fees.

Unlike B2B and B2C, C2C extensively deals with a third-party business to facilitate transactions, protect consumers, and manage quality control. 

Since the early days of the Internet, Amazon, eBay, and Craigslist have been the largest C2C ecommerce websites in the world. Recent innovators like Depop are taking advantage of social media to expand their reach.

Depop's app homepage

Shape your customer's experience every step of the way, and build a modern ecommerce website — all without writing a single line of code.

6 ecommerce business models growing in 2021

Once you’ve decided on a category, the next thing to tackle is choosing an ecommerce model for your business. The last few decades have seen a lot of ecommerce startups rising and falling. 

Here are 6 different types of ecommerce business models:

1. Private label

Many new ecommerce entrepreneurs have great product ideas but no internal resources or capacity to manufacture products themselves. So they order from manufacturers and then label, market, and sell products under a private label. 

Recent projections suggest the ecommerce private label market will quadruple in the next 5 years to meet growing demands. Here are 2 of the most convincing reasons that make private label a solid choice: 

  • Private-label products are developed, branded, and sold by one company, separating it from competitors. Private-label brand owners own the design, specifications, production technique, and have exclusive rights to sell under a private brand. Since they’re the only supply source, private labels with good marketing can create a demand hype and charge premium prices 
  • Private-label products typically enjoy very high profit margins. Brand owners take control of the manufacturing and operation costs so they can minimized the cost of goods sold (COGS). And since they’re the only sellers in the market, they can make strong margins from premium prices

There are some roadblocks and risks to consider for private label ecommerce businesses: 

  • Finding the right private label manufacturers to collaborate with is a challenge. To minimize the cost per unit, many entrepreneurs travel halfway around the world to developing countries like China and Vietnam. They pay a lot of upfront capital to order large batches and lower per-unit costs
  • Manufacturers can’t guarantee defect-free batches, even when a prototype is perfect, so running and managing quality control is necessary to avoid expensive problems
  • Selling branded products online that are only sold by one vendor limits customer access 

2. White label

Like the private-label model, white label retailers apply their brand names and resell generic products purchased from a supplier.

White-label businesses are free from the management of manufacturing and quality control, but deal with extensive competition. White-label vendors control package design, but not product specifications or quality. Since any reseller can sell these products, competitors hardly have an edge in terms of unique selling points and use marketing strategies and distribution channels to differentiate themselves.

Another obstacle white-label business owners deal with is inventory management. Most suppliers set a minimum order quantity to achieve economies of scale by increasing production. As a reseller, understanding the demand of your white-label products is critical. Mismanaging inventory can leave white labels stuck with large batches of unsold inventory. 

3. Dropshipping

In recent years, dropshipping has emerged as a genius retail fulfillment model for ecommerce beginners to launch with little to no capital. Dropshipping allows businesses to market and sell products online without stocking inventory. As orders are placed, dropshippers purchase items from suppliers who then ship products directly to customers.

The benefits of the dropshipping ecommerce model are considerable:

  • Dropshipping businesses don’t need to pay for warehouse space, order or manage stock, pack or ship products, track inventory, or handle returns
  • Dropshippers can start with a small budget and scale up as they’re ready with little financial risks
  • Dropshippers don’t have to worry about manufacturing or inventory and fulfillment management and can invest resources into site design, customer support, and marketing and sales strategies

Dropshipping risks include:

  • With no product control, a bad supplier can burden customer-support teams and damage the trust and credibility of a business
  • While the supplier manages the fulfillment process, the business owner still needs to deal with delivery tracking issues 
  • Since anyone can start a dropship business, the competitiveness is fierce. Low prices and large advertising and Google SEO budgets can mean low profit margins

Dropshipping isn’t a stress-free ecommerce model — it comes with several complexities to plan for. But the obvious advantages offer opportunities for new, ambitious, online entrepreneurs to start from zero and make something big.

4. Print-on-demand

The print-on-demand model is similar to dropshipping — businesses sell custom designs on a variety of products like t-shirts, hoodies, leggings, mugs, phone cases, and canvases. When an order is placed, a third-party manufacturer prints the selected design on a product, packs it up in branded packaging, and delivers directly to the customer. 

Dropshipping and print-on-demand models share common benefits:

  • Up-front capital is not required making it a business with low startup costs . Print-on-demand businesses only pay fees to third-party suppliers as orders are shipped
  • Inventory management is taken care of and orders are automated by professional third-party printing suppliers like Printify and Printful ‍

printify's website

To earn an edge in this increasingly competitive market, you’ll need strong graphic design skills, excellent marketing strategies, and top-notch customer support. ‍

Lovimals and My Face Socks are examples of successful, fast-growing print-on-demand websites.

5. Subscription service

Imagine you’re a busy professional, short on time — a meal delivery service that ships to your front door might be exactly what you’re looking for. The beauty of and demand for convenience has given rise to the fast-growing subscription-service ecommerce revenue model.

By definition, a subscription business model allows customers to subscribe to a service for a set period of time, typically monthly or annually. When the subscription period expires, customers can cancel or renew, enjoying convenience and savings on repeat orders.

This model has advantages that make it tempting as an ecommerce venture: 

  • Owners can reduce order abandonment rates and maintain high customer retention and loyalty
  • Owners can plan inventory and delivery in advance 
  • Owners can enjoy high margins and lower inventory risks

Healthy Surprise is an example of a food subscription service websites. Other potential products for a subscription model are books, videos, training courses, and consumer goods that need to be replaced regularly like electric toothbrush heads. 

6. Wholesaling

As the name suggests, wholesaling is a business model where an ecommerce store offers products in large quantities at discount rates. Wholesaling used to be mostly a B2B business practice. But thanks to the internet, anyone can offer wholesale as a C2B or B2C practice.

Wholesale in ecommerce companies is quickly rising. Take for example Beard & Blade doubling their revenue in the last 2 years and Laird Superfood increasing their annual revenue 550% .

Securing business partners for wholesale ecommerce requires tremendous effort in both traditional and modern sales channels like telesales, trade shows, advertising, and influencer marketing.

Choose the right ecommerce business model

Start your decision-making process by asking yourself some important questions: 

  • Who is your target market?
  • What do you want to sell? 
  • How much can you invest in your startup?
  • What are you capable of?
  • How do you want to position your business in the short term and long term?

Understanding the basics is important, but planning and innovation will help you stand out and scale quickly in today’s competitive ecommerce industry.

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Ecommerce Business Models: Impact, Types & Examples

27 November, 2023

e-commerce-business-models

Last updated on 27 November, 2023

Written by Content Team

Ecommerce Business Models: Impact, Types & Examples in 2023

Explore the impact of e-commerce on the business landscape. Explore diverse ecommerce business models with real-world examples, from B2C giants to innovative D2C approaches.

Table of contents

Overview of Ecommerce Business Model

Unlocking the ecommerce mystery: a sneak peek into business models, types of ecommerce business models: exploring the diversity.

  • B2C (Business to Consumer)
  • B2B (Business to Business)
  • C2C (Consumer to Consumer)
  • Subscription-based Model
  • D2C (direct-to-consumer)

The Impact of Ecommerce Business Models: Shaping the Future

Ever wonder how you can access a global marketplace and have goods and services delivered directly to your door with only a few clicks on your smartphone? Along with revolutionizing communication, the internet's development has also completely changed how businesses are conducted.

Electronic commerce—abbreviated e-commerce—has ingrained itself into our everyday existence. The ease of online shopping is unparalleled, whether it be for clothing or groceries. Yet, have you ever given any thought to the different business strategies that underpin these online transactions? What is the working mechanism of these platforms, and how do they affect our purchasing habits?

Let's dive into the intricate world of ecommerce business models, exploring the types of ecommerce business models and real-world examples of ecommerce business models that have reshaped the way we buy and sell.

Ecommerce has evolved beyond a passing fad to become a way of life. Before we delve into the intricacies of ecommerce business models, let us first deconstruct the phrase. E-commerce is defined as the buying and selling of goods or services via the Internet. E-commerce ranges from small artists selling handcrafted items to retail behemoths offering a wide choice of things.

1. B2C (Business to Consumer)

This is the most typical business model in which companies offer goods or services to customers directly. Consider your go-to app for ordering takeout or your preferred online clothes retailer. With its products, the company is attempting to connect with you, the customer.

Example: Remember the last time you ordered a new gadget from an online store? That's a classic B2C transaction, where the business sells directly to you.

The retail giant Amazon is a classic example of a B2C model. From electronics to books, Amazon connects consumers with a vast array of products, offering a seamless shopping experience with just a click.

2. B2B (Business to Business)

In this model, businesses sell products or services to other businesses. It's like a digital handshake between companies, facilitating trade on a larger scale.

Example: If you own a small business and source your raw materials online, you're part of the B2B ecosystem.

Alibaba operates on a B2B model, connecting businesses globally. It provides a platform for manufacturers and wholesalers to reach a diverse range of buyers, fostering international trade.

3. C2C (Consumer to Consumer)

This model involves consumers selling directly to other consumers. It's like a digital garage sale, where individuals can buy and sell second-hand items.

Example: Have you ever sold an old smartphone to someone online? Congratulations, you've participated in a C2C transaction. When it comes to the C2C model—which allows people to buy and sell products directly to one another—Ebay was a pioneer. It resembles an online marketplace where anyone can sign up to sell goods.

4. Subscription-based Model

Many ecommerce platforms offer subscription services, where customers pay a recurring fee to access products or services regularly. It's like having a curated selection of goods delivered to your doorstep every month.

Example: Consider your preferred streaming provider. You receive unrestricted access to a library of entertainment in exchange for a monthly subscription.

Blue Apron, a meal kit delivery service, operates on a subscription-based model. Customers subscribe to receive pre-portioned ingredients and recipes, making cooking at home convenient.

5. D2C (Direct to Consumer)

This model has gained prominence, especially among emerging brands. It involves companies selling their products directly to consumers, cutting out middlemen, and creating a more personalized experience.

Example: Direct online purchases of sneakers from a brand constitute direct-to-consumer (D2C) transactions.

Warby Parker, an eyewear brand, exemplifies the D2C model . By selling directly to consumers, they offer affordable and stylish eyeglasses, challenging the traditional retail eyewear market.

In addition to changing the way we purchase, ecommerce business models have also changed entire industries and economies. The marketplace has become dynamic and competitive due to the variety of business strategies and the ease of Internet transactions.

Examine the effects on conventional brick-and-mortar companies. A lot of people had to change or risk going out of style. A new era of brand-consumer relationships has emerged as a result of the disruption of traditional distribution channels, particularly with the direct-to-consumer model.

New brands now have the ability to communicate directly with their target market, resulting in a more customized and interesting experience.

Moreover, the subscription-based model has changed the way we consume goods and services. From streaming platforms to monthly subscription boxes, consumers now have the flexibility to tailor their experiences, creating a shift from ownership to access.

E-commerce now plays a crucial role in how businesses run and how customers make purchases in the modern business environment. The convenience, worldwide reach, and abundance of data-driven insights that e-commerce offers are clear indicators of its effect.

As technology continues to advance and consumer expectations evolve, the e-commerce landscape will undoubtedly undergo further transformations. Businesses that embrace these changes, stay agile, and leverage the appropriate e-commerce model for their objectives will be well-positioned to thrive in the dynamic and competitive online marketplace.

Ready to revolutionize your e-commerce journey? Explore new possibilities with GoNukkad , your trusted partner, for seamless and tailored e-commerce solutions. Visit GoNukkad and embark on a digital transformation that drives success in the evolving world of online commerce.

FAQs Related To Ecommerce Business Model

Q. What is B2C e-commerce?

A. B2C e-commerce involves businesses selling products directly to individual consumers. Amazon is a prime example, offering a vast array of products globally.

Q. How does C2C e-commerce work?

A. C2C allows individuals to sell directly to other consumers. eBay, a classic example, facilitates online auctions and peer-to-peer transactions within its platform.

Q. What characterizes a D2C model ?

A. D2C, or direct-to-consumer, bypasses traditional retail channels. Brands like Warby Parker sell directly to customers, maintaining control over brand image and customer relationships.

Q. How do marketplace e-commerce platforms function?

A. Marketplace platforms like Etsy bring together multiple sellers and buyers on one platform, acting as intermediaries. Etsy connects sellers offering handmade and unique items with a global audience.

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e-commerce-business-models

E-Commerce Business Models In A Nutshell

We can classify e-commerce businesses in several ways. General classifications look at three primary categories:

  • B2B or business-to-business, where therefore a business sells to another company.
  • B2C or business-to-consumer, where a business sells to a final consumer.
  • C2C or consumer-to-consume, or more peer-to-peer where consumers sell to each other.

Rather than getting bogged down in too many classifications, we’ll very practically look at the revenue streams of several successful e-commerce businesses, and see if we can borrow any of those elements and apply them back to our e-commerce business model .

Table of Contents

Amazon hybrid model

amazon-business-model

What can we learn from Amazon? Amazon is an interesting example, as it had the time to evolve over two decades.

So from Amazon, we can get what worked and see if that might work in building up our own e-commerce platform.

Amazon e-commerce, is structured around few lines, that make it solid:

Sell your own products to kick off the e-commerce

You might not know, but Amazon also sells a wide variety of brands that are owned by Amazon .

Therefore, over the years, the company internalized some of the successful products on the platform so it could gain better control over sourcing and perhaps customer experience.

Therefore, if you’re kicking off e-commerce, think of some simple products you can develop and start to sell to kick off the platform. And from there expand on third-party products

Host other physical stores that need a digital presence

In addition to that, Amazon hosts a wide variety of third-party products. Therefore, Amazon is an e-commerce platform, hosting other small e-commerce brands.

Here it’s important to offer a great hosting platform that works out well, and it’s smooth. And from there, you can build other revenue streams.

Transaction-based: Most of Amazon’s earnings as e-commerce is based on getting a commission on the transaction happening on the platform.

At the same time, Amazon also offers some related services. Thus, once the e-commerce has been kicked off, you can start offering some related services.

Build services on top of your e-commerce

Over the years, Amazon developed its fulfillment part, which comprises an inventory of products for third-party sellers, and shipping. When third-party e-commerce jin into Amazon fulfillment services, they don’t have any more inventory and delivery expenses, as they outsource them to Amazon.

However, they give up a good chunk of revenues, as Amazon will collect more from. the transaction.

When kicking off the e-commerce platform, and you have a critical mass of sellers, think of all the ways you can make their life easier (analytical tools, shipping tools, and so forth).

This will make them stick longer, and perhaps also create an additional revenue stream for your business.

Build membership services to abate shipping costs for customers

Building up also a related subscription-based service, on top of e-commerce, can be a great idea, to increase repeat customers, by making it more convenient to shop on e-commerce, by, for instance, abating the shipping costs.

That is what Amazon achieved with Prime, by offering a playlist of movies and entertainment (similar to Netflix).

You don’t have to go that far. All you need to do is to create a membership program, that gives access to special discounts and perhaps free delivery (we’ll see how Walmart has successfully implemented that).

Offer premium listings, or paid visibility

Once you do have kicked off the e-commerce you can also have it, in part subsidized, by other businesses selling their products. For instance, you can sell more visibility on e-commerce just like Amazon does. Indeed, Amazon e-commerce also has a successful advertising line, that enables better product placement and visibility.

eBay complex fee-based model

ebay-business-model

eBay is also a great example, as the company makes money primarily through fees collected on successfully closed sales on eBay and StubHub.

In addition to that, eBay also built a classified ads platform and a few other seller services.

eBay is a classic example of an e-commerce platform, that enables people to sell any sorts of things. The company has a compelling value proposition , which the company expresses in:

  • Easy listing, with a quick and simple set up.
  • Free listing, as sellers, can have up to 50 items for free every month, and only pay when they sell.

In addition, eBay counts over 170 million buyers and a stable and secure platform.

fees-from-ebay

eBay collects fees in four ways:

Insertion fees as an entry-point

As explained on eBay:

When you list and sell items on eBay, we charge selling fees. There are two main types of selling fees: an insertion fee when you create a listing, and a final value fee when your item sells.

Therefore, the seller has 50 free per month products to feature, and beyond that, the fee for listing in mostly $0.35, but it can vary.

Final value fees to make it compelling to selers to join

In final value fees, the e-commerce platform only makes money if the transaction is closed. On the eBay case, those fees can be 10% or lower.

Listing upgrades as additional option

examples-of-listing-upgrades-from-ebay-website

With optional upgrades like international site visibility, larger photos, bold character, more space to images, and more, listing upgrades can be a great option for sellers and a good way for the e-commerce platform also to subsidize it.

Fees in selected categories and based on selling-volume

Fees are different for certain categories and depending on whether the seller is a low or high volume. Therefore, eBay has a more complex fee structure, built over the years, also based on its experience.

low-volume-seller

Etsy simple fee model

etsy-business-model

Etsy is an incredible example of a two-sided e-commerce platform, also called a marketplace, as it enables smooth interactions between creative and buyers.

etsy-two-sided-marketplace

Etsy has a solid mechanism of category-suggestion when sellers are entering their items on the platform.

Etsy also has a very simple fee structure:

etsy-fee-structure

Etsy made its fee structure straightforward, and broken down in:

  • Listing fee .
  • Transaction and payment processing fee .
  • Offsite ads fee (only. for those who opt-in to Etsy offsite advertising program).

Etsy also offers seller tools to make their presence on the platform more valuable:

etsy-seller-tools

GrubHub bidding system

grubhub-business-model

GrubHub has an interesting business model , comprised of several brands. There are a couple of things worth exploring for GrubHub:

  • The pre-order commissions charged to restaurants as soon as diners place an order on the platform. Therefore, the company generates revenues primarily when diners place an order; this commission is born by restaurants.
  • Bidding revenues: restaurants can choose their level of commission rate, at or above the base rate. A restaurant that pays a higher rate will have a higher prominence and exposure to diners on the platform.

Shopify subscription-based service

shopify-business-model

Shopify is an e-commerce platform, that hosts other sellers’ websites. As such, it has a very simple pricing structure, made of three tiers:

shopify-pricing-tiers

Those pricing tiers are made of a few key elements:

  • Store’s features: store features comprise things like product uploads, support, SSL certificates, professional reports, and more.

shopify-features

  • Shipping: it comprises discounts which are higher for those with the more advanced plans.

shopify-shipping

  • Payment: fraud analysis, credit card rates that decrease with higher-priced packages.

shopify-payments

Additional Case Studies

Walmart Online Marketplace Model:

  • Own Products and Third-party Vendors: Similar to Amazon, Walmart sells its own products and also allows third-party vendors to list and sell their products on its platform.
  • Subscription Service – Walmart+ : A subscription service that offers members free shipping on eligible items with no order minimum, free grocery delivery, and more.
  • Pick Up In-Store: Customers can order online and pick up their items at a local Walmart store, often getting discounts for choosing this option.
  • Advertising: Walmart offers an advertising platform for vendors to promote their products within the marketplace.

Zalando Hybrid Model:

  • Fashion-focused E-commerce: Zalando started as an e-commerce platform focused on shoes but quickly expanded to a full range of fashion products.
  • Partner Program: Brands can join Zalando and sell their products directly, with Zalando handling logistics.
  • Zalando Lounge: A members-only shopping club for flash sales.
  • Pre-owned Section: Allows customers to buy and sell pre-owned fashion.

ASOS Marketplace:

  • Fashion Resale: ASOS Marketplace is a platform for selling vintage clothing and independent brands.
  • Boutique Fees: Independent boutiques pay a monthly fee to list on the marketplace and a commission on sales.
  • Advertising: Boutiques can pay for additional advertising and promotions on the platform.

Instacart Grocery Delivery Model:

  • Delivery Fees: Customers pay a delivery fee for each order or can subscribe to Instacart Express for unlimited free deliveries.
  • Partner Grocers: Instacart partners with grocery stores and earns a commission on each order.
  • Advertising: Brands can pay for premium placement and advertising within the app.

Dropbox Prosumer Model:

  • Freemium Model: Dropbox offers a free version with limited storage and a paid version with more storage and features.
  • Business Subscriptions: For enterprises and teams with additional collaboration tools.
  • Third-party Integrations: Dropbox integrates with third-party apps and can earn referral fees or commissions.

Rakuten E-commerce Model:

  • Online Marketplace: Rakuten operates an online marketplace where third-party sellers can list and sell their products.
  • Rakuten Points: A loyalty program where customers earn points for purchases that can be used for discounts on future purchases.
  • Rakuten Advertising: Brands can advertise their products for increased visibility.
  • Additional Services: Rakuten also offers fintech services, digital content, and more.

Redbubble Artist Marketplace:

  • Artist Sales: Artists can list their designs on products like t-shirts, stickers, and more. When a product sells, Redbubble handles production and shipping, and the artist gets a commission.
  • Promoted Listings: Artists can pay for better visibility in search results.
  • Licensing: Redbubble partners with brands for licensed merchandise, allowing artists to create designs for popular franchises.

Key Highlights

  • Sell Your Own Products to Kick Off E-commerce: Amazon sells its own products alongside third-party products to gain better control over sourcing and customer experience.
  • Host Other Physical Stores That Need a Digital Presence: Amazon hosts third-party brands on its platform, offering a smooth hosting experience and building additional revenue streams.
  • Transaction-Based Revenue: Amazon’s primary earnings come from getting a commission on transactions that occur on its platform.
  • Build Services on Top of E-commerce: Amazon developed fulfillment services for third-party sellers, offering tools to make their lives easier and creating additional revenue streams.
  • Build Membership Services to Abate Shipping Costs: Amazon’s Prime subscription offers convenient shopping with free shipping and access to movies and entertainment, increasing repeat customers.
  • Offer Premium Listings or Paid Visibility: Amazon offers advertising services to sellers for better product placement and visibility.
  • Insertion Fees as an Entry-Point: eBay charges sellers an insertion fee when they create a listing on the platform.
  • Final Value Fees to Make It Compelling for Sellers to Join: eBay earns money through final value fees, collecting a percentage of the transaction when it is successfully closed.
  • Listing Upgrades as Additional Options: Optional upgrades like international visibility or larger photos provide additional revenue opportunities for eBay.
  • Fees in Selected Categories and Based on Selling Volume: eBay’s fee structure varies depending on the category and the seller’s volume.
  • Listing Fee: Etsy charges sellers a fee for listing their items on the platform.
  • Transaction and Payment Processing Fee: Etsy earns money through a commission on each transaction and payment processing fees.
  • Offsite Ads Fee: Sellers who opt-in to Etsy’s offsite advertising program pay an additional fee for promoted listings.
  • Pre-order Commissions: GrubHub charges restaurants a pre-order commission when diners place an order on its platform.
  • Bidding Revenues: Restaurants can choose their commission rate, and a higher rate offers more prominence and exposure to diners on the platform.
  • Subscription Tiers: Shopify offers different pricing tiers with varying features for merchants to commercialize their products.
  • Store Features: The subscription includes store features like product uploads, support, SSL certificates, and professional reports.
  • Shipping: Shopify offers shipping discounts, with higher-tier plans receiving better rates.
  • Payment: Fraud analysis and credit card rates are included, with lower rates for higher-priced packages.

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17 Types of Ecommerce Business Models + Their Pros & Cons

types of ecommerce business

Ecommerce, in its essence, refers to the buying and selling of goods and services using the internet and electronic platforms. 

It transcends geographical boundaries, allowing businesses and consumers to connect and transact on a global scale with unprecedented ease and efficiency. 

From a consumer ordering a pair of sneakers on their smartphone to a multinational corporation sourcing raw materials from a supplier halfway around the world, ecommerce has become a ubiquitous force shaping our daily lives and the global economy.

The Importance of Choosing the Right Ecommerce Business Model

Ecommerce is not a one-size-fits-all proposition. 

Behind every successful online commerce lies a well-thought-out business model. 

The choice of this model can make or break a business. 

It’s akin to selecting the foundation upon which you’ll build your entrepreneurial dreams.

This brings us to a pivotal question: Why is choosing the right ecommerce business type so crucial?

The importance cannot be overstated.

Your chosen model dictates how you interact with customers, source products, generate revenue, and manage operations.

Understanding Different Types of Ecommerce Business

If you’re launching an ecommerce, chances are it will fit into one of these categories. Each category comes with its own advantages and hurdles, and it’s not uncommon for businesses to operate in multiple categories simultaneously.

Regardless of your business’s growth stage or chosen type, Vimmi can empower your business to reach its full potential. Feel free to get in touch with us and we’ll help you succeed!

Here are just some of the many types of ecommerce business models that exist. 

1. B2B (Business-to-Business)

This model involves companies selling products or services to other businesses. Think of it as the transactions occurring between suppliers and manufacturers, or between service providers and corporate clients. B2B ecommerce often involves larger order quantities and specialized products. 

Example: Amazon Business, Aibaba.

2. B2C (Business-to-Consumer)

In contrast, B2C ecommerce revolves around businesses selling directly to individual consumers. 

This is the most familiar type of ecommerce, where businesses sell products or services directly to individual consumers. Examples include online retail stores like Amazon, Walmart, and eBay.

3. C2C (Consumer-to-Consumer)

C2C ecommerce facilitates transactions between individual consumers. Think of online marketplaces like eBay and Craigslist where people list their used items for sale or auction sites where buyers and sellers interact.

4. D2C (Direct-to-Consumer)

Emerging as a powerful trend, D2C ecommerce enables brands to skip the middlemen and sell their products directly to consumers. This model fosters stronger brand-consumer relationships and more control over the customer experience .

5. Consumer-to-Business (C2B)

In this model, individuals or consumers offer products or services to businesses. This can include freelance work, influencer marketing, or user-generated content. Platforms like Upwork and Fiverr are examples.

6. Subscription Ecommerce

Businesses in this category offer products or services on a recurring subscription basis. Examples include streaming services like Netflix, subscription boxes like Birchbox, and software-as-a-service (SaaS) companies.

7. Marketplace Ecommerce Model

Online marketplaces bring together multiple sellers and buyers on a single platform. Customers benefit from a wide array of choices, and sellers gain access to a vast customer base without building their own online stores.

Examples include Etsy for handmade crafts and Alibaba for international wholesale trade.

Online marketplaces like Amazon and eBay create digital bazaars where multiple sellers can list their products.

8. Dropshipping Model

Dropshipping businesses don’t hold inventory themselves. Instead, they partner with suppliers and list their products online. When a customer makes a purchase, the product is shipped directly from the supplier to the customer.

9. Subscription Model

Subscription-based ecommerce services like Netflix and meal kit deliveries offer products or content on a recurring basis. Customers pay a regular fee to access or receive these offerings, ensuring steady revenue for businesses.

10. Niche Ecommerce

These are specialized online stores that cater to specific markets or niches. Examples include online stores that sell only organic and sustainable products or stores focused on a particular hobby or interest.

11. Digital Products and Downloads

Some ecommerce businesses sell digital goods like e-books, music, software, and digital art. These products are typically delivered electronically.

12. Wholesale/Retail Model

This type combines both wholesale and retail operations. Businesses purchase products in bulk at wholesale prices and sell them individually to consumers, typically through online stores.

13. Brick-and-Click

Some traditional brick-and-mortar retailers have an online presence as well. They use ecommerce websites to complement their physical stores and offer customers the option to shop online.

14. Social Commerce

This type of ecommerce takes place on social media platforms. Businesses use social media to showcase and sell their products directly to users, often through integrated shopping features.

15. Mobile Commerce (M-Commerce)

With the increasing use of smartphones, mobile commerce has become prominent. It involves conducting ecommerce transactions through mobile devices, such as smartphones and tablets.

16. Influencer Commerce

Influencer commerce, also known as influencer marketing in the context of ecommerce, refers to a marketing strategy where businesses collaborate with social media influencers or individuals with a significant online following to promote and sell their products or services. This approach leverages the influencer’s credibility, trust, and reach within their specific niche or target audience to drive product sales.

17. Video Commerce

Video commerce is the use of live and pre-recorded video content to promote and sell products or services online.

It is a powerful tool that can help businesses increase sales, improve customer engagement, and build brand awareness.

Video commerce can take many forms, including:

  • Product videos that showcase a product’s features and benefits
  • Live shopping events where viewers can interact with a salesperson in real time
  • Shoppable videos that allow viewers to purchase products directly from the video
  • Virtual try-on experiences that allow viewers to see how a product would look on them

What is Hybrid Ecommerce?

While the primary ecommerce models provide a solid framework, many businesses opt for a hybrid approach. Hybrid ecommerce models blend elements of two or more primary models to suit their unique needs and market conditions. These hybrid strategies can be incredibly flexible and innovative.

For example, a business might start as a B2C online store and later introduce a subscription box service (combining B2C and subscription models). Another example is a D2C brand that decides to expand by opening a marketplace where other complementary products are sold (combining D2C and marketplace models).

Hybrid models enable businesses to diversify revenue streams, reach a broader audience, and adapt to changing market dynamics. They reflect the ever-evolving nature of ecommerce, where creativity and adaptability often lead to success.

Pros and Cons of Different Ecommerce Business Models

Each model offers its unique advantages and challenges, and understanding them is vital for making an informed decision.

B2B (Business-to-Business)

    Pros:

   – Typically involves higher order values.

   – Long-term business relationships can lead to steady revenue.

   – Repeat orders and loyalty can be strong.

   Cons:

   – Longer sales cycles due to negotiations.

   – Limited customer base compared to B2C.

   – Demand fluctuations in the business sector can affect sales.

B2C (Business-to-Consumer)

   pros:.

   – Vast potential customer base.

   – Shorter sales cycles and quick decision-making.

   – Opportunity for building a strong brand directly with consumers.

   Cons:

   – Intense competition in many consumer niches.

   – Smaller order values compared to B2B.

   – High customer acquisition costs.

C2C (Consumer-to-Consumer)

   – Low entry barriers for individual sellers.

   – Access to a broad range of products and services.

   – Opportunities for individuals to monetize their assets.

     Cons:

   – Trust and safety concerns among buyers and sellers.

   – Reliance on the platform for dispute resolution.

   – Limited scalability compared to other models.

D2C (Direct-to-Consumer):

       Pros:

   – Full control over the customer experience.

   – Direct feedback and relationship-building with customers.

   – Opportunity to retain higher profit margins.

    Cons:

   – Requires substantial investment in marketing and branding.

   – May involve logistical challenges if handling fulfillment in-house.

   – Heavier reliance on customer acquisition and retention.

Marketplace Model

   – Access to a broad customer base.

   – Lower marketing costs as customers come to the platform.

   – Opportunity for sellers to focus on product listings.

   – Intense competition among sellers on the same platform.

   – Limited control over branding and customer experience.

   – Platform fees may cut into profit margins.

Subscription Model

   – Predictable recurring revenue.

   – Opportunity to build a loyal customer base.

   – Ability to personalize offerings for subscribers.

   – High customer churn if value isn’t consistently delivered.

   – Initial customer acquisition costs can be substantial.

   – Reliance on continuous innovation to retain subscribers.

Dropshipping Model

   – Low upfront investment in inventory.

   – Wide product selection without the need for warehousing.

   – Scalability and flexibility in product offerings.

   – Thin profit margins due to supplier markups.

   – Potential quality control issues with suppliers.

   – Inventory availability and shipping times are not always within your control.

Wholesale/Retail Model

   – Opportunities for bulk sales and higher profit margins.

   – Full control over product selection and pricing.

   – Brand building and customer loyalty potential.

   – Capital-intensive due to inventory purchasing.

   – Inventory management challenges, including storage costs.

   – Competition with established retailers can be fierce.

Examples of Successes and Challenges of Ecommerce Business Model Implementation

Examining real-world examples of brands businesses that have navigated these ecommerce models can provide valuable insights:

Companies like Amazon (b2c and marketplace), Netflix (subscription), Shopify (supporting various models), and eBay (C2C and marketplace) have demonstrated remarkable success by aligning their chosen models with their target markets and leveraging technology and innovation.

Challenges:

On the flip side, businesses like Groupon (daily deals, subscription) faced challenges with customer retention and changing market dynamics. 

Others, like Toys R Us (wholesale/retail), struggled to adapt to the online retail landscape.

The Importance of Choosing the Right Ecommerce Platform

Selecting the right ecommerce platform is one of the most important decisions that can make or break your ecommerce business. 

Vimmi stands out as the ideal choice for a multitude of reasons. With our proven track record of empowering businesses to thrive in the digital landscape, Vimmi offers a comprehensive suite of tools and solutions tailored to your specific needs. 

Our commitment to innovation, robust customer support, and user-friendly platform ensures a seamless ecommerce experience.

Here are some additional benefits of choosing Vimmi as your ecommerce partner:

  • Scalability : Vimmi can help you scale your ecommerce business as it grows. They have a proven track record of helping businesses of all sizes grow their online sales.
  • Security : Vimmi takes security seriously. They use the latest security technologies to protect your data and your customers’ data.
  • Support : Vimmi offers 24/7 support, so you can always get help when you need it.
  • Eitan Koter

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A Guide to E-Commerce Business Models and Revenue Models

E-commerce business models and the e-commerce store.

The concept of an  e-commerce business model  isn’t new. In fact, Amazon launched its first-ever e-commerce store in 1995. However, the business model has seen exponential growth after a record year in 2020, when retail sales shifted primarily to the online space.

E-commerce is simply the buying and selling of products or services over the internet. The type of e-commerce store you have will vary depending on your approach to your customers, your inventory and your distribution style.

In this article, we are breaking down the diverse types of e-commerce business models so you can choose which will be the right fit for your e-commerce store.

Which Business Model is the Best Fit for your E-commerce Business?

Understanding the e-commerce business model and setting yourself up for success in the beginning is a key for lasting success in the online retail space. It is imperative that you understand your business model, know your target audience and know what structure will best align with your customer’s needs. Before you consider your revenue model and fulfillment options, you need to understand who your customers are and what niche product or service you are providing them.

Business-to-Business

In this business model (B2B), the business sells their product to another business. For example, Chocomize is a streamlined operation that focuses on creating unique corporate gifts that help bring awareness to your brand and satisfy your clients.

Chocomize

E-commerce Revenue Models 

Subscription Revenue Model 

In this revenue model, a company charges an ongoing fee for services provided over a long period of time. Subscription boxes also fall into this category. An e-commerce model where consumers pay a monthly subscription fee and in exchange receive a bundled box full of a variety of items chosen by the retailer. To bring in revenue from this model, you will need a niche product, a target customer and a cost-effective way to source your products. This model is profitable but isn’t for the faint of heart, so be sure to do adequate research before deciding to hop on the subscription box bandwagon.

Sales Revenue Model 

This is the most common business model among users and the profit, as in the name, comes from selling services or products online rather than through a brick-and-mortar only store. There are single brand websites- such as the North Face- that only sell their specific product, or there are marketplaces such as Etsy that have various vendors from different parts of the world selling on their website.

Sales Channels: Direct vs. Marketplace

  Amazon (FBA) 

Setting up an e-commerce business through Amazon

Other Third-Party Platforms

There are other e-commerce store platforms that are gaining popularity. The following is just a sample of the many third-party platforms that are available for different niches in the e-commerce space.

e-commerce business platform

The following are website builders that you can use to build out your e-commerce business. The following three examples are not exclusive to e-commerce.

Setting up an e-commerce business example

Order Fulfillment Options

The e-commerce industry is complex and has many facets that you should consider before you decide which e-commerce business model you want to choose. The following is a quick introduction to the e-commerce industry and its fulfillment options:

Third-party Fulfillment

The third-party fulfillment model is an e-commerce business model where the retailer outsources the fulfilment. This model is different to dropshipping in that a fulfillment house is hired by the business and the warehouse is responsible for collecting from the supplier, keeping the product at their distribution center and then packaging and fulfilling the order.

Dropshipping

The dropshipping model is an e-commerce business model where the business does not have possession of the product they are selling. The store owner holds no inventory and the orders are sent to the manufacturer directly. They are responsible for shipping the item to the customer, not the e-commerce business owner. Dropshipping helps eliminate inventory risk, it takes less time, lowers ongoing costs and you have an immense amount of product flexibility.

In-house Fulfillment

The traditional order fulfillment model is most like that of brick-and-mortar retail. The owner of the business buys the stock wholesale. The business owner then delivers to the consumers directly. The benefits of traditional order fulfilment include lower costs of goods sold, inventory management and brand control. With this model you can be more in control of your stock and you don’t have to highly rely on suppliers. You also do not have to worry about missing items or low quality because you are responsible for this over the supplier before the product reaches your customer. You will spend more time on this model and have more ongoing costs and you do not have as much product flexibility.

Different Target Markets

When assessing your target market for your e-commerce business, you want to make sure you are validating your choice with market research. Start by defining what age bracket you want to target, their gender, location, even income level or education. You also want to always make sure you have a trial run to be able to evaluate whether your specific product or service will be successful in the target market you have chosen. We have laid out different real-world examples of successful e-commerce businesses that have narrowed down their target markets well and why they have found success by doing so.

Real-World Examples of Successful E-commerce Businesses

e-commerce business builds trust through transparency

As an e-commerce business building trust with your customers is a key factor in building success. Samuel Hum weighed in , “Many of us are aware about the  dark side  of the apparel industry, and how little we know about what exactly goes on behind the making of our clothes. The modern consumer  is now more aware, ethically conscious and skeptical. They demand to know more, but most companies probably wouldn’t oblige. And that’s why Everlane’s core narrative of being radically transparent about their business is extremely important and inspirational. They have visual fact sheets  outlining how much everything costs, including how much the brand earns for every shirt and bag”

What You Can Learn from Everlane

You can build trust with your customers through radical transparency. Everlane targets a demographic that is looking to live in a more ethical world. Although your target market may not include those that are hoping for a more sustainable tomorrow, you can still build trust with your customers by being transparent about the products they are buying and the company whom they are purchasing from.

Fashion e-commerce business sample

Asos is the one-stop-shop e-commerce store for all things fashion. From 3 Secrets behind Asos’ Success , “ One factor in Asos’ success is that  they have tailored everything they do to a specific demographic . There are no inconsistencies, no ‘general’ content. Niching down has allowed Asos to create content and adverts that engage their market, turning Asos into a fashion authority for young people.”

What You Can Learn from ASOS

Narrow in your niche. As SaaS founder Sunil Kowlgi said, success comes when you “keep your market focus an inch wide and a mile deep.” Asos have a narrow target market but offer a wide array of products that their customers can choose from- hints why they are gaining the younger audiences attention daily from their fashion revolution.

e-commerce business example

Dollar Shave Club have landed billions of dollars’ worth of success. Nikhil Basu Trivedi wrote that, “The team has worked very hard to launch new products, improve margins, spend money effectively on advertising, and more. But there is one key element to the business that has made it so successful:  Subscription . Dollar Shave Club built a direct-to-consumer subscription service for razors and other bathroom products.”

What You Can Learn from Dollar Shave Club

With the cloud-based world we are living in, people are more and more prone to products with a subscription. Dollar Shave Club capitalized on that opportunity by pairing it with the e-commerce space. The key here? Adapt to your customer base. Not only does the product you are offering matter but so does the ease of delivery and use for your customer.

e-commerce business example

What You Can Learn from Birch Box

If you are looking to create a subscription box, make sure you accommodate the preferences of your target market. The narrower your niche, the easier it will be to satisfy your customer because they will have products in their box that they will use.

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Ecomsay | Legitimacy Unveiled, Truth Revealed

Legitimacy Unveiled, Truth Revealed

6 Types of eCommerce Business Models You Need To Know

Last Updated: May 16, 2022

Are you related to e-commerce business but don’t know the types of eCommerce business models? Stay connected!

Many people know only about e-commerce and its basics but very few of them know the types of e-commerce business models, so in this post, I’ll talk about them.

There are 6 types of eCommerce business models:

  • B2C: Business-to-Consumer
  • C2B: Consumer-to-Business
  • B2B: Business-to-Business
  • C2C: Consumer-to-Consumer
  • B2A: Business-to-Administration
  • C2A: Consumer-to-Administration

Let’s discuss the types of e-commerce with diagrams and examples so you can understand them better.

First, take a look at the infographic and then we’ll talk in detail about them.

Types of ecommerce business models

Now let’s talk about them in more detail.

1. Business To Consumer (B2C)

Business-to-consumer or B2C e-commerce consists of the sale of goods and services to the general public.

In this type, customers or consumers can visit the website and purchase goods online using credit cards.

Business To Consumer Diagram

B2C Example

Let’s say we have a company, and we want to sell our goods or services online through our website or any other online resource, then it can be referred to as the B2C model.

An excellent example of it is Amazon or eBay . We can call their business, Business To Consumer model.

2. Consumer To Business (C2B)

Consumer-to-business or C2B e-commerce consists of the sale of goods and services to the business organization via the website.

In this business model, the consumer creates value, and the businesses consume that value.

C2B is a complete reverse of the B2C model; if we reverse the process of the Business-to-consumer e-commerce model, we can call it the Consumer-to-business model.

Consumer To Business Diagram

C2B Example

For example, a customer places some of their services or products on the website.

If the services or products create value for the business organization, then they order these services or products, but in most cases, services.

Suppose, a customer charge 100$ for a specific service and a business organization need that service because it can help them in some way so that they can order that service.

Whenever the deal is done, they receive services or products, and the customer receives money.

An example of the C2B business model is freelancing sites like Fiverr , Freelancer .

3. Business To Business (B2B)

Business-to-business or B2B takes place between two businesses where one business provides services to other businesses.

The business organization, also known as the manufacturer of the products, sells products to wholesalers, and the wholesaler re-sells them.

Business To Business Diagram

B2B Example

For example, there are two businesses:

  • Business Organization or Manufacturer

A wholesaler goes to the Business Organization’s website or any other online resource and orders products in bulk.

The Business Organization processes the order and supplies the products to the wholesaler.

When the wholesaler receives the products, then the wholesaler can sell those same products at a high price to their customers, and it can be referred to as a business-to-business or B2B model.

An excellent example of it is Alibaba .

  • Importing & exporting products are easy and comfortable, and you don’t have to go physically because you can order the products online.
  • The determination of buyers and sellers is easy.
  • B2B clients order more products than retail clients.
  • You can get the information about the Trade Guides and also make your business successful.
  • Business-to-business sales have a high potential to make more money than business-to-people sales.

4. Consumer To Consumer (C2C)

Consumer-to-consumer or C2C e-commerce takes place between two consumers where one consumer sells an item through an online auction while the other consumer purchases the item by offering the highest bid.

Consumer To Consumer Diagram

C2C Example

For example, consumer 1 wants to sell a car, so he/she can places his/her car on a website like OLX or eBay, while customer 2 wants to buy that car.

So, customer 2 can contact customer 1 and buys the car from him/her.

5. Business To Administration (B2A)

Business-to-administration or (B2A) takes place between companies, public administration, or government agencies.

In this e-commerce business model, there are dealings between companies and public administration using the internet.

Business To Administration Diagram

Government agencies (administration) use central websites to trade and exchange information with various business organizations.

B2A includes different services, and some of them are fiscal measures, social security, legal documents, and other government-related operations.

B2A Example

An excellent example of a B2A model is Accela ; it’s a software company that provides government software solutions and public access to government services for permitting, planning, licensing, public health, and so on.

6. Consumer To Administration (C2A)

The Consumer-to-Administration or C2A e-commerce business model encompasses electronic transactions online between individuals and the public administration.

Consumer To Administration Diagram

The C2A e-commerce model helps the consumers to post their queries and request information regarding public sectors directly from their local governments/authorities.

It provides an easy way to establish communication between the consumers and the government.

C2A Examples

Some of the examples of C2A are disseminating information, distance learning, distribution of information through social security, electronic tax filing, payment of health services, etc.

Wrapping Up!

There’s no doubt that eCommerce is growing at an unprecedented rate all over the world because it provides flexibility and gives more happiness than physical shopping.

Therefore, as I already said, you must know about these 6 types of e-commerce business models.

If you’re still confused or would like to express your opinion, please let me know in the comments section below.

FURTHER READING

  • What To Sell On Etsy – 11 Top Selling Items on Etsy
  • Printful vs Printify – Which is Best For POD?
  • Etsy vs eBay: The Ultimate Guide to Make Your Decision Easier

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About Arslan Javed

Arslan Javed is the founder of Ecomsay. He has years of experience in scrutinizing online businesses and has made it his mission to establish this platform as your one-stop trusted source for verifying the legitimacy of online businesses and platforms.

I have read your blog on Types of ECommerce Models.It was very informative & helpful for new beginners and new people but I have some points to share with you and other people. There are several types of ecommerce models, including: 1. Business-to-consumer (B2C) 2. Business-to-business (B2B) 3. Consumer-to-consumer (C2C) 4. Consumer-to-business (C2B) 5. Business-to-government (B2G) 6. Consumer-to-government (C2G) 7. Subscription-based 8. Dropshipping 9. White label and private label These are some of the extra points I thought to include in your article.

I didn’t understand about B2A and C2A.more explainations please

how can i reference my assignment showing that this info…is from you

Hi Arslan I hope you’re doing great, i would like to thank you for your amazing job and for the useful informations in this article, you helped me a lot THANK YOU!

Welcome, Nihad 🙂

Good example to explain e commerce it help me understand easily thank you

You’re welcome, Shyam 🙂

Hi Arslan! It is okay, i use the image on your website for my education on youtube. Thank you.

Hi Joe, It’s okay you can use but don’t forget to give the credits 🙂

Last c2a had mistake ,its Consumer-to-consumer has been written instead of Consumer-to-Adminstration

Spelling mistake fixed, Avi. Thanks for letting me know 🙂

THANKS A LOT , it just made my school project so easy on ecommerce

You’re welcome, Stella 🙂

Precious information, thanks!

You’re welcome, Salah-Eddine 🙂

Super good information about e-commerce

Hi Surya, Thank you!

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Choosing an E-commerce Business Model and Platform

Table of contents

E-commerce has revolutionized the shopping landscape, becoming one of the most promising areas for development and investment. In this digital era, creative founders have abundant opportunities to turn their ideas into reality. However, with various business models available, choosing the right E-commerce platform becomes a critical factor for success, rapid growth, and increased ROI (return on investment). Making the right choice can propel your venture to new heights, while the wrong one may lead to wasted resources and missed opportunities for advancement.

To delve deeper into the world of E-commerce business models and discover the perfect fit for your enterprise, read our comprehensive article, in which you’ll explore the possibilities and unlock the potential for unparalleled success in the E-commerce realm.

Why Launch an E-commerce Business?

E-commerce, short for electronic commerce, is the buying and selling of goods and services over the internet. It involves the entire process of conducting business online, from advertising and marketing products to processing transactions and delivering goods to customers. 

E-commerce has become increasingly popular due to its convenience, accessibility, and global reach, allowing businesses to operate 24/7 and reach customers around the world. The E-commerce market is growing steeply, with global retail E-commerce sales expected to be $6.310 trillion US dollars by 2023, according to Forbes . 

And this trend doesn’t seem to change. More and more people use the internet to purchase goods. By 2026, 24% of retail purchases are expected to take place online, making E-commerce a valuable long-term investment for businesses.

The growth of E-commerce sales worldwide

When establishing your E-commerce store , the primary objective is to curate an exceptional online shopping experience, catering to customers worldwide, irrespective of their geographic location or preferred shopping channels. An E-commerce model serves as more than a mere sales tool; it encompasses a comprehensive ecosystem that empowers businesses, providing greater control and robust support to foster substantial growth and success. 

Keep reading to learn what E-commerce business models exist and how to choose the one that best fits your business goals.

What E-commerce Business Models Exist and How to Choose One? 

E-commerce business models shape the way products and services are bought and sold online. Today, the most popular models are Business-to-Consumer (B2C), Business-to-Business (B2B), Business-to-Government (B2G), and Consumer-to-Consumer (C2C). Let’s discover what the differences are between them.

Business-to-Business

In the world of B2B business models, enterprises sell their products or services to other businesses. While the buyer may sometimes be the end-user, more often, they serve as a reseller, reaching the ultimate consumer. These transactions typically encompass a longer sales cycle, but they come with higher-order value and greater potential for recurring purchases.

The report by Astute Analytica reveals that the Global Business-to-Business (B2B) E-Commerce Market is projected to reach 18,771.4 billion USD by 2027. Other reports indicate that there are more transactions in B2B markets and more high-dollar transactions because business products are often costly and complex.

Business-to-Consumer

B2C businesses directly sell their products or services to end-users, encompassing a wide range of consumer goods, from clothing and household supplies to entertainment products. The decision-making process in B2C transactions is typically shorter compared to B2B purchases, especially for lower-value items. As a result, B2C businesses often allocate lower marketing budgets to achieve sales, although they may have lower average order values and fewer repeat orders compared to B2B counterparts.

Historically, B2C E-commerce has been more widely recognized due to its direct engagement with consumers, including online retail giants like Amazon, Alibaba, and eBay. B2C transactions are generally more visible to the public, as they involve selling products and services directly to individual consumers. 

B2B and B2C are the most popular E-commerce business models and often the top choices for businesses launching into the online realm. Let's explore their differences in this comprehensive table.

The comparison of B2B and B2C

Business-to-Government

B2G is an E-commerce model in which businesses market and sell their products to government entities and public administrations at various levels—local, county, state, or federal. The success of this model hinges on winning government contracts through competitive bidding. Government agencies issue requests for proposals (RFPs), and E-commerce businesses must bid on these projects to secure them.

While B2G offers a more secure business avenue, it differs significantly from dealing with other businesses or consumers. The bureaucratic nature of government agencies often translates to a slower decision-making process, potentially limiting revenue streams despite their inherent stability.

Business-to-Business-to-Consumer

In the B2B2C model, companies collaborate to expand their customer bases. For instance, businesses might partner with an E-commerce platform to reach new audiences. A real-world example is Instacart, where grocery stores join forces to access more customers through Instacart's digital platform. B2B2C E-commerce employs scalable and flexible marketing campaigns to reach its audience, similar to B2C businesses.

Consumer-to-Consumer

C2C E-commerce ventures, often known as online marketplaces, foster direct connections between consumers for exchanging goods and services, generating revenue through transaction or listing fees. While C2C businesses enjoy organic growth fueled by motivated buyers and sellers, they grapple with the challenge of maintaining quality control and technology upkeep.

This model traces its roots back to the early days of the internet, with pioneers like Craigslist, Walmart, Alibaba, and eBay shaping the landscape of online consumer interactions.

To choose the right E-commerce business model for your business, consider factors such as target audience, product or service type, competitive landscape, and your long-term goals. Once you have selected the best E-commerce business model that suits your needs, it's time to choose a suitable platform that aligns with your chosen model. 

Peer-to-Peer

The P2P (Peer-to-Peer) E-commerce model involves direct transactions between individuals without the involvement of a central platform or intermediary. 

The main difference between P2P and C2C E-commerce is that while both involve direct transactions between individuals, C2C transactions take place on a specific online platform that facilitates the exchange. On the other hand, P2P transactions can occur through various channels beyond dedicated e-commerce platforms and may encompass a broader range of interactions, not limited to consumer-to-consumer exchanges.

Here are a few examples of E-commerce websites with different business models:

E-commerce websites

What Is an E-commerce Platform?

An E-commerce platform serves as an all-in-one software solution, empowering online businesses to efficiently manage their website, marketing, sales, and operations. With its flexibility and cloud-based nature, it facilitates memorable customer experiences, streamlines operations, and opens doors to phenomenal growth opportunities.

E-commerce platform choices are essential for businesses looking to establish a strong online presence and reach a global customer base. So, when making your decision, consider four essential factors:

  • Scalability for rapid expansion
  • Ongoing running costs
  • Built-in customer engagement tools
  • Platform's level of customer service to support conversion, loyalty, and retention.

Even with the knowledge of these factors to consider, choosing the right platform can still be challenging. So let’s discover the most popular platform that exists today. 

According to our research using a number of sources, we collected the market share of leading E-commerce software platforms and technologies worldwide for Shopify, WooCommerce, Custom, Adobe Commerce(Magento), BigCommerce , and others as of July 2023.

E-commerce platforms

E-commerce is a thriving sector with significant development and investment opportunities. The convenience, accessibility, and global reach of E-commerce have contributed to its widespread popularity, with global retail E-commerce sales expected to surpass $6.310 trillion by 2023.

Choosing the right E-commerce business model and platform is vital for achieving success and maximizing return on investment. Different business models cater to various market segments, such as Business-to-Business (B2B), Business-to-Consumer (B2C), Business-to-Government (B2G), and Consumer-to-Consumer (C2C), each model coming with its own unique considerations and potential benefits.

When navigating the world of E-commerce, having a reliable partner can make all the difference. Emerline is an E-commerce solutions development company with proven expertise in this domain. Our team is ready to assist you in establishing your E-commerce venture, regardless of whether you're just starting out or looking to expand your existing business. We offer a wide range of services and flexible collaboration models to cater to your specific needs. 

If you want to leverage the power of technology to reach more customers or need guidance in your E-commerce journey, book a free consultation with our experts. Together, we can unlock the true potential of your E-commerce enterprise.

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E-commerce business models can generally be categorized into the following categories.

  • Business - to - Business (B2B)
  • Business - to - Consumer (B2C)
  • Consumer - to - Consumer (C2C)
  • Consumer - to - Business (C2B)
  • Business - to - Government (B2G)
  • Government - to - Business (G2B)
  • Government - to - Citizen (G2C)

Business - to - Business

A website following the B2B business model sells its products to an intermediate buyer who then sells the product to the final customer. As an example, a wholesaler places an order from a company's website and after receiving the consignment, sells the endproduct to the final customer who comes to buy the product at one of its retail outlets.

B2B Model

Business - to - Consumer

A website following the B2C business model sells its products directly to a customer. A customer can view the products shown on the website. The customer can choose a product and order the same. The website will then send a notification to the business organization via email and the organization will dispatch the product/goods to the customer.

B2C Model

Consumer - to - Consumer

A website following the C2C business model helps consumers to sell their assets like residential property, cars, motorcycles, etc., or rent a room by publishing their information on the website. Website may or may not charge the consumer for its services. Another consumer may opt to buy the product of the first customer by viewing the post/advertisement on the website.

C2C Model

Consumer - to - Business

In this model, a consumer approaches a website showing multiple business organizations for a particular service. The consumer places an estimate of amount he/she wants to spend for a particular service. For example, the comparison of interest rates of personal loan/car loan provided by various banks via websites. A business organization who fulfills the consumer's requirement within the specified budget, approaches the customer and provides its services.

C2B Model

Business - to - Government

B2G model is a variant of B2B model. Such websites are used by governments to trade and exchange information with various business organizations. Such websites are accredited by the government and provide a medium to businesses to submit application forms to the government.

B2G Model

Government - to - Business

Governments use B2G model websites to approach business organizations. Such websites support auctions, tenders, and application submission functionalities.

G2B Model

Government - to - Citizen

Governments use G2C model websites to approach citizen in general. Such websites support auctions of vehicles, machinery, or any other material. Such website also provides services like registration for birth, marriage or death certificates. The main objective of G2C websites is to reduce the average time for fulfilling citizen’s requests for various government services.

G2C Model

A business journal from the Wharton School of the University of Pennsylvania

Creating Value Through E-Commerce Business Models

September 28, 2000 • 8 min read.

As businesses strive to implement innovative web-based initiatives, they increasingly will have to pay attention to e-commerce business models. What exactly is a business model, how does it differ from a revenue model, and why is it so important? Raffi Amit, co-director of the Wharton e-Business Initiative, and Christoph Zott, his co-author from INSEAD, answer these questions and more in a new paper called “Value Drivers of E-Commerce Business Models.” They also develop a framework to analyze how effectively e-commerce business models help create value.

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Types of E-commerce Business Models in Insia

by Team Unicommerce | Jul 16, 2020 | E-commerce Industry

what is a business model in e commerce

Home > Blog > Types of E-commerce Business Models in Insia

What is E-commerce?

Electronic commerce or internet commerce is the term used to describe the sale and purchase of services, goods, etc., on the internet, in virtual reality and this term is popularly known as e-commerce.

E-commerce is a collection of physical as well as commercial transactions made via the internet which includes buying of products, transfer of money and data.

Online shopping is of the biggest asset of e-commerce and it began only about a decade ago in 1994, in the United States of America when a budding online seller, through his website, sold a popular band’s compact drive or CD as it was known at that time to a friend. 

Starting from such a small scale, the e-commerce industry evolved beyond imagination and with rapid technological support to enable ‘Shopping at your fingertips’ as we know it today.

Customers sitting at any corner of the world can now easily discover and purchase whatever they want through online retailers and marketplaces, without stepping out of their homes. 

And this is a major factor that has given rise to the eCommerce industry and allows it to expand even further with upcoming and cutting edge technology being added to the industry every day to make the purchasing experience of customers better and smoother.

What are the Different Models of e-Commerce Business in India?

The e-commerce industry operates in several modes and based on the audience and services provided by a business, there are various types of eCommerce models, categorised as:

1. Business to Consumer (B2C):

The B2C eCommerce model works around the model of businesses selling goods and services to consumers directly. 

Businesses provide their customers with various services via their websites or marketplaces and the transaction of services take place directly between the two. 

Example of this type of business model includes – ebay, Zalando, Amazon.in, Flipkart.com, Myntra.com, Snapdeal.com etc.

2. Business to Business (B2B):

The B2B eCommerce model is based on the services provided by one business to another or transactions between the two. This kind of model may work for businesses such as a retailer and wholesaler.

In this model, a business can provide supply chain solutions to other businesses and not to the consumers directly.  Companies can purchase products like raw materials for use in the manufacturing processes from another business.

Udaan, Alibaba,Trade Key, Quill.com, AmazonBusiness.in, Power2SME.com are some of the most known names of this model.

3. Consumer to Consumer (C2C):

The C2C eCommerce model is when a consumer sells goods to another consumer, without the involvement of an organization.  

This mode of business is basically used to sell refurbished products or services and requires direct contact between two individuals. Consumers can go on multiple online websites to buy and sell items, grow their small to medium business or simply resale products that they own.

Quite popular among people, some of the best-known business models include Etsy, Craigslist, Quikr and OLX.

4. Consumer to Business (C2B):

The C2B eCommerce model is defined as a service provided by a consumer to a business. When a consumer expresses their views about a product or service that they have been using, they directly promote this model of selling. Selling refurbished goods is also a part of the C2B model.

This mode is quite popular these days as eCommerce businesses encourage consumers to share their experience with the product they bought and give it a rating to help other buyers make the right choice. 

Businesses such as Trip Advisor, Cashify, Naukri.com, Fiverr, etc are the most common examples of this mode of business.

5. Direct to Consumer (D2C):

In the direct-to-consumer (D2C) model , businesses sell their products directly to end customers, bypassing intermediaries like wholesalers or online retailers. Unlike the B2B2C model, there are no middlemen between the business and the consumer.

What are the Different Components of the e-commerce ecosystem?

While a business model defines who you want to sell to, business components define what you want to sell to.

Your services not only require your audience but also well defined and categorized services you want to sell in order to actually gain profits.  With tens of different choices, the eCommerce industry operates in several domains that define the services of each business and enables the categorization of systems.

The different components of the e-commerce ecosystem include: 

  • Demand Channels (Marketplaces, Website, social media etc.)
  • Online Marketing
  • Inventory Management 
  • Shipping/ Logistics
  • Payment Gateway
  • Accounting 
  • Customer Relationship Management (CRM)
  • Enterprise Resource Planning (ERP)
  • Channel Management Software

Your eCommerce business can work on all or some of these components, depending upon your company requirements and the services you offer.

Mainly for businesses, the biggest aim is to generate sales, acquire new customers, and maintain a smooth relationship with them by enabling faster, more efficient, and highly accurate services.

In order to enable this, your business needs to have a thorough understanding of what works best for the customers and what more can be done to increase overall profitability.

How to Start Your E-commerce Business in India? 

Building up an eCommerce business requires more than just a product, it requires a complete grasp of the growing online market and what is in demand. To turn a business into a successful enterprise, follow these simple steps:

– Make Sure of Your E-commerce Business Model

Among the 4 major business models mentioned above, you need to first understand which model does your business fall into.  Your business can fall into one of the many categories and based on that you can move ahead to the next steps of facilitating the official steps involved. 

– Decide whether to go for a marketplace or build an own website

A very important aspect to clear out before you kickstart your eCommerce journey is to choose between a marketplace or a website to sell from. This key decision helps you further plan your requirements. 

If you decide to go for a marketplace directly, you will be taking on the services of a third party such as Amazon, Flipkart, Udaan, Noon, etc. A marketplace will ensure thousands of visitors but at the same time, you will find yourself competing with several other sellers as well.

If you wish to go for your own website, the first things to keep in mind is to focus on cataloguing insightful content that can be easily absorbed by the users along with quick step navigational features to place an order, as you will be building your own audience from scratch.

For this, you can easily utilize the plug and play feature of brands such as Shopify, Magento, etc that not only help you build your online store with the best outlook but also puts your name out with many useful features.

– Get your business registered, facilitated and ready to roll

Once you have determined the model, domain and from which platform you would be selling, the next step is to get the nod of official rules and regulations from your government to be able to successfully run 

Based on the government norms being followed, get your business an official name and register it with a logo that will represent your brand. Once the registration is done, make sure to get all the additional documents required for you to run your business legally in the country as well as overseas.   In addition to registration, you may be required to get a Business License,  Employer Identification Number, Permit Rights, etc

– Create an Attractive Product Line

Your products are your sales so make sure to showcase each and every product in the most attractive way possible.

You may require to hunt for product lines and what exactly your brand speaks out about as it will help you with narrowing down what areas to work on to connect your product to the customers.

– Educate your Customers First

You may know your target audience but the same audience needs to know all about your business from all means possible. Social media, especially Facebook, Instagram and Whatsapp have become the new marketplace for budding businesses as the margin of reach is very high and the cost to do so is very low.

Promote your brand on all social platforms, connect with your customers and allow them the chance to advertise your business by encouraging them with more sales and sharing their valuable testimonials on a regular basis.

– Ensure a Hassle-Free Checkout Processes

Making sure that the buying process is as easy as possible and restricting the clicks to a minimum is what will ensure you make more sales and leave your customers fairly satisfied.

Nothing spoils an experience more than interrupted or unsmooth checkout processes so focus on consumer experience first, right from Checkout to payments.

You will have to make sure your prices are competitive, the entire process of making a purchase is less time taking and your payments gateway is a trusted partner as it is a highly crucial aspect of eCommerce sales. 

Collaborate with a partner that allows payments from all methods including credit, debit cards, net banking, UPI, COD, etc.

– Figure out the Perfect Logistics Partner 

Logistics is the backbone of any eCommerce business, and so it requires to be the strongest facet. 

Once your customer has made a purchase, you need to keep a close check on the delivery process and the quality of the goods to be delivered.

Onboard a partner for complete management of order processing to shipping and delivery, while giving you as well as your customer, real-time updates on all developments.

How to Start, Maintain, and Scale Up Your E-commerce Business?

Starting off a store may have been the first choice, but as we adjust to the new normal of things post the Coronavirus outbreak, not only offline businesses, but many online businesses have understood the need to focus majorly on eCommerce more than ever.

To turn sales into profits you need to follow specific guidelines and gradually onboard highly technological solutions to help you handle your business better. These 3 key methods can help you run a successful eCommerce business.

– Capture the interests of your Consumers 

To make sure your customers get the most out of your services, track their interests and purchases. This will help in suggesting relevant products that the consumer may want. 

Saving login details and keeping a log of purchase history to provide quick ideas for purchases can prove beneficial.

– Provide Seamless Customer Support 

No matter how quick or easy your interface is, or how closely you capture the interest of a shopper, if the customer support is not easy to access, you may end up losing more clients than you gain.

So, as soon as you have data that suggests the interests of your consumers and maintains the history of purchases made, you need to strengthen your customer support team with tools and technologies to enable quick and effective resolutions to any of your customer troubles. 

You also need to create a detailed guide to your customers that helps them navigate through the process to contact support and get their issues taken care of as soon as possible. 

Chatbots and live chat tools have made the process much easier and customers are able to find resolutions to their issues faster even if they contact your business with inquiries outside of regular business hours.

– Emphasize on Marketing Your Products 

Paid Marketing is a big part of enlightening your customers and ensures that a buzz is created around your business which continues to grow from various sources.

With the presence of tons of competition, your business needs support to stand out among others. To be able to achieve that, you need to focus on your marketing strategies that help customers pay attention to your services.

By utilizing Search Engine Marketing, Social Media Advertising, Influencer and Affiliate Marketing, you can drive traffic to your online store, convert that traffic into paying customers by building brand awareness, retain those customers post-purchase, drive customer loyalty, and ultimately increase online sales.

– Find the right software for your business

For an eCommerce business to provide the best possible services, it is important to ensure all operations run smoothly. 

Building the right strategic partnerships is one of the biggest factors of running a profitable and productive eCommerce business

Right from Inventory management to order processing warehouse management, customer support, logistics and much more, the key to growth is by having a swift and efficient supply chain management.

In this day and age, the most suitable way to achieve highly productive operations is by onboarding a technologically driven solution that can provide complete support to your e-commerce business needs.

The best way to kick start your e-commerce business is to integrate with a platform with 360-degree solutions to cater to all their requirements to launch the business and ensure growth.

Unicommerce is one such leading middleware solutions provider that ensures the best possible solutions for your business right from maintaining multichannel order and inventory management to providing best warehouse management solutions , handling returns, providing collective e-commerce integrations with 200+ global marketplaces, carts, logistics providers, ERP & POS and much more. 

Looking for the best solutions for your business? Want to scale up to the next level?  Request a Demo now!  

Related read –

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  • Logistics vs Supply Chain Management
  • E-commerce Apparel Industry: Trends, Challenges, Opportunities & Solutions

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What Is Dropshipping: Unveiling the E-commerce Business Model

Dropshipping is a streamlined form of retail where you, the seller, do not keep goods in stock. Instead, when you sell a product, you purchase it from a third party and have it shipped directly to the customer. As a result, you never see or handle the product. This method cuts down on operational costs because it eliminates the need for warehouse space and reduces the risks associated with holding inventory.

One of the main advantages of dropshipping is the ability to offer a wide range of products without the need for a substantial upfront investment. It’s a popular choice for entrepreneurs who wish to minimize costs while expanding their online stores. Your profit is derived from the difference between the wholesale price you pay for the goods and the retail price at which you sell them.

Running a dropshipping business requires careful management of supplier relationships and a keen understanding of market demands. You’ll primarily focus on marketing and customer service as the logistical aspects of order fulfillment are the responsibility of your suppliers. In order to be successful, it’s crucial to ensure that the products are of high quality and that they are shipped in a timely and reliable manner, as these factors are directly associated with customer satisfaction.

Understanding Dropshipping

Dropshipping is a retail fulfillment method where you don’t keep products in stock. Instead, when you sell a product, you purchase it from a third party and have it shipped directly to the customer. This section breaks down the essentials of dropshipping, including its business model, advantages, potential drawbacks, and the crucial role suppliers play.

Defining the Business Model

Dropshipping is a streamlined business model where your store markets products without maintaining an inventory. It is characterized by low startup costs and overhead, since there is no need to purchase or store merchandise upfront. The retailer acts as a middleman, focusing on marketing and customer interactions while leaving the stocking and shipping to wholesale suppliers.

Advantages of Dropshipping

Scalability and flexibility are key advantages of the dropshipping model. With no physical inventory, you can easily expand your product range or adjust your strategy with minimal risk. Dropshipping also allows for a low-cost entry into the retail market, making it an accessible option for entrepreneurs starting their businesses.

  • Low Overhead : No warehouse means reduced ongoing expenses.
  • Flexibility : Run your business from anywhere with an internet connection.

Disadvantages of Dropshipping

Despite its attractiveness, dropshipping comes with challenges like low profit margins and inventory issues. Since you do not handle the products directly, quality control can be more difficult, and shipping fees from multiple dropshipping suppliers may erode profits.

  • Low Profit Margins : Competitive pricing means profits per sale can be slim.
  • Quality and Control : Relying on a third-party supplier can complicate quality assurance.

The Role of Suppliers

Your success in dropshipping hinges largely on your suppliers. It’s essential to partner with reliable dropshipping suppliers or wholesale suppliers that can provide quality products, fast shipping times, and effective communication to keep your customers satisfied. Building a strong relationship with your suppliers can mitigate some of the inherent disadvantages of dropshipping, particularly those related to product availability and shipping logistics.

Setting Up a Dropshipping Business

A guy trying to setup his dropshipping business

To establish a successful dropshipping business, it’s vital to focus on product selection, create a strong online presence, integrate with the best e-commerce platforms, and comply with legal frameworks.

Choosing a Market and Products

Selecting the right market and products is foundational to your dropshipping business. Start by identifying a niche that aligns with consumer interests and has potential for growth. High-quality, unique products that add value tend to stand out in the market. Tools like SaleHoo and Worldwide Brands offer directories that can assist in product selection while validating the quality and potential of your chosen items.

Establishing Your Online Presence

Your online store is your virtual storefront. First, register a domain name that resonates with your brand and is easy to remember. Next, create an ecommerce website using a website builder like Shopify, which offers a balance of customizability and ease of use. Ensure your website provides a seamless shopping experience, with clear product descriptions and intuitive navigation.

Integrating E-commerce Platforms

For efficient management of your online business, integrate with reliable e-commerce platforms. Shopify, DSers, and AliExpress are robust options that support dropshipping by simplifying product import, order fulfillment, and inventory management. Make use of automation features to streamline your sales process, allowing you to focus on growing your business.

Legal Considerations

It’s crucial to navigate the legal considerations properly. Register your business and obtain a business license if required. Be aware of the tax obligations and the need for business insurance. Consult with a legal expert to help ensure you have all the necessary legalities in place to operate your business without complications.

By meticulously addressing these four critical areas, you can create a structured pathway to launch and grow your dropshipping business on a solid foundation.

Operational Strategies

Woman working on her laptop for dropshipping supplies

In dropshipping, operational strategies are pivotal as they directly impact your efficiency, customer satisfaction, and, ultimately, profitability. It’s about having a grip on inventory management, understanding the nuances of order fulfillment, and ensuring a robust system for quality assurance and returns.

Managing Inventory and Suppliers

To excel in inventory management, you must maintain a seamless supplier database that updates in real time. This allows you to minimize overstocking and avoid selling products that are out of stock with your suppliers. Keep your inventory and supplier information synced, perhaps using a cloud-based inventory management system that offers real-time data on inventory levels, supplier availability, and lead times.

Handling Order Fulfillment and Shipping

Order fulfillment must be swift and reliable. Partner with trusted shipping partners and logistics providers to ensure that orders are dispatched and delivered on time. Use a system that provides tracking information to both you and your customers, which enhances transparency and trust. It’s crucial to establish efficient channels of communication with your fulfillment partners to mitigate any delays or issues that may arise.

Quality Assurance and Returns Management

Maintain a standard for product quality and set in place stringent quality assurance protocols. Your customer service team should be well-trained to handle returns and manage customer expectations tactfully. Returns management involves a clear policy that favors both your business and customer satisfaction while managing logistics costs effectively. Assess your returns process to help inform product selection and supplier choices to reduce the incidence of returns due to quality issues.

Marketing and Sales

Marketing of a business

In the dynamic world of dropshipping , successful marketing and sales strategies are central to drawing in customers and converting interest into transactions. Your expertise in these areas can potentially scale your business for greater profitability.

Creating a Marketing Strategy

To create a marketing strategy that’s effective in the dropshipping landscape, start by identifying your target audience. Lay the foundations with solid SEO practices to increase the visibility of your ecommerce store . Incorporating social media platforms like Facebook and Instagram can magnify your reach and establish direct communication channels with prospective customers. Utilize a blend of content marketing, perhaps through a blog, and targeted ads to educate and engage your audience, keeping track of key performance indicators to tweak and improve your efforts.

Optimizing Sales and Conversion

Once you’ve attracted potential customers to your site, your focus should shift to optimizing sales and conversion. First, streamline the customer experience—ensure your website is intuitive, and the transaction process is seamless. Make use of analytics to understand customer behavior and tailor your approach accordingly. Promotions and upselling tactics can effectively increase profit margins. Moreover, test different elements of your sales funnel and landing pages to enhance conversion rates, a critical measure of profitability in the dropshipping business.

Scaling Your Dropshipping Business

To effectively scale your dropshipping business, you need to enhance your product offerings, strategically tap into additional sales channels, and refine your approaches to amplify profit margins.

Expanding Product Offerings

Expanding your product selection is crucial for scaling. Investigate manufacturers and wholesalers who uphold strict quality standards and offer a broader range of products. Employing tools like analytics to understand market trends can guide you in adding items that reflect consumer demands. Prioritize adding diversity to your selection that aligns with your brand’s identity and market position.

Exploring Additional Channels

Venturing into new marketplaces can substantially impact your scale. Consider listing your products on dominant platforms such as Amazon, eBay, or AliExpress. Each marketplace attracts its audience and involves distinct overhead costs, policies on returns, and branding opportunities. For instance, eBay’s auction system may open up a different pricing strategy that could help in gaining a competitive edge in North America, expanding your customer base significantly.

Strategies for Increasing Profit Margins

To boost your profit margins, focus on reducing overhead costs by choosing manufacturers that offer dropshipping-friendly prices without compromising on quality. Negotiate better deals with suppliers as your order volumes increase. Implement an effective pricing strategy that accounts for marketplace fees and your own return policies. Ensure your branding is consistent across all channels to maintain a strong, value-driven image which, in turn, can justify a higher price point and garner customer loyalty.

Customer Relations

Employee working for the customer support at the office.

In dropshipping, establishing trust with your customers hinges upon exceptional customer service and actively utilizing customer feedback to improve your business operations.

Developing Customer Support

Your customer support team is the frontline in cultivating a positive customer experience. Key strategies include:

  • Quick Response Times: Ensure your customers receive timely responses. Research has shown that a delay in response can lead to customer dissatisfaction and lower sales.
  • Multiple Channels: Offer customer support through various platforms like email, live chat, and social media to meet your customers where they are.
  • Knowledgeable Staff: Your support staff should have a comprehensive understanding of your products and policies to provide informed and helpful advice.

Leveraging Customer Feedback

Customer feedback is a goldmine of insights. Here’s how to leverage it:

  • Act on Feedback: Use customer suggestions to refine your product offerings and website design, which can increase customer satisfaction and repeat business.
  • Share Reviews: Positive customer reviews can be displayed on product pages, serving as powerful social proof for other potential buyers.

By prioritizing customer support and feedback, you establish a relationship built on trust and reliability, which is essential for long-term success in dropshipping.

Frequently Asked Questions

When considering entering the dropshipping business, you’ll likely have a number of questions about starting up, the legal aspect, platform integration, niche selection, and strategies for success. Here are some of the most common inquiries .

How can I start a dropshipping business with minimal investment?

To start a dropshipping business with minimal investment, choose affordable platforms like Shopify or WooCommerce for your online store , and partner with suppliers who do not require high upfront fees. Carefully selecting a niche with low competition and higher profit margins can also minimize initial costs.

What are the legal considerations for running a dropshipping business?

Running a dropshipping business requires adherence to legal standards such as obtaining necessary business licenses, understanding tax obligations, and ensuring compliance with consumer protection laws. Consult with a legal professional to ensure all regulations are met in your country and regions of operation.

How do dropshipping models work on platforms like Amazon and Shopify?

Dropshipping on platforms like Amazon involves listing products without holding inventory, while the supplier directly ships orders to customers. Similarly, platforms like Shopify allow you to create an online store where orders are fulfilled by third-party suppliers.

What are some profitable dropshipping niches or business ideas?

Profitable dropshipping niches are those with high demand and low market saturation. Examples include niche fashion items , eco-friendly products , or specialized tech accessories . It’s important to conduct market research to identify products that offer good profit margins and have consistent consumer interest.

How can one become a successful dropshipper?

Becoming a successful dropshipper often involves thorough research, careful supplier selection, creating compelling and SEO-friendly product listings, and crafting an effective marketing strategy. Consistently analyzing your sales data and customer feedback to optimize your offerings can greatly contribute to your success.

Is dropshipping a viable option for those new to e-commerce?

Dropshipping can be a viable option for those new to e-commerce due to its lower overhead costs and the ability to test product markets without significant investment. However, it requires dedication to learning digital marketing, sales strategies, and effective customer service.

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