There are several different ecommerce business models that you can choose when selling goods and services online.
Both new and existing businesses can benefit from understanding the different types of ecommerce business models. Learning more about the different ways you can set your online business can help drive success.
In this article, we’ll be covering:
- What is an ecommerce business model?
- Types of ecommerce business models
- Ecommerce business model examples
What is an ecommerce business model?
An ecommerce business model outlines what type of seller you are, who you’re going to sell to and how you’re going to create value for that target audience.
A clearly defined model can aid new and expanding businesses attract investment, by helping investors understand exactly how the company is going to operate.
Consider your company's business model as something that you should regularly review. This can help you stay up to date with of emerging trends and challenges. Active business model innovation demonstrates to stakeholders your ability to adapt and address shifting market demands.
Types of ecommerce business models
When selecting an ecommerce business model, it's important to factor in what best suits your expertise, your budget, your time constraints, and the level of risk you are willing to take.
The four most popular ecommerce business models are:
The business-to-business model involves the trade of goods and services between two companies.
For instance, a company might enter into a contract with another business to supply the raw materials required to make a product, or simply supply the necessary stationery needed for an office.
Direct sales to consumers are the focus of B2C companies. Every purchase you make as a customer at an online store is a B2C transaction.
This ecommerce business model is also known as ‘etailing’.
Consumer-to-consumer (C2C) is a business model that facilitates the transaction of products or services between customers. It’s sometimes referred to as peer-to-peer or P2P.
Well-known examples of websites that operate a C2C model include eBay and Facebook Marketplace. In both cases, a customer – not a business – sells goods or services to another customer, with the website simply acting as the platform to connect the buyer and seller.
These types of ecommerce businesses can sometimes be considered less predictable than traditional B2B or B2C models, as the business has no control over the quantity or quality of the goods being traded.
The term consumer-to-business (C2B) refers to a type of ecommerce where a customer or end-user offers a good or service to a business via a website.
An example of this would be a private individual licensing photography, music, or other creative work to a business to use for commercial purposes.
Ecommerce business model examples
Though the four most popular types of ecommerce business are mentioned above, there are actually several more specific definitions of ecommerce business models.
Online retailing is the ‘simple’ business model of a company selling a product to the general public.
An example of this would be Snag, who ethically manufacture tights and other clothing products, which they then sell on their website directly to customers.
You don’t need to manufacture products to be an online retailer, however. You could simply source products from elsewhere and sell them on an ecommerce website with an appropriate markup.
White labelling is common in the cosmetics, clothing, and food industries. It’s where products are produced in large quantities by a single company, which then licenses the products to other businesses. These businesses are then able to apply their own branding and markup before selling to the retail market through a website.
A white labelling ecommerce business model can enable startups to launch quickly, allowing them to take advantage of emerging trends. It also greatly reduces the amount of upfront investment required, because the product development and manufacturing processes are already taken care of by the firm that licenses the product..
Online subscription services have become an increasingly popular ecommerce business model in recent years as consumers demand ever more flexible and cost-effective ways to purchase and use goods and services.
Media streaming services, alcoholic beverages, cleaning products, and even cars can now be purchased via online subscription services, with companies charging a recurring fee for use of their products.
Digital products such as online courses are especially suited to subscription service business models, but they’re equally as applicable to any regularly accessed, consumed, or replaced product.
Print-on-demand, also known as on-demand manufacturing, has similarities to dropshipping in that businesses don’t need to place an order for products from suppliers until a customer makes a purchase on their website.
Once the purchase has been made, the business can forward the details of the order to the third-party printing company which can then ship the item directly to a customer.
For creatives who love designing their own products, print-on-demand offers a simple and low-cost method of selling t-shirts, tote bags, mugs, posters, and anything else that can be printed.
Online wholesaling is a business model where one business supplies goods in bulk to another, usually via an ecommerce platform that requires an account to access.
Wholesale ecommerce used to be an exclusively B2B activity, but some companies have diversified into the retail market as well. Whether B2B or B2C, a wholesaler will require a large space in which to store goods prior to sale.
Generally, the aim of online wholesalers is to sell large quantities of goods at reduced per-item prices to retailers, who then add a markup and sell on to the general public, either via their own website or physical stores.
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