There’s no doubt that e commerce has grown exponentially and continues to grow the same way. Today, we’ve reached an age where an enterprise without online presence is static and dated. But you should be wary of looking at an ecommerce website as something you need to just have in order to fulfill a criterion.
What is ecommerce?
E Commerce is the buying and selling of goods, products and services over the internet, and transactions of money, data or funds made over the internet also come under the purview of Ecommerce. Ecommerce is also known as electronic commerce. The transactions that happen in ecommerce can be done in many ways such as Business to Business (B2B), Business to Customer (B2C), Customer to Customer (C2C), and Customer to Business (C2B). More or less these are known as ecommerce models.
Given that global retail e-commerce reached up to $27 Trillion in 2020.In this article, we will discuss each of these aspects in detail to help you gain a greater understanding of ecommerce, including top solutions for your own business. This section, we are going to talk about all the components that can make ecommerce businesses different from one another.
These components ideally make decisions that you want to make when planning to start your own ecommerce business.
Models represent the type of an ecommerce business transaction. Models can be classified into four main categories and this classification is done on the basis of the actors that are involved in each ecommerce transaction. When you start a new business, chances are that you will fall into any one of these models that suits your business.
- B2B business model
- B2C business model
- C2B business model
- C2C business model
- Mixed models
B2B business model
The B2B model implies a longer sales cycle, but greater order value
B2C business model
Here, the business sells directly to a customer. This is the most popular and common model among existing ecommerce models. Quite a number of methods can be adopted under this model to cater the needs of customers including advertising, Omni channel architecture etc.
The B2C model implies a shorter sales cycles and less order value
C2B business model
This model gives the consumer the flexibility to sell products to business. Freelance artists, writers, and software developers are good examples, as are bloggers, lawyers, and accountants who serve business needs. This model is generally service based given its constriction to be as effective as other ecommerce models.
C2C business model
The C2C model facilitates Consumer to Consumer. This is the type of e-commerce that involves individuals selling one another directly.
Companies like Craigslist and eBay pioneered this model in the early days of the internet.
C2C businesses benefit from large scale participation by motivated netizens, but face a key challenge in integration, quality control and site maintenance.
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; however, many government agencies will not go directly to an ecommerce website and place an order.
Eg: Business to business to consumer (B2B2C)
This is an example of mixed ecommerce business models and is known as business to business to consumer (B2B2C). This model is actually a combination of both the B2B and B2C models. In this model a company sells its products to another company that sells the products to customers. An example of a B2B2C arrangement is white labeling
Improve your strategy using business model
Identifying your ecommerce business model gives you an extra advantage over your competition. Once you have identified your suitable business model (that) you need to best serve your customer base, you can concentrate on improving the business network.
Choosing a business model for e-commerce is not a piece of cake, there are many e-commerce business models, and finding the perfect one for your business will help you succeed.
Let’s get the ball rolling.
Types of e-commerce businesses
There are 4 main types of e-commerce businesses:
B2B is a commercial activity between two companies.
If your products or services are geared towards meeting the needs of your business, your choice is a B2B e-commerce strategy. Networking and outreach are a big part of this approach. The most important task when using B2B is to convince established companies that your products/services are ideally suited to their needs.
B2C e-commerce is a more traditional e-commerce model. In B2C, online stores sell products directly to end consumers. This model will suit you if your products or services are people-oriented.
This is not a very common type of online business. In this case, consumers themselves set the price for services and goods offered by enterprises.
Most of the clients are for-profit organizations, and freelancers are often individuals. Freelance platforms are a typical example of C2B.
Customer-to-consumer platforms profit from charging commissions or selling additional features. C2C websites help the consumer sell their assets, such as residential properties or cars. This business model is complex and requires careful planning to operate.
There are also types that involve government transactions with businesses or consumers.
The B2G model involves the government using websites to conduct transactions with businesses. B2G deals are carried out based on tenders or quotes.
Typically, this model works like this: businesses that meet government requirements calculate fees and provide pricing information for the project. After that, the government considers and selects the most suitable enterprise and decides whether to sign a B2G contract with it.
C2G is an e-commerce business model in which people conduct transactions with the government. An example of a C2G e-commerce business model is paying for services on a government website.
E-commerce business models
Once you understand the direction in which you want to develop your site, you will need to start choosing an e-commerce model for your business. There are various models of e-commerce, let’s take a closer look at them:
Dropshipping is a direct delivery of goods from a supplier to a buyer, in which the seller does not store goods in his warehouse. The goods are sent to the customer directly from the warehouse of the manufacturer, supplier, wholesaler, or distributor.
Dropshipping scheme: you find buyers and send their order to the supplier of goods(your partner); the supplier sends the order directly to the end customer. You earn a profit from the difference between the wholesale price set by the supplier and the final price at which the item was sold.
- Low initial investment
- No warehouse needed
- Product price under your control
- A limited quantity of goods
- Delivery options and speed
- Supplier problems are your problems
Wholesaling is one of the most expensive ways to start your e-commerce journey, but it can be very rewarding. With a wholesale approach, you buy an item in advance from a supplier and then sell it to customers at a higher price. In the past, wholesaling was mainly a B2B business practice. But thanks to the Internet, wholesaling has become a common practice in C2B or B2C.
Before going wholesaling, research the market for the demand for the product you want to sell. If demand turns out to below and you cannot sell the product, then you run the risk of serious financial losses, and in addition, you will have to store unsold items.
- Location doesn’t matter
- No advertising costs
- Favorable purchase prices
- Limited customer base
- High intra-sphere competition
- High initial investment
Selling digital products
An e-commerce store for digital products has many benefits, especially when it comes to your own product. Selling digital products is attractive in that it does not require you to organize the storage or delivery of products. Also, this type of e-commerce business is convenient for buyers, because they can receive their purchases instantly and the digital product will always be in stock, so you can sell unlimited items.
On the other hand, the field of selling digital products is highly competitive. Before you start, you will need to consider how you can differentiate your product from the competition.
- Unlimited stock
- Higher profitability ratio
- No costs or restrictions associated with shipping
- Harder to advertise
- The cost is not obvious
- High intra-sphere competition
It is important to note that using this approach, you cannot just start selling a product and forget about it. For customers not to leave and new ones appear, you will need to constantly update your offer.
- Recurring payments and predictability of income
- Long customer lifetime
- Demand predictability and planning capability
- High entry threshold, because you need to build a loyal customer base
- This model is difficult to switch to for companies with complex products, the distribution of which is built through dealer networks.
- Requires regular content update
Manufacturing products is another way to get started in e-commerce, especially for people who are passionate about the products they create.
Advantages in selling your product: you completely control your brand and its development, and you also have a chance to occupy a free niche in the market.
To achieve success in this area, you will need to think about how you will scale your business in the future, how your product range will change to be competitive and offer customers something new.
- Small initial investment
- Full control of the assortment
- A sufficient number of free niches in the market
- Good opportunity for a startup to test a product
White Label is a concept of cooperation between two companies: one produces a product or service, and the other sells them under its own brand. White Label is often confused with private label, but there is a difference between the two.
Private label products are also manufactured by another firm, but they are only produced for sale in the stores of a particular distributor. Using the White Label concept, you can sell a product to a large number of consumers.
This model allows you to save on production, but there are certain risks. You need to determine which batch of goods to make and whether it will be in demand. If you cannot sell the product, then you just have to accept it and calculate the losses.
- No need to create something new
- Reduced costs and reduced risks
- Reduced launch and promotion costs
- There is no complete control over the processes since some of them take place on the partner’s side.
- Difficulties in managing inventory
- High competition
So, what business model will you choose?
what is e-commerce its benefits, how to start selling online
Before we dive deep into defining eCommerce and looking at its benefits, you may want to take a look at the Statistics on eCommerce in the United States from 2017 to 2024
In 2019, U.S. online retail sales of physical goods amounted to 343.15 billion US dollars and are projected to reach close to 476.5 billion US dollars in 2024
Apparel and accessories retail e-commerce in the U.S. is projected to generate 153.6 billion U.S. dollars in revenue by 2024.
Now, that is only the United States, but that is not all, more eCommerce statistics worldwide show that the growth is expected to remain steady for the next few years and growing even faster especially from emerging markets in Asia.
Additionally, you can also look at the History of eCommerce to get an even broader picture of the timeline for the development of e-commerce.
What is E-Commerce?
E-commerce, also known as electronic commerce refers to the activity of buying and selling of goods or services using the internet.
Online Transaction processing and technologies such as mobile commerce and EFT (Electronic funds transfer) are used, which is basically the transfer of funds from one bank to another without the direct intervention of the bank.
Just like the traditional advertising of passing around brochures and Radio advertising, electronic Commerce uses Online Marketing also known as Internet advertising which is a form of marketing and advertising that uses the Internet to deliver promotional marketing messages to consumers.
What are the Benefits of E-commerce?
Now, if you review the Global eCommerce statistics, you know that means huge potential and a massive opportunity for anyone wanting to start an eCommerce business. But one might ask, besides all that, what are the core benefits of getting my business online?
With an online business, you are not limited to a physical geographical location as it is for a local store. Going from a local customer base to a global market at no additional cost is one of the greatest advantages eCommerce offers. E-commerce opens up the whole world as a market for your products or services.
Faster Payment/ Transactions.
Ever found yourself waiting in line or pushing through crowds just to buy something? Well, that never happens on the internet, which means you shop from home and get the products you want and need without stressing yourself and being constrained by the hustle usually experienced in a traditional brick-and-mortar store.
Open for Shopping 24/7/365
Another great benefit of an online business is that it is always open. If you own an eCommerce business, this means a dramatic increase in sales opportunities and convenience for your buyers. Buyers get to enjoy unrestricted working hours, therefore, getting products and booking the services they need without being constrained by operating hours of a traditional brick-and-mortar store.
Besides the startup costs like purchasing a domain name and your website hosting, there is no rent or staff to hire and pay, and very little fixed operating costs. For example, websites such as Bluehost, Wix, and HostGator offer free domains if you purchase a yearly plan for website hosting from as low as 2.7 dollars per month.
Automated Inventory management
With electronic commerce, order fulfillment, delivery, and payment procedures can be accelerated and inventory management automated with the various electronic online tools and third-party vendors such as PayPal, Stripe, Google Checkout, and Amazon Payments among others. Inventory management has become even more sophisticated as you can manage your inventory on multiple platforms like eBay or Amazon.
Work from anywhere
With an eCommerce website, all you need is a laptop and an internet connection, log in to your inventory management platform and start fulfilling orders and managing your business on the go. This is not restricted to location, in fact, some platforms like Amazon or Shopify have their own mobile apps that allow you to fulfill orders right from your smartphone or tablet.
What are the Disadvantages of E-commerce?
Everything has it’s pros and cons, and so let’s now look at the disadvantages of an online store or e-commerce website.
One of the biggest issues with an online store is trust. Trust on the internet space may come in different forms but first, you need to ask yourself, do people trust the company or brand you represent? Do they trust the quality of the products you offer if you are selling physical products, and most importantly the payment method, buyers want to know that their information is secure especially if they are purchasing using Credit/Debit cards.
A review system such as Trustpilot and a secure payment solution like PayPal would be some of the few ways to go around that.
Well, you just contact the support team of whatever platform you are using to host your website. Wix, Shopify or BigCommerce have dedicated services to help you out if these issues arise.
Limited interaction with Customers
With an online store, your customers don’t have to see you and you don’t need to see them for a successful online transaction to take place. This makes it difficult to collect first-hand customer concerns and data even though there are other ways to get this data for example through surveys.
No ability to try-on or Test the products
So far, we have looked at mostly the disadvantages of eCommerce for business owners. For customers, it means they can’t try on the products or test the products before they can make the purchase. However, some websites offering software or services have trials for a specific period of time.
What can you sell with an E-commerce Website?
Now that you know a little bit about eCommerce and why you need to have an online business, let’s go ahead and look at what you can sell on your eCommerce website. You can call these the different types of eCommerce businesses.
Whatever you sell physically right now, anything that can be physically touched, acquired to satisfy consumer needs and desires, you could sell online. These could be things like furniture, merchandise, apparel, or books that you would usually sell and ship to customers. If you sell physical products you’ll need to add at least one shipping option to your store.
You can call these e-goods, they are intangible goods which means you can’t touch these because they exist in digital form via the internet. These are things such as downloadable music like iTunes, internet radio, internet television for example NetFlix, e-books like Tai’s MentorBox, and Amazon’s Audible offers, even simple guides.
These types of products also include things like online courses like LinkedLearning offers, software like Adobe offers, or even graphics templates to use on a website or social media like Canva offers. Digital products might also come in the form of guides or eBooks.
When you look at the definition of a Service, it’s simply doing work for someone. A service is a transaction in which no physical goods are transferred. Service-based websites may include Fiverr, Freelancer or Upwork for Freelancers that are compensated for their time or work done.
You don’t have products to sell? No problem. Dropshipping allows you to sell what you don’t own/have. With dropshipping, you simply source the products from a supplier or manufacturer and list these products on your selling platform, when customers buy these products, your supplier will help you fulfill the orders.
Orbelo helps you dropship using Shopify while AliDropship offers a WordPress plugin and 100% done for you Dropshipping stores for those with zero drop shipping experience!
Alidropship custom 100% done dropshipping stores
B2C (Business to Consumer)
This is the most common eCommerce model, it represents a transaction between businesses and consumers (individuals in the general community). Examples include Nike among other B2C businesses.
B2B (Business to Business)
In this e-commerce model, one business provides the other with products and/or services. For example, Neil Patel’s Crazy Egg online software helps other businesses track visitor actions and the Ubbersuggest analytics tool helps other companies that want to increase their website traffic. In simple terms, with the B2B e-commerce model, both parties involved are businesses.
C2B (Consumer To Business)
This could be you selling your expertise to a business or organization. For example, if you are a photographer or a freelance logo designer. Examples of this eCommerce model include freelance platforms like Fiverr where individuals create value for businesses and get paid hourly or per project.
C2C (Consumer To Consumer)
When you sell your own goods or services to someone else, let’s say you are selling your old furniture or used laptop on Amazon or eBay, this eCommerce model is called Consumer to Consumer.
Of course, there are other eCommerce Models like B2G (Business to Government), C2G (Consumer to Government), or G2B (Government to Business) just in case you want to get a better picture.
However, the most common categories will be the B2C, C2B, B2B, and C2C eCommerce models.
Where can I sell my products/services? E-commerce Marketplaces to Consider
So far, we have looked at the different benefits of selling your products or services online, and we have also looked at the different types of products you could be selling on the internet. But where can you sell these products and services and how?
We looked at the top 10 e-commerce platforms that allow you to build and customize your online store and to manage your e-commerce website, sales, and other e-commerce operations from a central hub like Wix. If you want a detailed review of the top e-commerce store builders, make sure to check out the Top 10 Website Builders.
By the way, if you want to create your online store using Wix, watch this.
Selling only using your website/online store limits your sales opportunities and it would be a great idea looking into marketplaces. Adding to the top 10 list are Dropshipping websites like AliDropship and other e-commerce marketplaces to help you leverage the wide audience available to you.
Statistics show that Amazon is the largest e-commerce seller in the United States. With over €70000 spent on Amazon every minute around the world, it’s crucial to add your product listing on Amazon. This is one of the biggest online marketplaces in the world. Here is a detailed guide to listing your products on Amazon.
Over 60 million items were listed on Etsy in 2019. Etsy is an e-commerce website focused on handmade or vintage items and craft supplies. An online marketplace that’s made for Artists and other individuals with handmade items under a wide range of categories, including jewelry, bags, clothing, home décor, and furniture, toys, art, and paintings, as well as craft supplies and tools.
Unlike the above-mentioned marketplaces, Fiverr is an online marketplace for freelance services. A platform for freelancers to offer services to consumers/businesses/organizations worldwide. Fiverr reached a revenue of over €20 million in 2019.
Whether you are looking for a remote worker/virtual assistant or looking to make money on the internet leveraging your skills, you can use Fiverr for all kinds of services including Graphics & Design, Digital Marketing, Writing & Translation, Music & Audio Production, Video & 3D Animation among other services.
Fiverr perfect freelance services for any business
An alternative to Fiverr would be Upwork or Freelancer, while other e-commerce marketplaces and retailers include Taobao, Flipkart, Walmart, Newegg for computer hardware, and consumer electronics, and online course creation software and launching platforms like Teachable or Udemy.
A quick guide to getting started with your Online Business
The eCommerce Ceo breaks down everything you need to set up an online business here.
Another great article by Entrepreneur breaks down the process into 3 simple but very powerful steps.
This is the most important part. You start your online business by first of all deciding whether your business idea is suited for the web, what resources your business will need, your target audience, and your forecasted revenue.
Understanding your Technology needs
In a nutshell, you need space on the internet to sell your products or services, first, you need a domain name, then hosting for your website and a platform to help you design your e-commerce website also known as your virtual shopping cart. For domain names check out Namecheap and for hosting, you can look at Bluehost, Wix, HostGator, or GoDaddy.
Conclusion (Getting your eCommerce knowledge to work)
Alright, now that you know what e-commerce is, the benefits of getting your business online with your own e-commerce store, whether you are a merchant or seller, and some examples of the products and services you could sell online, plus where you would typically sell your products or services online and a quick guide to getting started.
It’s time for you to take massive action.
When most people think of ecommerce, they might imagine going to a website and purchasing products. In reality, ecommerce can encompass so much more. The ecommerce industry has grown to include a vast array of business models and delivery methods. One ecommerce business might look totally different from another.
Learning about the types of ecommerce can help you determine what model is right for your business.
Types of ecommerce
Fundamentally, ecommerce means a company selling products online. Just like in the non-digital world, there are many ways an item can get sold on the internet:
Types of B2C ecommerce business models
The world of B2C has multiple business models to choose from. The consumer may not even always know which type they are buying from, but as a store owner, choosing the right B2C business model is crucial to your success.
Direct to Consumer (DTC)
A DTC model is one in which your business manufactures its own products and sells them directly to the consumer. Examples include Gymshark and DU/ER.
- Advantages: Since they own their production process,DTC businesses typically have strong margins, good product quality control, and a competitive price point.
- Disadvantages: Owning your manufacturing can be a huge undertaking. This means setting up a production line, factory, or kitchen to make your products.
Subscription ecommerce businesses are similar to typical DTC ones, with a twist: you can only purchase their products by signing up for a subscription service. This is different from a DTC business that has a “Subscribe & Save » feature.To be a true subscription business, you need to require your customer to opt in to a recurring purchase. Subscription businesses are popular in consumable product categories, such as supplements (BIOHME) or food (Sakara).
- Advantages: By having recurring charges, subscription businesses can have a high customer lifetime value (CLTV)—if they are successful at retaining customers.
- Disadvantages: Subscription businesses aren’t a fit for many product categories that are reusable.
White label and private label
Some businesses prefer not to do their own manufacturing, but still want to create a unique product. They turn to a white label/private label model. In this model, the ecommerce business contracts a supplier to create a product that meets their needs. The supplier manufactures it, then the ecommerce business adds their own branding and sells as their own. This is common in highly specialized categories where the manufacturing takes niche expertise and the product requires strong branding focus. For example, many skincare brands are white label businesses. If a supplier makes a product exclusively for your business, it is ‘private labeling’, and if it’s not exclusive, it’s ‘white labeling’.
- Advantages: Since a supplier takes care of the manufacturing, the ecommerce business itself is much simpler to operate, and the business owner is able to focus primarily on branding.
- Disadvantages: When the ecommerce business doesn’t own the supplier, they typically have less margin and less quality control than they would if they manufactured it themselves. They also have to make an upfront investment in having the supplier design and sample the products.
E-retailers are trusted curators and intermediaries of other brand’s products—the digital equivalent of physical grocery stores or shopping malls. In this business model, the ecommerce business purchases its products from other brands at a wholesale price and then sells them to customers. The value they add is in the bespoke curation of products and in the shopping experience itself. Much like their brick and mortar counterparts, this works best in categories where taste and selection is key, such as food and fashion. Modern examples of these types of businesses are Goop, Culture Kings, and The Breakfast Pantry.
- Advantages: The business has the opportunity to offer a wide product selection without developing every product.
- Disadvantages: No product of your own makes it harder to distinguish your brand. Managing inventory of wholesale products purchased can also be challenging.
What if you didn’t have to deal with managing inventory or the risk of purchasing it upfront at all? That’s the promise of dropshipping. In this business model, you don’t produce your goods or even store inventory. A third-party partner handles all the storage and fulfillment, you just tell them when orders come in. Technically, dropshipping is a modified type of either white label or e-retail ecommerce businesses. A “traditional” white label or marketplace ecommerce business still holds its own inventory, whereas a “dropshipping” white label or marketplace ecommerce business does not.
Dropshipping typically happens behind the scenes—the customer doesn’t usually know that a product was dropshipped. For example, a large department store with a robust ecommerce site may not hold all of its inventory directly, preferring to dropship items from smaller vendors. In this instance, the department store forwards the order and customer information to the vendor directly, who fulfills it from their own warehouse stock.
- Advantages: Since inventory doesn’t have to be purchased up front, this is the most logistically light and least capital-intensive business model. This makes it attractive for many first-time business owners.
- Disadvantages: Dropshippers typically have low margins, and are reliant on their supply partners for ensuring their operations run smoothly.
“B2C wholesale” might sound like an oxymoron, but that’s not totally the case. There are many businesses that traditionally only served other businesses, but realized that with ecommerce, they could open up their products to the general consumer. These sites often have the features of a B2B site (large selection, large volumes, highly customizable orders, detail-focused product pages), but are open for customers to make smaller-sized orders. Examples include ULINE, Alibaba, and Swish.
- Advantages: These businesses benefit from the operational efficiencies that come with large order sizes. This model can also provide diversification for existing, offline-oriented B2B businesses.
- Disadvantages: Customers of B2C wholesale sites are highly price-sensitive, so the businesses that win usually have a cost advantage (such as massive scale).
How to choose an ecommerce business model
If you’re planning your own ecommerce business, the number of models might seem overwhelming. But choosing the right model comes down to a few simple questions.
What does your audience want?
Great businesses start with an audience and their frustrations or desiresin mind, and let that dictate the products. For example, if you’re passionate about helping new mothers stay healthy through organic meals, find a group of them, and ask them questions like:
- Do they love shopping for food or do they just want to tick it off their list?
- Do they value variety in their food or consistency?
- Do they prefer to buy in bulk?
- Do they buy the same types of things over and over, or does it always change?
- Are they willing to pay extra for a more premium product?
All these questions will help inform whether you need one product or many, whether you can do a subscription model, and whether you’ll be able to afford a lower-margin option such as a marketplace or dropshipping.
What resources do you have?
New business owners might default to an optimistic outlook. But when determining your business model, it helps to be highly pragmatic and even skeptical. Some business models, such as DTC and private label, require more cash up front and more time to operate. Other business models, like marketplace and dropshipping, benefit from great supplier contacts. By taking stock of your supplier relationships and the cash you have available to invest, you can make a clear-eyed decision about the business model that’s right for you.
What are you best at?
This ultimately may be the most important factor. Great businesses are built on a competitive advantage, and that starts with the owner. Your greatest skills can be your competitive advantage, which can inform your model:
- If you know product development for your industry, DTC may be the best fit.
- If you are a branding or social media expert, white/private label may be the best fit.
- If you are best at the customer experience (from ecommerce website to unboxing), dropshipping or marketplace may be best for you.
- If you have a sustainable cost advantage, B2C wholesale may be best for you.
The ecommerce industry is now a fairly mature one with many differentiated approaches. That means there are plenty of existing companies to learn from. By studying existing businesses, as well as your audience and your own capabilities, you can identify the business model that’s best for you.
Ecommerce Business FAQ
- Choose a business model: Decide between setting up an online storefront, creating a custom ecommerce solution, or using a third-party platform.
- Select a product or service: Research the market and decide what you will sell.
- Create your website: Design an attractive, functional website that meets the needs of your customers.
- Promote your business: Use social media, email marketing, search engine optimization, and other tactics to generate traffic and interest.
- Monitor and optimize: Analyze data to improve your sales, customer service, and overall strategy.
What are the 4 types of e commerce?
- Business-to-Business (B2B)
- Business-to-Consumer (B2C)
- Consumer-to-Consumer (C2C)
- Consumer-to-Business (C2B)
Is ecommerce a profitable business?
Yes, ecommerce can be a very profitable business. Many businesses are able to generate significant profits from their online sales, especially if they offer products and services that are in demand. Businesses with a well-developed online presence can also benefit from digital marketing, which can help them reach a wider audience.
Is ecommerce a good business to start?
Yes, ecommerce can be a great business to start. It offers the potential for low start-up costs and the ability to reach a wide customer base. Additionally, the digital nature of ecommerce makes it easier to track sales, manage inventory, and process payments, which can make running an ecommerce business easier than running a traditional brick-and-mortar business.
You have a lot of choices to make when starting a business. Outside of the product you choose to sell or your marketing strategy, one of your biggest decisions is what business model to pursue.
Ahead, get a high-level breakdown of the eight major business model choices so you can make the best decisions right from the beginning.
It’s important to understand each of these methods in order to make the right choice for your small business. There are pros and cons to each business model and, depending on your product, market, and cost structure, one may be more suitable for you and your business than the others.
Table of Contents
What is a business model?
A business model is a company’s core framework for operating profitably and providing value for customers. Features of an effective business model explain the customer value proposition and pricing strategy. The model identifies the products and services a company offers, its target market, and future expenses.
Why are business models important?
Business models are essential for both new and established businesses. They help companies understand their customers, keep employees motivated, attract investment, and provide a sustainable competitive advantage by identifying growth opportunities.
Think of your business model as a live asset for your company. It’s healthy to update it regularly to stay on top of upcoming trends and obstacles. If you’re planning to raise capital or partner with someone, active business model innovation shows stakeholders you can adapt and meet changing market demands.
Business Plan Template
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Common business model types for ecommerce
There are four main ecommerce business model types:
Business to consumer (B2C)
The business-to-consumer (B2C) business model refers to commerce between a business and an individual consumer, like buying a shirt from a brand’s website. B2C business includes ecommerce and brick-and-mortar.
Business to business (B2B)
Business to business (B2B) refers to any commerce between two businesses. Wholesale transactions typically fall under this category. You can include business-to-business offerings as either an ecommerce business or a brick-and-mortar. For instance, a coffee brand can sell its beans to shoppers on its website (B2C), but also sell in bulk to coffee shops (B2B).
Sell wholesale and direct to consumers with Shopify
Only Shopify comes with built-in features that help you sell B2B and DTC from a single store or platform. Tailor the shopping experience for each buyer with customized product and pricing publishing, quantity rules, payment terms, and more—no third-party apps or coding required.
Explore B2B on Shopify
Consumer to consumer (C2C)
The rise in the creator economy led to a spike in consumer-to-business (C2B) companies. This business model refers to when a consumer sells their own products or services to a business or organization. If you want to become an influencer or a photographer selling photos online, this is the type of business model you’d use.