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As the ever-evolving eCommerce industry expands, it continuously represents the share of total retail sales. Having a strong foundation and understanding what is eCommerce and the different eCommerce models is crucial to navigate the digital marketplace and create a successful online business strategy.
Whether you're new to the world of eComm or looking to optimize your existing business and create a website—this article will outline the different types of eCommerce and help determine which is the right fit when starting a business.
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7 types of eCommerce
The eCommerce market consists of various models, each with unique features to meet businesses' specific needs. Before diving into the world of eCommerce business, consider and understand these models:
01. Business-to-consumer (B2C)
As one of the most common types of eCommerce used today, business-to-consumer (B2C) businesses focus on selling goods and services directly to the end consumer. These businesses invest in creating a seamless user experience, offering personalized recommendations and providing easy checkout options. They often use digital marketing strategies like social media advertising and email marketing to drive traffic to their eCommerce website. Popular types of eCommerce within this include dropshipping and print on demand.
B2C examples: Amazon, Target and Coal and Canary
02. Business-to-business (B2B)
While business-to-consumer models involve a transaction from a business to a private individual, business-to-business (B2B) is the sale of goods or services from one business to another. Businesses focus on providing a streamlined ordering process, allowing buyers to order products in bulk, manage their inventory and track orders in real-time. B2B eCommerce platforms can offer customization features like tailored pricing for bulk orders, easy reordering options and integration with inventory management systems.
B2B examples: Salesforce, Slack, Something Good Studio
03. Business-to-government (B2G)
Businesses in this eCommerce model sell products or services to government agencies. These include a wide range of sectors like cybersecurity, waste management and urban planning. B2G platforms often have robust security features and strict compliance standards to ensure the safety of sensitive information shared between the two parties.
B2G examples: FedBid, GovSpend and GovPlanet
04. Consumer-to-consumer (C2C)
When two individuals engage in a transaction, rather than business entities, it falls under the category of consumer-to-consumer. Online platforms can act as intermediaries, providing a secure platform for buyers and sellers to connect and complete transactions. It also allows consumers to buy used or refurbished items at a lower price point, making it an ideal option for budget-conscious shoppers.
C2C examples: Etsy, ThredUp, Vinted
05. Consumer-to-business (C2B)
Consumer-to-business covers services provided by individuals, for businesses. Freelancers, consultants and independent contractors who offer their skills and services to the marketplace often use this structure. Businesses use online platforms to post the projects they need help with, and individuals can bid on those projects, providing services at a competitive price. C2B also includes influencer marketing, where individuals with a large following on social media can collaborate with businesses to promote products or services.
C2B examples: Wix Marketplace, Fiverr and Upwork
06. Consumer-to-government (C2G)
Consumer-to-government eCommerce involves transactions between individuals and government agencies. Consumers sell goods or services directly to government agencies, including providing goods or services for government contracts, grants or other procurement opportunities. This type of eCommerce is frequently seen in the healthcare industry, where medical equipment or services for government hospitals are purchased from individuals.
C2G examples: eHealthTech, Medical Equipment USA and Grants.gov
07. Business-to-business-to-consumer (B2B2C)
In this eCommerce model, businesses sell their products or services to other businesses, who then resell them to the end customer. This type of eCommerce can be used in industries like retail, where businesses buy goods from manufacturers and sell them to consumers in their stores. B2B2C can also involve third-party distributors or wholesalers, allowing those companies to reach a wider audience and expand their target base.
B2B2C examples: Best Buy and TJ Maxx, Walmart
5 eCommerce delivery model frameworks
In addition to the different types of eCommerce, there are also various delivery models businesses can use to fulfill orders and get merchandise into the hands of purchasers. Each framework has its unique approach to generating income, and businesses can choose which model best suits their goals and target audience. These delivery methods can greatly impact customer engagement and play a role in the overall success of an eCommerce business.
Direct-to-consumer (DTC)
Direct-to-consumer is a popular delivery model where businesses sell their products directly to the end customer without any intermediaries. This method allows businesses to have full control over the production, pricing and marketing of their products, resulting in higher profit margins. It also gives them direct access to customer feedback and valuable data, that allows for better insights into consumer behavior and preferences.
DTC examples: Warby Parker and Izzy Wheels
Subscription DTC
Subscription DTC eCommerce involves a recurring fee to receive goods or services regularly. Businesses selling consumable merchandise like beauty and grooming products, groceries or curated meal kits can benefit from this approach. Selling subscriptions offer convenience for customers, as they can enjoy regular deliveries without having to reorder each time.
Subscription DTC examples: Casper, Barkbox and Dollar Shave Club
White label and private label
White label and private label models allow businesses to offer products manufactured by another company under their brand name. With white label, the merchandise is sold to multiple retailers, who then rebrand it as their own. Private label involves selling a unique product created exclusively for one retailer or business. This channel allows businesses to offer a wider range of goods without having to invest in manufacturing.
White label and private label examples: CVS Pharmacy (white label) and Target's Up&Up brand (private label)
Dropshipping
Ecommerce dropshipping is a type of retail fulfillment business where production, warehousing and shipping are outsourced to a third-party supplier. In this model, there is no need to worry about stocking or fulfilling items personally. Instead, manufacturers or wholesalers ship orders directly to customers.
Dropshipping examples: Modalyst, Printful and Vistaprint
Wholesale
Wholesale eCommerce involves businesses purchasing products in bulk at a discounted price from manufacturers or distributors and selling them to shoppers at a higher price. This option requires businesses to handle storage, shipping and customer service but allows for more control over the merchandise and pricing compared to dropshipping.
Wholesale examples: Costco, BJs Wholesale Cluband Uline
How to choose an eCommerce business model
Understanding the different types of eCommerce and delivery frameworks is a principal for how to start an eCommerce business. The next step is to dive deeper and focus not only on what type of products or services you offer, but also get to know your audience. By narrowing in on the specifics, this will guide your answer on which type of eCommerce is right for your business.
What are you selling?
Consider the nature and demand for your products and services. For example, if you're selling handmade goods, a subscription model may not be the best fit, as customers may prefer a variety of products rather than receiving the same one regularly. If you're offering digital services or software, a subscription model could provide a steady stream of income.
Who is your customer?
Understand your target market and their shopping habits. For instance, if you're selling luxury items to high-end customers, a wholesale or private label model may be more fitting as it allows for control over branding and pricing. If you're targeting budget-conscious consumers, a dropshipping or subscription model may be more appealing.
What are your cost and profit margins?
Consider the resources you have available and which approach aligns best with your capabilities. Some types of eCommerce may have lower overhead costs but also result in lower eCommerce profit margins, while others may require significant upfront investments but offer higher profit potential. For instance, a subscription strategy may require regular product restocking and customer service management, while dropshipping may only need an initial investment in marketing and eCommerce website development.
What is your competition doing?
Analyze what successful competitors in your industry are doing and whether their approach would work for your business. Additionally, keep an eye on emerging eCommerce technology trends and see if incorporating them into your chosen method could give you a competitive edge.
Advantages of eCommerce models
From sustainable eCommerce and the rise of AI in eCommerce, the industry is quickly changing the way markets operate. Before plunging into the world of eCommerce, it’s critical to first understand why businesses are turning to this method of selling. Here are some advantages of eCommerce models:
Expanded reach
Traditional brick-and-mortar locations are limited by their physical footprints and can only attract customers within a certain area. An online store is open at all times and accessible from anywhere in the world with an internet connection. This is an excellent opportunity for businesses to break into new markets without being limited by geography.
Reduced overhead costs
Running a retail store can be expensive. Rent, utilities and employee wages all add up quickly, making it difficult for small businesses to compete. In contrast, eCommerce stores have reduced overhead costs since there is no need for a physical storefront. Additionally, digital marketing strategies are usually less expensive than traditional advertising methods. With less operating costs, eCommerce businesses can often offer lower prices to consumers while maintaining profitability.
Enhanced customer experience
With eCommerce models, shoppers can receive a more personalized shopping experience compared to traditional shopping methods. Online businesses can track customers’ browsing and purchasing histories to make better product recommendations and offer promotions tailored to their interests. Providing personalized customer experiences helps build loyalty, which can lead to repeat business.
Improved inventory management
Brick-and-mortar stores often face the challenge of properly managing inventory levels. This can lead to either out-of-stock products or excess inventory, both of which can be expensive and hurt the bottom line. In contrast, eCommerce models allow businesses to better manage their inventory levels. With real-time inventory tracking systems, businesses can quickly restock popular goods and reduce inventory levels on slower-moving items.
Disadvantages of eCommerce
Ecommerce has truly transformed the way people shop and conduct business. As with any system, it's important to be aware of limitations when considering setting up an eCommerce business.
Technology dependence: Ecommerce heavily relies on information and communication technologies, which makes it vulnerable to disruptions. Be aware of the potential risks and take necessary measures to ensure a smooth online shopping experience.
Regulatory issues: Currently, there is a lack of adequate laws and regulations governing eCommerce activities, both nationally and globally. It is crucial for policymakers to address this gap and establish comprehensive frameworks to protect consumers and foster trust in online transactions.
Shipping delays: Customers may have to wait longer for their products to arrive, or there could be issues with delivery, such as damaged items or lost packages. This can result in customer dissatisfaction and a negative impact on the reputation of the business.
Product experience: When shopping online, some consumers may feel hesitant to make a purchase without being able to physically examine the products beforehand. Providing detailed product descriptions, high-quality images and customer reviews can help alleviate these concerns and enhance the overall shopping experience.
Tip: Read more on how to write product descriptions that’ll make your customers convert.
Security concerns: In the digital age, security threats such as hacking and data breaches are a concern for online transactions. It is essential for eCommerce platforms to implement website security measures, such as encryption and secure payment gateways, to safeguard customer information and instill confidence in online shoppers.
Types of eCommerce FAQ
Which types of eCommerce businesses are successful?
The success of an eCommerce model depends on various considerations, including the niche, target market and execution of the business. The key lies in choosing the right model to align with your business goals and cater to your customers' needs.