eCommerce has revolutionised the way businesses operate. Businesses now have the capacity to run their operations around the clock, and give consumers relevant and the latest updates regarding their products.
This year, because of the COVID-19 pandemic, it is expected that the online shopping market will grow with around 2.14 billion individuals all around the world opting to purchase goods and services online.
For business owners, this represents both a need and opportunity to develop eCommerce capabilities. Read on to find out more about the different types of eCommerce business models for different types of industries as well as examples of how these models work.
Four Most Common Types of eCommerce Business Models
1. Business-to-Consumer (B2C)
B2C is the most common type of business model where products and services are directly transferred from businesses to the consumers. It is characterised by small purchases made by individuals or households. As a result, most businesses have now widened their online presence to not lose market share to their online competitors.
Examples of B2C Models
- Direct Selling
This is the most common type of B2C where consumers buy goods and services straight from the retailer. Some examples of this are target.com.au and zappos.com.
- Online Intermediaries.
Businesses utilise online platforms where consumers will connect with sellers to purchase their products. eBay.com.au and Webjet.com.au are good examples of online intermediaries.
Companies utilise internet traffic to sell advertising which will eventually yield to selling products and services. The Huffington Post is one of the best examples of this model.
Online communities are utilized under this model where the shared interests among the members allow businesses to better market their products directly to the consumers. The most popular example of this model is Facebook.
Consumers are required to pay for a subscription to have full access to the company’s content. Netflix and Hulu are the best examples of the fee-based eCommerce business.
2. Business-to-Business (B2B)
Under a B2B model, the business conducts a commercial transaction with another business. An example of this is when a business sources raw materials from another business or when another business would want to resell the products of another business to their consumers.
Example of an eCommerce B2B Model
An example of a company that follows the B2B Model is Alibaba. This B2B giant was established by Jack Ma in 1999 and has been one of the biggest B2B eCommerce companies in the international market since then. Alibaba connects Chinese companies to businesses worldwide who are sourcing products directly from the suppliers.
3. Consumer-to-Business (C2B)
C2B lets customers offer goods and services to businesses and companies. Under this model, customers post the work that they need to be done and let businesses auction for the opportunity to complete the tasks. Moreover, C2B allows consumers to name their own price and is usually binding.
Example of C2B Models
An example of a C2B Model is when restaurants reach out to food bloggers to write a review of the dining options or food products. Bloggers are usually given free products from the restaurant or paid monetarily. Paid advertisements on the blogger’s website may also be included.
4. Consumer-to-Consumer (C2C)
Under a C2C model, the transaction is made between two private individuals. These two individuals trade goods and services in an online environment also called an online marketplace. A C2C business profits from the transaction or listing fees in the online marketplace.
Example of C2C Model
A traditional example of a C2C model is the classified ads of a newspaper like Gumtree.com.au. In the digital age, mobile apps abroad such as letgo and OfferUp are also good examples. These apps allow its users to sell goods and services within their neighborhood. eBay.com.au and now Amazon in Australia are also good examples of C2C businesses. Users can sign up and start buying or selling products.
Other Ecommerce Business Models
1. Business-to-Government (B2G)
B2G model is when businesses sell their products and services, sometimes information, to the government and its agencies. Usually, businesses bid so they will have the right to do the government projects or supply the products that the government needs.
Example of B2G Models
SMEs providing IT services to a government office is an example of a B2G model, through a platform such as www.tenders.gov.au.
2. Customer-to-Government (C2G)
C2G is a business model where citizens transact with the government. These transactions are either requesting information that concerns the public sector or paying bills, insurance, and taxes to the government.
Example of C2G Models
Paying your electricity bill or tuition fee loan through government websites are some of the examples of C2G model.
Which eCommerce type is the most successful?
For entrepreneurs considering starting an eCommerce business, the B2C and B2B models are two of the most common and successful eCommerce business models. This is because these eCommerce platforms can remove the friction encountered from traditional sales channels, while also providing significant opportunities for scale.
For example, when people inquire about what you are selling, one can simply say that they are selling products directly to people or businesses without worrying about the need to explain the supply chain. Also, B2C and B2B businesses can easily have a clear understanding of what their target market is because their customers’ user data provides insight into who is buying their goods and services.
How do I choose which eCommerce type to adopt?
There are a few things you should consider before deciding which type of eCommerce business model to adopt.
Firstly, be sure to conduct at least some level of research on the opportunities to apply eCommerce for your business. This will provide you with a background of how competitors are implementing the eCommerce channels effectively, what technology or platforms are currently being used, and what potential investment will be required.
Secondly, consider developing plans to support your eCommerce operations after they have been launched. A common misconception of eCommerce is that the channel itself will generate its own business. eCommerce is a growing yet competitive business so consider carefully how you plan to support and promote your eCommerce operations moving forward.
Lastly, do not be too hasty to package your business model as simply “out of the box” . Instead, customise your product and software development based on the needs of your target market. It may be challenging to customise packaged applications, but this challenge is what usually leads to a more stable business and competitive advantage.