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Last Updated on January 15, 2023 by Arif Chowdhury
Most of us nowadays used to shop at the online store though only a few know the eCommerce business models. White labeling, private label, and business-to-government models are also eCommerce business models.
Looking back ten years, you’ll notice how much things have changed. What store do you shop at? What route did you take to get your meal? What steps did you take to get a new jacket?
A new breed of online retailers has redefined what’s possible and altered how we purchase today. In the year 2021, eCommerce sales will be 13% of all sales in the United States, only 9% and 6% in the years 2017 and 2013, respectively.
According to industry analysts, eCommerce sales will account for 17% of all sales in the United States by 2023. More than ever, creative enterprises can quickly bring their ideas to reality.
As a result, many new eCommerce shops emerge yearly, and around $4.5 trillion in sales are made annually. However, despite the fast advancement of numerous instruments, the rules remain the same.
Therefore, the first step in disrupting the existing quo is figuring out your company model and developing new ideas.
Here, we’ll look at what are the four types of eCommerce businesses and what kind of advantages and disadvantages they have.
Four types of eCommerce business models.
Most people who establish an eCommerce firm fall into one of four groups.
Each category has advantages and disadvantages, and many organizations concurrently operate in many types.
With this knowledge, you’ll see the potential dangers connected with your plan in a more realistic light.
Type #1: B2C model (business to consumer).
Business to consumer abbreviation is B2C. This eCommerce business model is standard, and many options are accessible.
In the B2C business model, a transaction occurs when an end-user purchases from an online merchant, such as purchasing a book from Amazon, for example. B2C purchases are easier to make than B2B purchases, particularly for low-value goods.
Choosing a shirt or pants to purchase rather than selecting a hosting service for a website or purchasing software for an organization would be a lot simpler.
Additionally, developing a comprehensive business plan and implementing effective digital marketing strategies can help ensure your eCommerce business’s success.
B2C businesses have a relatively more nominal value of products and fewer recurring customers than B2B companies; however, B2C business model marketing cost is also less than B2B business.
Furthermore, the B2C business model has both products and services.
B2C organizations have utilized mobile applications, local marketing, and retargeting to promote their products and services to consumers. It’s a simple traditional marketing method.
For example, Amazon.com is a perfect example of a B2C business model. It is because most of its customers are end-users, such as watches, books, clothes, etc.
Another example could be AliExpress.com. They are using simple marketing methods to promote their products. For instance, they use traditional PPC advertising in search engines and social media ads to reach potential consumers.
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Advantage of a B2C business model.
You will enjoy the below advantage when using the B2C model for your eCommerce business.
Less operating cost.
Hence, less staff, fewer data input, and less customer support contribute to the lower operating costs of a B2B firm.
Short consumer journey.
B2C sales cycles are shorter since customers are the ultimate decision-makers in the process. Making a choice is required; no one else’s input is needed.
Simple to handle.
B2C companies are simple to run since they are tiny and don’t need a lot of effort. Also, as a beginner, you don’t need a lot of talent or expertise to get started with this activity.
A simple WordPress website or blog can do the job. You may also use social media pages to promote your products.
Quick Note: The B2C business model is one of the most popular and robust business platforms. If you are launching a new business, you should target the B2C business model.
Direct sells to consumers.
A B2C company allows you to sell directly to clients, so you don’t have to depend on third-party vendors.
The disadvantage of the B2C business model.
Some of the penalties you may have to endure.
Competition for B2C enterprises is fierce as many companies and brands choose from it.
Less marketing reach.
In the B2C sector, there are no aggressive product advertisements. Because of this, clients have fewer chances to view and utilize the items and services you provide.
Type #2: B2B model (business to business).
Business to business abbreviation is B2B; it refers to exchanging goods or services between two companies, not consumers.
It’s common for this kind of transaction between two organizations, such as Amazon being a retailer. However, they are also a customer of other website hosting companies.
Two or more businesses rather than individuals engage in this kind of transaction.
An example of a B2B transaction is purchasing supplies from another firm for production. For instance, garment factories buy raw materials from other companies, such as fabrics and buttons.
Automobiles, garments, and similar businesses are engaged in B2B transactions.
An organization sells its goods and services to others in a B2B arrangement. It’s all about business dealing; no consumers are involved.
However, when selling to businesses, the sales cycle may be longer. Still, the average volume of orders and price and the frequency of repeat purchases are more significant than the B2C model.
Entrepreneurs in the B2B sector who have taken advantage of eCommerce sites and customized market targeting have found success.
B2B purchasers in 2022 will be nearly twice as many millennials as in 2012. Therefore, it is becoming more crucial to younger generations as they reach the digital age of business transactions that online B2B sales are becoming more significant.
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Advantage of a B2B business model.
Here are some advantages of the B2B eCommerce business model.
Robust and reliable market.
Unlike other eCommerce models, the B2B business model is more stable. However, a B2B industry may have to adjust its products and services based on various market factors.
With a significant online presence, you can attract new customers and resellers and grow your business.
More opportunity for sales.
Increased customer loyalty results from a better supply chain and cooperation in the B2B business model; thus, sales increase.
Any B2B business may use this opportunity to increase its overall revenue possibilities.
Cost reduction strategy.
With this model, businesses may save money by implementing an efficient supply chain strategy.
Automation, in most circumstances, minimizes the risk of mistakes and unnecessary costs.
Quick Note: In comparison to the B2C model B2B model is more stable. However, your customers are different types of organizations. Thus, you have to be more formal.
The disadvantage of a B2B business model.
Here are some issues you may face when using a B2B model.
Small customer base.
Because it focuses on dealing with other businesses, the B2B model has a smaller customer base than the B2C model.
It’s a hazardous investment for small-sized eCommerce businesses with a limited budget.
Lengthy customer journey.
Buying a product is a long process since two firms are involved. Furthermore, no single person is making the buying decision, as it is a company; thus, many officials may influence the decision-making process.
Compared to other types of organizations, in the B2B model, the customer has the upper hand over the seller, as they can demand and alter the product and service based on their desire.
They may request changes, regulations, or a reduction in the cost of the items they are selling.
Type #3: C2B model – (consumer to business).
In this business model, a consumer can deliver products or services to a company for a business process or obtain a financial benefit.
The C2B method was developed in reaction to the proliferation of well-known and high-quality products and services produced by consumers.
The C2B model allows a company to offer a commission to a client if they promote its product on its website or other online or offline channels.
A webmaster gets compensated for writing, filming, or recording a product or service review under this arrangement. Customers may also access paid advertising space on the company’s website in other situations.
Customers can buy products and services directly from people via the C2B platform.
In this model, an organization can offer their loyal customers to share their products and services in exchange for a commission or exclusive discounts on their products. Affiliate marketing is a B2B service that comes under this category.
This concept was pioneered by a freelancer website, which helped companies find freelance workers worldwide.
The organization that uses the C2B model has a competitive edge due to the low cost of products and services.
As a result of this method, customers may determine their rates or allow firms to compete for their attention.
It’s not uncommon for brands to use well-known influencers worldwide to help advertise their wares.
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Advantage of a C2B business model.
As a job search tool and a location to make money from skills or efforts that one already has, Craigslist has a lot to offer its users. In addition, the execution of this method has resulted in the generation of new ideas.
Consumer-to-business eCommerce has given companies a new way to make money.
The internet has also made it easier for clients to connect with the business directly. But, again, these things were unthinkable before this trend.
It’s much simpler today that computers and cell phones are generally accessible to everyone.
The model is a win-win situation for everyone involved. As a consequence of this, both consumers and companies might profit. As a result, it’s getting more popular.
The disadvantage of a C2B business model.
Concern about achieving one’s goals is expected. It may be a problem in response times and other difficulties. There is no standard pricing in this geographically dispersed industry.
Owners of businesses have a disadvantage as a result of this policy. It is also unreliable due to the loss of confidentiality or data.
If sensitive material is exposed, there might be a lot of misunderstandings. Another fundamental problem with this worldview is that many individuals utilize it maliciously.
Type #4: C2C model – (consumer to consumer).
Customers and sellers may trade directly using the C2C concept.
If you’re looking for a business model that doesn’t need the involvement of a third-party organization for the transaction, then C2C is for you.
The online platform now handles most C2C transactions. However, people formerly performed those transactions in newspaper advertisements, live auctions, and garage sales.
eCommerce businesses such as Amazon or Walmart exist to assist consumers in finding the items they desire and provide companies access to a pre-existing client base.
Most C2C platforms need merchants to pay a small fee to promote their items or a flat fee to complete the transaction.
Customers may sell their goods and make money by listing their products or services on an open online marketplace for a fixed fee.
Before 2007, companies like Craigslist and eBay pioneered this approach. However, their popularity has been reduced as the eCommerce platform, and website builder becomes cheap and easy to achieve.
Maintaining industry-standard quality and security are significant roadblocks for companies that profit from the self-propelled development of driven customers and sellers.
Advantages of a C2C Business Model.
The most significant benefit is no third party between buyer and seller.
Increase profit margin.
By removing the third-party intermediary organization, both customers and sellers can profit.
Using the C2C approach is ideal when dealing with rare or second-hand items.
Skip all the formalities.
The C2C model removes limitations that hinder customers from utilizing different company forms.
For some sellers, the expenses of maintaining a typical small company, for example, may be prohibitive, while for others, selling is not their primary line of work.
Brick-and-mortar establishments may be challenging for consumers to discover low-cost items and services. But, thanks to C2C technology, you may now do business from the comfort of your home.
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Disadvantages of a C2C Business Model.
Like other business models, C2C has its downfall.
No guarantee of quality.
As there is no third-party organization between buyer and seller thus, you will get no quality guarantee.
No security in payment.
Because usually, the C2C platform does not have an integrated secure payment system, you may have to pay in cash or use a third-party payment platform.
No security from fraud.
C2C platforms, which lack the rules of conventional corporate structures, thus have no guarantee of security from fraudulent activities.
Buyers should be looking for sellers that use unusual payment methods or fail to provide enough information in their ads. Until the seller receives payment in full, they should not send anything.
We have talked about the types of eCommerce businesses model. Both their advantages and disadvantages are also discussed in this guide.
You’ll need to go through all of it to discover a market for your new company.
Creativity does not occur out of anything, even though it requires preparation. But it’s out there, and now is the moment to start applying what you’ve learned thus far.