If you want to quit your 9 to 5 to execute your eCommerce business idea, If you cannot connect to multiple eCommerce business models and get confused between B2B, B2C, C2C, and so on, this is your post.
When starting an eCommerce business, you have many different options to choose from. Some companies are dedicated to one product or service, while others offer a variety of products and services. But one of the biggest challenges new eCommerce entrepreneurs face is choosing the suitable business model for their venture.
The right model offers the best opportunity for growth and also provides the best long-term financial model for the business. Choosing an appropriate model is essential since this will affect the rest of the business’s direction and strategy.
That said, choosing a suitable eCommerce business model can make or break your company. The reasonable model will allow you to scale and be profitable, while the wrong model will limit your growth and even result in bankruptcy. However, it is not possible to decide on any business model as it depends on what your eCommerce business would be based on: physical products, digital products, or services. Which one works best for you also depends on your goals, location, and the types of products and services you offer.
This guide will go over the most common eCommerce business models and help you decide which is best for your business. So, let the game begin!
Most popular and prevalent eCommerce business models
Similar to traditional wholesalers who deal with other small or medium businesses offline, the Business-to-Business model facilitates the same thing but online. A B2B eCommerce platform can sell any products or services that other firms buy for themselves or their end customers. For example, BigCommerce or Shopify allows other eCommerce businesses to build and maintain their customized platform. Or Alibaba connects retailers with worldwide manufacturers and wholesalers.
If you have something to sell that other businesses need or you think you can bridge the gap between retailers and wholesalers, the B2B model is for you. Compared to the B2C model, eCommerce platforms with B2B generally have high-value orders. Because companies would want to buy in bulk or in more quantity than individual customers.
Not to mention, if you deliver satisfactory services with quality products, the orders tend to be recurring. On the downside, the model requires a significant capital investment to set up to fulfill big orders and is prone to having a long sales cycle.
The most common business model among all eCommerce platforms, Business-to-Consumer-based eCommerce apps bridge the gap between retailers and their end customers. In contrast to B2B, products and services sold by B2C sites are of lower costs, so decision-making time is also shorter. Recently many brick-and-mortar retailers have adopted the B2C model to create their own eCommerce apps and serve their customers online.
As a result, the global B2C e-commerce market size is expected to grow at a 9.7% CAGR from 2021 to 2028, which was valued at $3.67 trillion in 2020. Since it offers a hassle-free shopping experience without requiring customers to step out of their homes, the demand for B2C eCommerce apps is rising. However, with the need, the number of competitors is also snowballing, oversaturating the market.
This calls for the right strategy, offers like same-day delivery, and elite customer service to compete with giant B2C eCommerce sites.
You know eBay and Etsy are the two most famous eCommerce platforms, but do you know what model they have built their business on? Right, it is the Customer-to-Customer eCommerce model they have adopted which enables anyone to sign up and sell anything to other customers. In other words, under this model, you offer a technology solution to connect buyers and sellers to trade.
Though, C2C eCommerce platforms are required to have rich functionality, such as in-app chat and call, online payment, order delivery, tracking, etc. However, developing a feature-rich eCommerce platform may cost a little higher.
But, since you don’t actually source and store any products and need just one high-performing app, you can start a C2C eCommerce business with a minimal budget. You can also integrate multiple revenue streams, such as transaction fees, ads, premium app versions, etc.
The Customer-to-Business is a reverse model of B2C where customers or end-users provide value to businesses in need. An eCommerce platform with this model connects businesses with individuals who can do their job. For example, UpWork, where millions of sole professionals offer services they excel at, including web development, copywriting, marketing, etc.
If you have an idea or want to build an eCommerce platform with the C2B model, you will need to conduct comprehensive target market research. Finding your niche and high engagement are critical to C2B businesses.
Things to consider when choosing an eCommerce business model
After looking into four conventional eCommerce platform business models, let us now talk about how to identify which one to go for.
Who is your customer?
Who’s your target market? You should think about what they would expect when they buy the kind of product you’re selling.
Understanding the behaviors and habits of your audience is key to being successful. If you can find ways to improve them or save money, you will be more likely to achieve your goals.
To understand your audience, you’ll need to look for places where the current system isn’t working for them. This way, you can find success as an innovator by carving out your own place in the market.
What can you do better than others?
When it comes to your strengths, what do you know better than anyone else? Use that to your advantage and build around the pieces that energize you. Just be realistic about what elements you can do yourself and what you’ll need help with.
It’s not always easy to be aware of your own limitations, but it’s an important piece of information to have if you want to make good decisions that will help you in the long run.
What is best for your product?
The model you choose for your product should be based on what will be most beneficial for you. Different products will require different models in order to be successful. For example, if you are producing your own products, business-to-business may help cover production costs and allow you to break even more quickly.
If you distribute other companies’ products, you should go with business-to-consumer and put more money into direct marketing and strategies to get more customers.
What is your positioning?
Make sure you can explain why your eCommerce platform is better than your competition. If you can’t, consumers won’t either. Are you competing on convenience? Product quality?
Your unique value must be communicated clearly in all aspects of your business from the back end to the front end and everything in between.
Have you decided yet?
There are many different ways of selling products and services online. The fact is that you can sell online using almost any method. However, choosing the eCommerce business model is one of the most complex decisions for online retailers. It requires comprehensive research and a lot of careful planning. Because only an ideal eCommerce business model can help you generate fair revenue to cover the cost of operations.
On that note, I hope this post adds value to your eCommerce business model research and helps you recognize your best one.