Ecommerce business models are more than just B2C or C2C. There are specific frameworks you can implement for your online business. Learn more!
Ecommerce business models are more than just the traditional B2C or C2C. There are specific frameworks to buy and sell products and services online, and understanding them is essential to make your business profitable.
In this article, you’ll learn about the different ecommerce models, advantages, examples, and how to choose one for your business.
Yes, but doing your due diligence before buying an ecommerce or is very important. "Having a clear-eyed view of the market and understanding the true value and potential of a business is more important than ever," says Juan Ignacio García, CEO of Boopos.
Total ecommerce sales for 2023 were estimated at $1,118.7 billion, an increase of 7.6% compared to 2022, according to the U.S. Department of Commerce.
In our podcast, The Boopos Buzz, Nate Ginsburg, CEO of Centurica, stated that "good ecommerce businesses are still selling for good multiples, but the market is not as heated as it was."
Revenue in the ecommerce market is projected to reach US$3.178 trillion in 2024 worldwide, and it is expected to show an annual growth rate (CAGR 2024-2029) of 9.47%, according to Statista.
Business to consumer or B2C is a business model where the business sells its products or services directly, if not exclusively, to a final user. This means that B2C also deals with all the factors included in the sales process, such as customer service, delivery, or returns, to name a few.
These businesses use platforms like Shopify or WooCommerce to set up an online store to showcase the different products and services that are available, and the purchase usually occurs through the platform itself.
Examples of B2C ecommerce businesses include all streaming and on-demand services. Whether music or video, these platforms provide entertainment directly to the person who will make use of it. The final user of their products and services is the customer who pays directly from his pocket.
Unlike B2C, business-to-business or B2B is a model where the seller does not deal directly with the final consumer or user; instead, the online business provides its products or services to another company that can modify, add, resell, or use the provided solutions for operational purposes even if the customer is not aware of it.
Software as a service (SaaS) such as Customer Relationship Managers (CRM) like HubSpot or Salesforce are a very good example of B2Bs. They provide services to marketing or sales areas of other companies so they can keep track of their own clients.
Consumer-to-consumer (C2C) is an ecommerce business model that consists of individual customers buying and selling directly to other consumers. The seller uploads a product with specifications to a platform for potential buyers to look it up and compare it to others before they make a purchase.
All of this is made through an online platform that provides the conditions for these transactions to be secure for both parties in exchange for a commission on the transactions made.
Marketplaces like Amazon or eBay are good examples of C2Cs, where sellers and buyers know what they can expect from the other party based on ratings and purchase history and can rely on the fact that the platform will advocate for every transaction to run smoothly.
Consumer-to-business (C2B) involves businesses seeking individual consumer services across specialized platforms, where they respond with offers.
After contacting each other through the platform and negotiating, both parties come to an agreement and sign a contract specifying which products or services will be provided.
Just like with C2C platforms, both businesses and consumers can leave feedback and ratings so that others can see and make an informed purchase or service request.
There are many platforms that use this model, especially the ones focused on content services. Whether it's graphic, motion, or text content, freelancers can showcase their portfolios to businesses that go through them like a catalog and choose the best option matching their needs and budget. The ratings and previous projects can give the business an idea of what to expect.
In a business-to-government or B2G ecommerce model, the businesses sell products or services to government agencies. Through investigation and prospection, the business identifies government procurement opportunities and then submits an estimate or quotation that government agencies evaluate and select.
The business becomes a vendor for government agencies throughout the duration of the contract.
It's common to see private cybersecurity companies in B2G. They provide security services for many government agencies to keep their information secure.
The model where companies sell a product or service to other businesses in order for the latter to sell it again directly to the consumer is called business-to-business-to-consumer or B2B2C.
Usually, the first business manufactures and distributes the product or service, while the second business functions as an intermediary (retailer, second distributor, or outlet) that targets an individual consumer.
If you've used services like Uber Eats, then you've been part of a B2B2C: the restaurant is the first business that manufactures the product, the delivery platform the second business which then takes this product to the final consumer, you.
Although it's impossible to enumerate every single type of ecommerce business model (keep in mind this is an ever-evolving market), it is possible to try to make a list of those more relevant.
Here you have some of them:
Dropshipping usually works hand in hand with C2C businesses, where the seller doesn't keep the products in store but only when and if a customer places an order; the seller then purchases the product requested and arranges for it to be delivered directly to the consumer. This way, the seller never handles the product itself nor has to make a full-on investment at the initial stages since there's no need to have an inventory or a place to store it.
Products are manufactured by a business but sold under the label of another brand that functions as a buyer. The first business is also in charge of packaging under the buyer's specifications.
The buyer ultimately sells the product with its own brand to the final consumer. The buyer can offer unique products without directly investing in the manufacturing of the product.
As a seller of a private label, you take part in the business that owns the brand. The products are made, packaged, and labeled according to your specifications, but you sell them through an ecommerce site.
This way, you have control over the consumers' experience, but it will also require a larger initial investment.
In this model, the buyer purchases products in bulk directly from manufacturers at a wholesale price and then resells them via Amazon, eBay, or other marketplaces at a retail price for a profit. The seller usually does previous research and selects products with high demand and low competition in the platforms to reach customers on a large scale, although it is necessary to sell in mass in order to make a profit.
This ecommerce business model works by offering consumers the possibility to sign up for the recurrent delivery of products or services in exchange for a subscription fee.
This is attractive for customers who already need to acquire what you offer repeatedly. Examples are products such as cosmetics, hygiene items, food or snacks, clothing, or services like SaaS.
The main benefits of this model are the recurring income (especially if you offer some kind of loyalty program) and managing a more efficient inventory.
Read more: How to value an ecommerce businsess
Traditional businesses take into consideration certain costs that an ecommerce business does not have, such as physical facilities.
With online commerce, you eliminate unnecessary expenses like rent, equipment, and employees associated with the maintenance of the brick-and-mortar store. Also, many processes can be automated, which saves money and time.
Ecommerce allows you to expand your target market as much as your business requires, not having to rely on the reach of physical advertisement and prospecting at a lower budget. A customer could place an order, or you could contact a company worldwide, especially if you are offering a service or software instead of a manufactured good.
The capacity of your business to handle a major sales volume is enhanced by the fact that you can manage it efficiently without having to compromise your customers' experience while also not having to absorb significant additional costs. This opens a whole new door of opportunities regarding expansion to new markets.
For ecommerce businesses, it is crucial to acquire valuable and accurate data about your customers, their shopping habits, search trends or purchase cycles.
All this information can be put to better use when it's compiled efficiently, which will translate into improvements in your product's quality, delivery processes, and customer experience, ultimately driving your business into sustained growth.
The model you choose will define how your business operates on every level, from internal processes to marketing and sales. You can follow these criteria as a starting point to make the right choice.
Not every product or service is for everyone. Researching your market is key to understanding who your target persona is and what its needs are. Meanwhile, you should also define your product: is it niche-specific? Then, selling products via subscription might be the way to go. Are you offering many different products or services? Then B2C might be the right path.
How will your business generate revenue? Will it be directly through sales, or will you apply an advertising strategy? You may already have a subscription-based model. Whatever model you choose must allow you to maximize potential revenue and sustained profitability, which will drive your business toward substantial growth.
Keep in mind that some models require a more substantial upfront investment directly related to operational costs. This could mean recurring investments as your business scales up: more equipment, workers, materials, and costs associated with your operation since more customers also mean more deliveries, inventory, returns, and so on.
Business models like subscription or dropshipping may require you to be involved in backdoor processes like storing data. For you to acquire, store and use your consumers' information, some regulatory and legal compliance might apply. If that's not the case, there are other legal issues that every business has to consider, such as tax regulations and proper licensing. Take this into consideration to choose wisely and make an informed decision.
If you're on the fence about what business model is the best fit, seek expert advice. It is a small but wise investment that will save you time and money. Boopos has advisors to guide you throughout the process of acquiring an ecommerce.
No matter what business model you choose, profitable ecommerce businesses must achieve efficiency in every single part of the process and provide an exceptional user experience.
If you are looking to buy or sell an ecommerce, you can use an online marketplace like Boopos. For buyers, we select profitable businesses and provide guidance on the acquisition process; for sellers, we help with the business valuation and connect them with qualified buyers.
Learn more about how Boopos works to buy or sell profitable ecommerce businesses.
