The ecommerce industry has been significantly growing over the past few years. Aside from the continuous technological development, global events such as the Covid-19 pandemic attributed to the sudden growth of online sales and transactions. During the height of mandated quarantines and lockdowns, the use of mobile devices and online shopping spiked exponentially. According to a 2020 report, the ecommerce industry accounted for more than 4.2 trillion US dollars and has grown 20% to 40% from the year prior.
Taking this into consideration, many believe that there is so much more in store in the future of the ecommerce industry. The numbers continue to rise and it’s one of the many reasons why people are taking their chances with online retail to start their electronic commerce career.
However, starting a business online is not as simple as it sounds. While it’s easy just to start selling products through social media and the likes, entrepreneurs still need to understand the basics of the ecommerce industry. This will allow them to create a more appropriate business plan and establish suitable marketing tactics to break through different ecommerce platforms.
For this article, we will focus on the different types of ecommerce business models.
Types Of Ecommerce Models
Much like traditional businesses, electronic commerce also consists of different business models. Most online stores fall under one of these general categories. The type of ecommerce model guides new businesses with their structure, processes, and operations. Aside from that, it also provides them with a faint idea of the benefits and challenges a particular ecommerce model has.
Business to Consumer (B2C)
The B2C or business-to-consumer model is widely considered to be the most common and simplest form of ecommerce. It refers to any online store or business that directly sells its product, digital goods, or services to an end-user or consumer. This can be as simple as selling a single hairpin online or having a clothing collection that customers can choose from.
A business-to-consumer transaction is relatively simple as well. The primary goal of a business-to-consumer ecommerce model is to cater to the need of an individual as one as possible. Since B2C involves direct consumers, the sale cycle is shorter and is often adopted by startups and small businesses. The common trend among B2C businesses is that there is lower expenditure on marketing. However, B2C also has fewer recurring customers or orders as well as a lower average order value when compared to other ecommerce models.
Business to Business (B2B)
B2B ecommerce is a model that involves a business selling their goods or services to another business. While there are cases where the business customers turn out to be the end-user, the most common form of transaction in B2B is that the buyer resells these products to direct consumers.
B2B ecommerce answers the pain points of B2C transactions. Although business-to-business models have a longer sales cycle, it also has more recurring orders or clients and a significantly higher order value. Since B2B businesses cater to other business accounts and clients, they need to invest more in their marketing strategy.
Consumer to Consumer (C2C)
The C2C model is widely considered a unique ecommerce strategy. The consumer-to-consumer form of ecommerce refers to online transactions that occur between one consumer and another. It involves a consumer trading, buying, selling, or even renting products and services to another consumer. Also referred to as online marketplaces, C2C businesses are often conducted on ecommerce platforms such as Craiglist, eBay, Alibaba, OLX, and the likes of Facebook Marketplace.
Consumer to Business (C2B)
This form of ecommerce empowers individuals by allowing them to sell products, goods, and services to companies. All that is needed is a platform that allows the consumer to publicize the work they want to accomplish and have companies or businesses bid for it. This opens a competitive market that pushes businesses to meet the demand or up bid other companies in order to land the transaction or opportunity.
Business to Government (B2G)
The business-to-government ecommerce model refers to online sales or transactions between a private business company and government agencies. The private business would sell their product or service by bidding for a government contract. The way it works is that the government office or agency involved would request proposals from businesses of the same industry and have these ecommerce sites compete for and bid for this project. Ideally, the winning bidder would not automatically go to the cheapest offer but rather the most cost-efficient project proposal.
Tips In Choosing An Ecommerce Model
Given that there are different types of ecommerce models, it is important for entrepreneurs to know how to choose the right one. With that, here are some factors that new ecommerce owners should consider when choosing a business model:
What do you have to offer?
Entrepreneurs enter ecommerce because they have something they want to sell to people. When it comes to choosing an ecommerce model, one of the first things you need to know is the type of product or service you are going to sell. With this, you can then look into how and where to place yourself in the vast ecommerce market.
The most commonly sold item in the ecommerce industry is physical goods. The process is not so different when compared to traditional businesses. You have a product that other people want to buy, but instead of going to a store or boutique, you complete the transaction online. This includes customer service, payment, and shipping process.
Ecommerce also includes the sale of digital goods. This can be in the form of digital images, ebooks, web design, and the like. Entrepreneurs can also tap the world of ecommerce by selling their services online. Individuals and service-based businesses can find customers online and easily find clients looking for what they may have to offer.
What is your business capable of?
Your target market or customer immediately sets the ecommerce model you need to follow. Let’s say you’re a small business selling baked goods online. You are only looking for a handful of customers who would want to buy your goods on a pre-order basis. Then, you’re more likely to adopt a business-to-consumer ecommerce model given the small-scale production capacity.
However, you can change to a business-to-business ecommerce model as you continue to grow your business. When the demand is high, you can either limit your pre-order service or invest in a team that will help you meet the consumer’s needs. And as your production capacity increases, you can also start expanding your business venture and serve as a supplier to other smaller businesses online.
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