Do you remember what shopping was like 10 years ago? Think about where and how you purchased your groceries or your clothes.
Today, e-commerce has redefined the way we shop. Data reveals that e-commerce accounts for 13.3% of total retail sales in the US. Not only that, but the total e-commerce sales account for as high as 222 billion US dollars in 2021. Thanks to e-commerce, it has become easy for business owners to transform their ideas into successful businesses.
Effective tools and online marketing strategies are some of the ways to increase retail sales and build a successful e-commerce business. When we study e-commerce trends, we will discover that these strategies continue to evolve through the years. However, the foundation remains the same. To grow, expand and innovate your e-commerce business, you need an effective e-commerce business model.
In this article, we will highlight and explain the various models of e-commerce.
An e-commerce business model explains how your business intends to deliver value to customers at the right price and generate online business revenue. Think of an e-commerce business model as a structure that ensures predictability and consistency in business operations, sales, and revenue.
Taking the time to examine what type of e-commerce business model works for your business reduces the risk of wasteful spending, helps you streamline costs, and ultimately increases business revenue.
Finding and building the right e-commerce business model may sometimes be tricky. However, with the right professionals at ePlaybooks by your side, it can become a walk in the park.
Now, let’s look at four major eCommerce business models and define their peculiarities.
Here are four types of e-commerce business models:
B2B (business to business) e-commerce as the name implies describes the online transaction that happens between businesses. Essentially, a B2B model in ecommerce involves selling products to other businesses. The product orders can be carried out digitally and delivered to the customer (business, manufacturer, wholesaler, etc).
Let’s examine the forms of B2B e-commerce:
Wholesaling is a popular form of the B2B e-commerce model. Wholesalers can be the original manufacturers of products or their distributors. Manufacturers or distributors sell products in bulk to other businesses who then sell them at retail value to downstream customers. Wholesale B2B cuts across many industries from consumer products, such as food, toys, and household cleaning products, to construction, medical, etc. For example, many goods that consumers buy at their local supermarket is typically procured through this business model. Manufacturers and/or distributors of food products wholesale their products, in bulk, to supermarkets, which then sell them at retail to consumers.
Wholesalers can conduct business through a variety of avenues. Increasingly, B2B is being conducted digitally, using a number of tools, including B2B ecommerce platforms which allow wholesalers and their distributors and/or customers to operate in a digital marketplace where wholesalers are able to display and demonstrate their products and their customers are able to make their purchasing decisions online.
Manufacturing, particularly in the form of parts and/or raw materials is another popular B2B model in e-commerce. Specifically, B2B manufacturers build parts or raw materials which are then used by other manufacturers to create a product that is then sold to the ultimate consumer. There are numerous industries that function this way.
A common example is the car industry. Manufacturers build parts such as engines or materials for seats or even computer chips which increasingly run all of the systems in a car. Other manufacturers produce important raw materials such as steel. A car manufacturer then puts these parts together in order to build a car which it then sells to consumers. In this scenario, all of the manufacturers that sell to car companies are conducting B2B business and the car companies are B2C. A similar scenario plays out in a variety of industries.
Distributors or resellers work closely with manufacturers acting as intermediaries between manufacturers and other businesses. They buy from manufacturers in bulk and sell to other manufacturers and retailers. In the above example, a car manufacturer may obtain some of the parts that are ultimately used in a car from a distributor and not directly from the manufacturer of the part. Distributors provide a number of functions as middlemen between manufacturers, among them, they have a network of buyers that help increase company sales and brand visibility. They also can help with logistics and delivery systems that manufacturers may be short on or otherwise lacking altogether.
As the name implies, this type of business operates by eliminating the middleman between B2B operations and B2C ones. It typically includes a partnership between two businesses that sell their product to the end consumer. This model usually involves one or more businesses with less brand reputation that get their products to consumers leveraging on the reputation of their partner. For example, a mobile food service app can partner with affiliate restaurants to deliver food to end consumers.
B2B e-commerce platforms have a number of distinct advantages over their brick and mortar counterparts, among them:
As with anything, with the pros come some disadvantages
When a company sells products or services directly to its end users through e-commerce platforms, the company runs a B2C e-commerce model. This e-commerce model is built to answer customer needs and provide a seamless experience for them. There are also various forms of B2C e-commerce models which we will explain shortly.
For this type of model, the process of decision-making is much shorter. Consumers can easily purchase a pair of shoes online unlike in a B2B model where a pencil company might need to decide on suppliers of raw materials for their product.
Here are five B2C e-commerce models:
The B2C e-commerce model has evolved over the years. Companies now use what is called the Hybrid model. This model involves using a combination of an online shopping platform and a brick-and-mortar store. With most people now looking up products online before making purchases both online and in-store, the hybrid model has become a popular business model.
The C2B e-commerce business models involve individuals who sell their products and services to businesses. Individuals may put up their work on sites where businesses can bid on them. With this model, consumers have the power to set their prices and have businesses pay for them. C2B e-commerce examples include selling stock photos, affiliate marketing, blogging, etc.
The C2C business model involves consumers selling goods and services to other consumers. There are a number of platforms that facilitate C2C sales. Users on these online platforms can buy, sell or rent products and services. The platforms themselves typically generate revenue by charging a commission for every transaction. C2C e-commerce business model examples include sites like eBay.
Now that we’ve identified the various models of e-commerce, we will briefly look at how building an e-commerce model for your business creates value. First, Identifying the right business model helps you stand out from the competition. How you may ask?
A business model helps you serve your customer base consistently with the value your business promises. When customers receive value from your business consistently, trust and loyalty are built. When there is trust and loyalty from customers, brand visibility, sales, and revenue also increases.
Second, an e-commerce business model helps you channel your marketing efforts through the right channels, helping generate more income for your business. While some companies may take a haphazard approach to marketing and sales, you can increase company sales using the best e-commerce model for your business.
Last, an e-commerce model helps you improve your product and marketing strategies. Doing this builds customer loyalty, boosts sales and increases online business revenue.
You can identify the exact e-commerce business model propelling your business and driving multiples of its current revenues. You can get started with e-commerce experts at ePlaybooks.