Types Of ECommerce Business Models To Consider In 2023
The eCommerce Industry has changed the way we shop. It is one of the fastest-growing industries and will reach new heights in the coming years.
By considering the phenomenal growth of the eCommerce industry, a vast number of startups, SMEs, and enterprises are thriving to join the industry.
If you also want to start an eCommerce business, then you have reached the right place.
To start an eCommerce business, one needs to be familiar with many things such as eCommerce trends, choosing products, defining the target audience, etc. But, the first thing you should be aware of is the eCommerce models.
However, when you search for the eCommerce business models, you are bombarded with a lot of information, and finding the best model would be challenging.
We have years of expertise delivering eCommerce solutions and are familiar with the ins and outs of the eCommerce industry.
Therefore, here we will walk you through eCommerce business models, eCommerce delivery models, and how to choose the best eCommerce model for your business.
So, let us start.
6 Types of Ecommerce Business Models
Here are some of the most common types of eCommerce Business models followed by startups to enterprises.
1. B2B eCommerce Business Model
In the B2B eCommerce business model, products or services are provided from one business to another.
This model can include many things like giving software to different companies by which they can run their office efficiently, or it could be selling office utilities and other office appliances to various businesses.
In general, the majority of organizations following the B2B business model include manufacturers, distributors, and wholesalers.
Apart from this, many businesses working as per the B2B model include service providers, software development firms, cloud hosting, project management tools, etc.
The benefit of the B2B model is that it has a long business cycle; hence, it results in bulk orders and repetitive purchases.
Here are the top B2B eCommerce examples.
On the other side, the major drawback of this model is that it requires more investment up front.
Another B2B eCommerce example that you might know is Oracle & its database management system.
2. B2C eCommerce Business Model
In the B2C eCommerce business model, the business sells products and services to consumers. This model focuses on building a relationship between the business and the customer.
Out of various types of eCommerce business models, this is the most common business model, and the majority of the online eCommerce businesses follow this model.
The main advantage of the B2C business model is it has low marketing costs, and the decision-making process is short for the customers.
Moreover, these types of businesses are generating higher revenue each passing year by introducing a broad category of products.
On the other side, the main drawback of the B2C model is the low ordering value and less repetitive order compared to the B2B. Secondly, there is stiff competition in the market.
Moreover, customers expect high-quality products and better support, which is quite challenging.
One of the best B2C examples that fall under this model is Amazon.
If you want to open an online retail store for your new or existing business, it will fall under the B2C eCommerce business model. Here, you can create an app like amazon at the primary level to join the eCommerce sector.
3. C2C eCommerce Business Model
As the name suggests, C2C eCommerce encourages transactions between consumers.
It allows consumers to sell, buy, or exchange goods or services with other consumers. The platforms that connect consumers generate revenue from consumers for listing and transaction fees.
The main advantage of this model is that the business owner has to spend less on marketing, which in turn saves time & effort.
The disadvantage of this model is that it solely depends on the buyers and sellers; hence, they should be present in massive amounts and remain actively engaged on the platform.
Since their inception, eBay and Craigslist are the best well-known sites following the C2C model. Lately, the popular site Depop has entered this segment by taking the support of social media and has observed tremendous growth.
4. C2B eCommerce Business Model
We can compare the C2B eCommerce model with affiliate marketing. In this model, individuals or sole proprietors sell their services or products to large online businesses.
The benefit of this eCommerce model is that it does not require much investment and customer service.
However, the main drawback of the C2B model is that an eCommerce business requires a considerable amount of traffic to run smoothly.
Common examples of this model include reverse auctioning websites, affiliate marketing blogs, and Google Adsense.
5. B2G eCommerce Business Model
In this eCommerce business model, the business markets its products or services to the government agency or public administration. The agency could be local, county, state, or federal.
A national-level B2G example could be a cement company selling cement to the government for building roads, railways, etc. A local level B2G example can be an engineering company providing equipment to the government for building a gas supply system in the city.
In this model, the eCommerce businesses have to bid on the government projects whenever the government declares a request for proposals. The approval process from the government takes time as the businesses have to go through various systems placed by the government.
Compared to the other eCommerce business models, a government agency does not visit an eCommerce website and places an order.
6. B2B2C eCommerce Business Model
In this eCommerce business model, the business sells its products to another business, and later the new business sells the products to the consumers. A simple example of this model could be a wholesale distributor selling its products to the retail business, which then sells
products to the consumers.
The B2B2C eCommerce business model consists of three parties: the first business(product origin), the intermediary (a business), and lastly the consumer. This model is highly beneficial for eCommerce sites and applications. For instance, a company can partner with another company and provide a commission for each sale.
Various eCommerce store owners worldwide go with this model to acquire new customers. On the other side, consumers are familiar with a product but cannot get the product because of geographic location, high shipping costs, etc.
B2B2C is one of the best eCommerce business models for the eCommerce store owners to grow their customer base.
4 Best Ecommerce Delivery Models
After you have decided on the eCommerce business model, the next thing is to consider a suitable delivery model for your business. Here we have curated the highly profitable eCommerce delivery models.
Dropshipping is considered one of the most popular methods of selling products. It allows businesses to market & sell items without any need for inventory. Here, you can take advance payment from your customers through online payment methods.
In short, you need to purchase the products from the suppliers who ship products and instantly deliver them to the customers.
The main benefit of dropshipping is that you don’t need inventory, warehouse, packaging, or shipping. Also, you can start a business with a low budget and take calculated risks when you have finances.
Besides this, as you don’t have to think of manufacturing, you can invest in website design, customer handling, marketing & sales.
The drawback of dropshipping is that you have zero control over the product. Hence, if your supplier is not good, it will have a poor impact on the reputation of your business. Secondly, you have to deal with order tracking issues.
Moreover, any person can initiate dropshipping. Hence, you will face stiff competition in the market.
In this model, you play the role of a wholesale distributor. As an eCommerce store owner, you purchase the products in bulk at discounted prices.
Initially, wholesaling was considered a B2B practice; however, it has evolved, and now many retailers are offering products following the B2C model.
This model is highly beneficial to a brand that has made a reputation in the market because it can sell items effortlessly.
The drawback of this model is that you require a lot of investment for inventory, warehouse, order tracking, and shipping.
3. Private Label
The private label model is highly suitable if you have an excellent product idea; however, not enough capital to manufacture products.
Therefore, you need to hire a manufacturer who can provide you with the desired product. Later, you have to label, market, and sell the product under a particular private label.
In the private label model, all of your products are manufactured, branded, and sold under a single company. Hence, you can decide many things related to the product like design, quality, etc. Also, you can manage operational, manufacturing costs, etc.
You have the freedom to do marketing of their products and charge premium prices from the customers.
One main challenge you will face in a private label is finding the best manufacturer. Secondly, if you sell products from a single vendor, you will have a limited audience.
Lastly, this model is widely preferred by anyone who wants to start an online clothing store.
4. White Label
In the white label model, you have the freedom to sell generic products under your private name and packaging. Here, you don’t have command over the product specifications & quality.
The main benefit of the white label revenue model is that you can choose products that sell seamlessly. To achieve this, you have to define a proper marketing and target audience.
The drawback with this model is that you have to order a fixed set of quantities of products. By chance, if you fail to sell them, then they will remain in your inventory.
Businesses involved in the beauty and wellness industries consider this model.
How to Choose Ecommerce Business Models?
Here are some of the simple steps you should consider for choosing the best eCommerce model for your business.
1. Choose Your Customers
Who are your ideal customers? Business or individuals? What are their shopping habits and behaviors?
A detailed analysis of all of these things is the first step toward choosing a suitable eCommerce model.
2. Decide Your Capabilities
What makes you unique from any other business in the market? Reflect on yourself, and make a list of your strengths and limitations.
Choose wisely what you can do yourself and where you need help from experts. Knowing these things will further help you choose a suitable eCommerce business model.
3. Choose the Best Way to Sell Your Product or Services
It is the time to choose a delivery model for your eCommerce business. The best way to select a delivery model is to look at your business from the eyes of a manufacturer or distributor.
If you are producing your own products, you would like to go with the subscription or wholesale delivery model.
If you are distributing products of other businesses, you would consider establishing a brand through direct marketing and growing your customer base.
4. Position Your Business
You have a complete idea of your product but do your customers?
Do competitive research and define the reason why your product is the best in the segment.
On what terms you are competing with the customer? Is it price, convenience, or anything else.
Define the way you will present your products or services to the consumers. Also, make sure you offer the same value to consumers right from start to end of your shopping.
We hope you have understood the eCommerce business and delivery models. Also, you will be able to choose a suitable eCommerce model by following the streamlined process we have provided.
The selection of a proper eCommerce business model helps you reach a target audience and expand your business effectively. If you are still confused about choosing a suitable eCommerce business model, then contact us.
Guru TechnoLabs is a professional eCommerce development company. We understand your business requirements and goals and help you choose the best eCommerce model for your business. Moreover, we can provide a suitable eCommerce solution for your business.