If you’re starting an e-Commerce business and don’t really know what business model to choose, here’s all you need to know about the six major e-Commerce business models and how they work.
What is an e-commerce Business Model?
An e-Commerce business model is created to allow consumers and businesses to sell products online or make purchases. The following are the 6 major e-Commerce business models:
- Business to Consumer (B2C)
- Business to Business (B2B)
- Business to Government (B2G)
- Business to Business to Consumer (B2B2C)
- Consumer to Consumer (C2C)
- Consumer to Business (C2B)
Here, you’ll get to learn more about them and how they’re different from one another.
Business to Consumer (B2C)
B2C or Business to Consumer is an e-Commerce business model where a company markets its services or products to their end users. It is the most popular model and fairly straightforward. Every time you order food online, watch a movie in the cinema, or eat in a restaurant, you complete a B2C transaction.
When it comes to e-Commerce, there are five separate B2C models: online intermediaries, direct sellers, community-based, advertising-based, and fee-based.
The most common model is the direct selling one which is when consumers purchase products directly from the seller. Online intermediaries include those online businesses that bring consumers and sellers together. These online businesses take a cut of every transaction between the two parties. When information is given away for free and Fp drives the sales on the site, we’re talking about the advertising-based model. A community-based site such as Facebook targets ads to users based on their location and demographics. Lastly, the fee-based model includes companies that sell entertainment or information to consumers for a specific monthly or yearly fee such as Netflix.
Business to Business (B2B)
B2B or Business to Business is when a company markets its services and products to another company. This business model can be broken down into two separate methodologies: horizontal and vertical.
If you opt for a horizontal approach, you will be selling to customers from a myriad of industries. On the other hand, a vertically oriented business sells its products only to a very specific industry. Both of these two approaches have their benefits and drawbacks. For instance, the vertical methodology has market depth and industry expertise, while the horizontal one offers wider market coverage and diversification.
While both of these approaches can be highly beneficial for the business, you need to choose the one that will actually fit your business needs. This depends on what products you’re offering, who your customers are, and many other factors.
Business to Government (B2G)
The third one is B2G. This is a business-to-government model in which companies market their services and products to a government agency. This can include a wide variety of government agencies such as the county, local, federal, or state agencies.
For instance, a B2G relationship can be when an ammunition manufacturer sells ammunition equipment to the US Army. It can also be when a local B2G business such as a private engineering company sells its services to a county government for the purpose of building new sewer systems within the community.
Interacting with government agencies differs a lot from interacting with consumers or other businesses. Due to the fact that you have to deal with bureaucracies, business deals will move a lot slower. An e-Commerce company can bid on government contracts, but most government agencies won’t directly contact an e-Commerce website to place an order.
The only exception to this rule can be a local government agency that places an order on the website for repairing a piece of equipment. However, this depends on the size of the agency and its needs.
Business to Business to Consumer (B2B2C)
Business to business consumer model (B2B2C) is when a company sells their products to another company and that company proceeds to sell these products to their consumers. One example of this model is when a wholesale distributor sells merchandise to retail stores and that’s where the products reach the end users.
This model contains three parts: the first business, an intermediary, and the end user. There are a few ways this model can be used in e-Commerce. For instance, two companies can partner up in order to promote your business and each other’s services and products. They can provide a commission for every sale made. The biggest benefit of such practice is definitely the acquisition of new customers.
Consumer to Business (C2B)
Consumer-oriented models have been gaining a lot of popularity recently. The C2B e-Commerce business model includes individuals such as freelancers and contractors and allows them to share services or work they have skills in. Most of the time, businesses put in a request or a bid for the worker’s time and then pay them through the same platform.
One of the most popular examples is Upwork. This platform helps connect companies directly with talent. It’s sort of like a marketplace for work. It includes a wide variety of job positions and you can even look them up based on your location. For instance, if your company is based in Australia and you need someone from your country and region who understand the tax laws of your country to help you with bookkeeping tasks, you can look up a tax accountant in Sydney and get them hired through a C2B model.
The biggest advantage of this model is that it allows consumers to choose their own prices and even expand their reach.
Consumer to Consumer (C2C)
Lastly, a C2C model is a consumer-to-consumer business model. With the rise of the digital landscape, this concept has been made possible. Companies such as Craigslist, eBay, and Etsy are great examples.
In this e-Commerce business model, consumers can sell their services and goods to other consumers. They usually do this by using a third-party website or marketplaces that allow transactions on behalf of sellers and buyers. E-Commerce marketplaces are great for small businesses or even people who like to indulge in their hobbies and sell hand-made goods.
To sum up, there are six e-Commerce business models in total. They differ based on the parties involved and how the products and services are promoted and sold. All of them have their benefits and are used based on what your company needs and offers. Use them wisely to reach your company’s target audience.