Types of e-commerce Business Models
E-commerce, or electronic commerce, has gained more and more traction in recent years. Buying and selling goods and services online has enabled businesses to access wider markets, establish broader market presence, and establish more efficient distribution channels. Coupled with pandemic-driven trends, rising e-commerce statistics make sense – it has become easier, faster, and more convenient to buy things online. Hence, taking your business online has many benefits.
Before you enter the online marketplace, it is crucial to first understand the different types of e-commerce business models, and then decide which one best suits your business strategy.
Here are the six most common e-commerce business models:
1. B2C (Business-to-consumer)
The most known form of e-commerce, the B2C model refers to companies that market their goods or services directly to end users. Customers are able to purchase a product (such as shoes), or a service (like laptop repair) directly from the business’ website.
2. B2B (Business-to-business)
The B2B model occurs between two businesses, where one provides goods or services to another. This model is common with product manufacturers, who sell to other businesses, usually wholesalers. For example, Microsoft provides a wide range of products and services, such as computer software and cloud computing services, to other businesses.
3. B2B2C (Business-to-business-to-consumer)
The B2B2C model comprises three players: the business (providing the product), an intermediary (like a business platform), and the consumer. For example, a wholesaler (business) sells their products via another business platform to customers. This intermediary business platform might have better touchpoints and engagement with customers, or better logistical resources for distribution. An example of a B2B2C model is Sephora, which is a one-stop shop for cosmetics and skincare.
4. C2B (Consumer-to-business)
In the C2B model, individuals sell goods or services directly to companies. For example, websites that facilitate transactions between skilled freelancers and businesses, where businesses pay for someone’s time or skill through an online platform, such as Fiverr.
5. D2C (Direct-to-consumer)
The D2C model eliminates any third-party involvement or middleman. Companies who use the D2C model tend to target a specific audience as they have direct contact with their consumers and understand their needs well. American eyewear brand Warby Parker discovered that eyewear could be made more affordable by eliminating the middleman, giving the D2C brand a competitive edge over other eyewear retailers.
6. C2C (Consumer-to-consumer)
The C2C model takes place between two consumers. Consumers sell goods directly to other consumers, deciding on pricing and who they want to sell to. C2C models do not require a storefront; this e-commerce model usually works on online marketplaces that help to facilitate transactions, such as eBay or Carousell.
When deciding on your e-commerce business model, it is important to consider the following:
What are you selling?
It is important to be aware of what is already being sold online. What is there a demand for? What markets (or products) are oversaturated?
Who is your target customer?
Your target customer will greatly influence your business strategy. Who will best benefit from your product or service? Who is willing to pay for what you are offering?
How are you positioning your product?
The online marketplace is vast; hence it is vital to distinguish your product or service from others. By clearly defining your offering, target audience, and business model, you will be able to differentiate yourself from your competitors, allowing potential customers to see why they should pick you over someone else.
Aebersold, Kirsten. “6 Types of eCommerce Business Models”. Elastic Path. Published 11 October 2021, https://www.elasticpath.com/blog/6-ecommerce-business-models-b2b-b2c
Ecomsay. “6 Types of eCommerce Business Models You Need to Know”. Updated 16 May 2022, https://www.ecomsay.com/types-of-ecommerce-business-models/