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E-Commerce Business Models - Types & How to Choose Them?

Starting a business through e-commerce today has never been easier. However, knowing the type of business model to use may just be the biggest obstacle one will face at the start. 

What is a Business model?

A business model is the fundamental strategy used by an organization to run profitably and satisfy clients. The customer value proposition and price strategy are explained by the characteristics of an effective company model. The model defines a company's offerings in terms of goods and services, target customers, and projected costs.

Types of E-Commerce Business Models

Different production and delivery processes are used in different types of. business models. Let's explore a few common business models that can be used to launch a business. 

B2C

Selling directly to consumers is the focus of any B2C companies. Every purchase a person makes as an online consumer tends to be a B2C transaction.

In particular the decision-making process for a B2C transaction is much quicker than that of a B2B purchase. Compared to B2B, B2C businesses often spend less on marketing while also having shorter sales cycles, smaller average order values, and fewer repeat business.

B2C encompasses both goods and services. B2C innovators have used technology to directly sell to their customers and improve their lives, such as mobile apps, native advertising, and retargeting.

B2B

A business offers its goods or service to another business in a B2B business model. Although the buyer frequently resells to the consumer, the buyer is occasionally the end user. On average, B2B transactions have a longer sales cycle but bigger order values and more frequent purchases.

New and recent B2B entrepreneurs have created a niche by eschewing order forms and catalogues in favour of storefronts on e-commerce sites and an improvement on targeting a certain niche market. 

Millennials made up 60% of B2B buyers in 2021, an almost double increase from 2012. B2B selling online is growing increasingly crucial as younger generations enter the age of commercial interactions.

B2B2C

Business-to-Business-to-Consumer is referred to as B2B2C. It is a business strategy in which a corporation partners with another organization to offer its goods or services to final consumers. 

The end customer is aware that they are purchasing a good or using a service from the main business, unlike when a corporation white labels a product and presents it as its own.

B2G

Business-to-government (B2G) is an e-commerce model in which a company offers and sells its products to public administrations or government agencies, whether they be municipal, county, state, or federal.

This strategy depends on obtaining government contract bids. A request for proposals (RFP) will normally be posted by a government agency, and e-commerce companies will then be required to submit bids for these projects. 

B2G is different from other companies or consumers even if it is one of the most  secure models. Government organisations tend to move at a somewhat slower speed due to their bureaucratic structure, which might restrict their ability to generate income. 

C2B

C2B firms creates a space for people to offer their products and services to businesses. In this e-commerce approach, a website might allow users to publish the job they need done and request quotes from companies. Services for affiliate marketing would also be categorized as C2B.

The pricing of goods and services is the competitive advantage of the C2B ecommerce model. With this strategy, customers have the authority to set prices or to influence company competition to satisfy their wants.

Recently, creative thinkers have connected businesses with social media stars to advertise their products.

D2C

Without the assistance of outside wholesalers or internet retailers, a direct-to-consumer business sells its own product to its final clients. 

There is no intermediary between the customer and a business, unlike other business models like B2B2C.

C2C

Online marketplaces and C2C ecommerce companies connect customers to trade products and services, and they often recoup their costs by charging transaction or listing fees. 

C2C firms gain money from the customers and sellers who create their own growth, but they also confront significant challenges with quality assurance and technological upkeep.

In the early years of the internet, companies like Craigslist, Walmart, Alibaba, and eBay pioneered this strategy.

Delivery methods

Every business model type has its own delivery method such as:

White label: selling a third-party product under your own brand name. 

Private label: getting a product produced by a third party and selling it under your own brand name, controlling everything about the product. 

Wholesaling: selling products in bulk at a discount to other businesses. 

Dropshipping: marketing and selling items fulfilled by a third-party supplier. 

Subscription service: offering customers convenient and recurring deliveries of goods or services

How to Choose the Right Ecommerce Business Model ?

With the various types of business models and delivery methods to choose from it can be difficult to make up one's mind. However it is not impossible to do so if you answer a few basic questions

What are you selling?

Physical goods

The most popular and frequently most profitable item on e-commerce sites is physical goods. 

If you know what product you want to manufacture, it won't be difficult to enter the online market for everything from car parts to books to electronics and gadgets. 

Digital products

The world is increasingly becoming a digital marketplace, making it simpler than ever to sell digital goods and things. 

Because of the nature of digital goods, your business virtually totally determines what you may sell and how much of it. Do you want to sell eBooks? a web layout? The world is your oyster as long as you're not violating any copyrights.

Services

The ease with which services are now sold is another impact of the wider shift into the digital economy. 

Prior to the advent of online marketplaces, most service sales were made through word-of-mouth or newspaper advertisements. Service-based companies can now build their own websites to promote themselves.

Furthermore, there are many accessible routes for advertising because to the success of markets like Facebook Marketplace, Etsy, and Amazon. It only takes a few clicks to locate a group seeking exactly the services you might provide. 

Who are you selling to?

When acquiring the kind of new product you intend to offer, take into account the expectations of your clients. Understanding their behaviors and habits and coming up with solutions to change them or cut costs can increase your chances of success.

You'll need to identify any problems with the way business is now conducted at your organisation if you want to achieve this. This is a chance for entrepreneurs to create a niche where they may enhance consumer connections and general contentment.

How does it differs from competitors?

You are aware of the improvements your product makes, but will customers agree? Consider your rivals and make sure it is obvious why your product is the better option. Your back-end operations, warehousing, marketing, and the purchasing experience on your website should all clearly demonstrate your distinct value.

How to sell the product effectively?

Different models will serve you better than others depending on your goods.

For instance, if you are producing your own goods, you might want to think about subscriptions or wholesale sales to aid with production expenses and reach break-even faster.

If you are a distributor of other people's goods, you should put more money into direct marketing and techniques for expanding your clientele.

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