Module One

eCommerce Business Models

In our journey of learning e-commerce from A to Z, we have gained a lot of valuable insights in previous chapters. From learning about the evolution of shopping to e-commerce and seeing the evolution of e-commerce to understanding its benefits and challenges, our journey was full of knowledge. But now we will learn about different eCommerce business models. 

 

Hence, in this chapter, we will explore different eCommerce business models in detail. Yes! We had a brief understanding of e-commerce in our previous discussions. However, here, we will be exploring it in greater detail. By the end of this chapter, you will:

 

• Learn about different eCommerce business models in detail
• Be able to choose the right model for your business

 

So, let us start our discussion and understand every crucial aspect of different e-commerce business models. 

 

Different eCommerce Business Models

Today, with the increasing popularity and usability of e-commerce, more and more businesses are aligning themselves with it. As a student of e-commerce and someone who looks forward to starting their own e-commerce business,  you should know about the different business models available.

 

Here, we are going to learn about four major types of e-commerce businesses in detail and have an overview of other types as well. So, let us explore!

Business to Consumer (B2C)

As we can easily identify from the name itself, the process of business-to-consumer (B2C) business involves directly selling products and services to the consumer. Well, let us simplify this for you. 

 

You visit an online store to purchase a product, let’s say a pair of jeans. Now, when you are going to purchase it at the store, this will be covered under the process of a B2C transaction. If we are going to break it down more, the total time that you are going to take to make this decision is much shorter than B2B business. 

 

The approach of a B2C e-commerce business is to directly involve the consumer and thus a lot of effort is put into marketing the product in the right manner. For example, Amazon selling books directly to customers is B2C.

 

Do you know about the Direct-to-Consumer (D2C) business model? It is somewhere more like the B2C model but without the involvement of the middleman. 

Business to Business (B2B)

The Business to Business (B2B) eCommerce business model involves all those transactions where two or more businesses are involved in the exchange of goods or services. So, when a company or a business is going to market its products or services to other businesses, it will come under a B2B e-commerce model. 

 

Here, you are going to observe that sometimes the buyer uses the product even in the B2B model. However, most of the time, you will see that the buyer will further sell the product to the final consumer for use (B2B2C). 

 

In addition, you are to observe that B2B businesses generally have longer sale cycles. Also, these have a higher-order value and more repeating purchases. An example of this can be Salesforce providing CRM software to businesses.

Consumer to Consumer (C2C)

The Consumer to Consumer (C2C) business model connects consumers to directly exchange goods and services among themselves. How these businesses make money is through charging platforms or listing fees from the users. 

 

Let’s try to understand this using an example. You must have heard about OLX. What happens in OLX is that a person can sell their items to other people who are interested in them. For example, someone has listed a car for sale on OLX. You can simply connect with the person and buy it. 

 

How does OLX make money from it? Well, OLX is going to make money through sponsored links, sponsored listings, and advertisements. It is how a C2C e-commerce business model works.

Consumer to Business (C2B)

A consumer-to-business model is where an individual gets the opportunity to directly sell their goods or services to businesses. Yes! How does this business model work? 

 

Well, today we see different freelancers and contractors providing their services to companies. For example, a person is skilled in graphic design. A business requires someone with professional skills and hires the individual. It will come under a C2B e-commerce business type. 

 

Other than these there are other eCommerce business models such as Business to Government (B2G). In B2G, a company is directly providing its products and services to the government. For example, IBM supplies IT services to government agencies.

 

Choosing the Right ECommerce Business Model for Your Business

One of the most important aspects of ensuring that your business works wonders is choosing the right eCommerce business model. Moreover, this choice is ultimately going to decide your target audience, operational process, and also revenue streams. So, how to do that? 

Some Crucial Factors for You to Consider

• One of the most important factors for you to consider is the identification of your target audience. The target audience has a prominent role in deciding the right business model. Are you selling directly to consumers, or businesses, or facilitating transactions between consumers? 
• Are you offering goods that require direct consumer interaction, or are you providing bulk products to businesses? The type of product or service influences the suitability of different models.
• What is the market demand for your service or product? You need to research in detail about industry trends and consumer behavior. To make it simpler for you, understand that a high demand in a consumer market might indicate a B2C model, while niche products for specific industries may be better suited for a B2B model.
• What financial goals do you wish to achieve? Different models offer you varying revenue opportunities. Hence, you must align your goals with the revenue goal that you are aspiring for.
• At present, are you capable of handling logistics, supply chain management, and other technical aspects of the business?

Comparing eCommerce Business Models

B2C vs. B2B

B2C businesses sell directly to consumers, focusing on shorter sales cycles and mass marketing strategies. B2B businesses, on the other hand, involve transactions between businesses, often with longer sales cycles and higher order values. Evaluate the benefits and challenges of each model based on your business goals.

 

C2C vs. C2B

C2C businesses facilitate transactions between consumers, often through platforms like OLX. C2B businesses allow individuals to sell products or services to businesses, such as freelancers offering graphic design services. Consider the unique aspects of each model and how they align with your offerings.

 

D2C (Direct-to-Consumer)

The D2C model eliminates middlemen, allowing businesses to sell directly to consumers. This model offers greater control over branding and customer experience. Evaluate whether a D2C approach fits your business strategy.

 

So, what do you think now? What will be the right eCommerce business model for you? Well, before you make your choice, think, evaluate, and then proceed with the right eCommerce business development partner. 

 

Key Learnings from this Chapter

• B2C includes businesses selling directly to consumers, like Amazon.
• B2B includes transactions between businesses, such as Salesforce providing CRM software.
• C2C allows consumers to trade goods and services among themselves, like OLX.
• C2B lets individuals sell products or services to businesses, such as freelancers.
• D2C removes middlemen, enabling businesses to sell directly to consumers.