Selecting an ecommerce business model is an essential decision that will have lasting impacts on how your online store runs. Here are six popular models you should keep in mind when making this choice:
C2C transactions involve customers selling products or services directly to each other. Companies like eBay, Craigslist and Esty provide this platform through hosting online marketplaces that facilitate transactions.
1. B2C
B2C (or business-to-consumer), is a retail model where goods and services move directly from businesses to customers, in contrast to B2B (business-to-business), where products and services pass between different businesses.
Online B2C ecommerce models typically fall into one of five categories: direct sellers, intermediaries, advertising-based B2C, community-based and fee-based models. Direct sellers include manufacturers, small businesses and online retailers while intermediaries connect consumers with products by promoting brands, products and services on their websites and generating traffic with traffic-driving digital marketing strategies, ultimately earning commission for every sale made through them.
Community-based models consist of social media platforms with communities focused around specific identities, interests and ideas. These sites use data about users such as demographic information and geographic location to help marketers market goods and services more effectively to them. Fee-based ecommerce models require users to pay a subscription fee in order to gain access to content like The New York Times or entertainment services such as HBO Max.
Benefits of B2C ecommerce models for consumers include lower prices as they don't pass along retailer markups or agent commissions to customers, as well as 24-hour access for retailers and stores alike. It also enables a company to stay open 24-7 and provides additional opportunities such as installation of home theater systems or pre-purchase consultation and design of electronic equipment purchases; or connecting customers to sources of financing for larger purchases.
2. B2B
Business-to-business (B2B) ecommerce refers to transactions between businesses online. Companies engaged in this form of commerce tend to be wholesalers, manufacturers, or distributors that sell products and services wholesale or bulk quantities to other businesses.
Under the B2B model, ecommerce businesses may create or contract with suppliers to manufacture unique products before adding their own branding and selling them as their own - an approach known as white labeling or private labeling that's increasingly common for specialized categories where off-the-shelf solutions don't meet specific needs.
Ecommerce businesses can also generate income by selling their expertise - whether that means social media strategy, copywriting or influencer marketing services via platforms like Upwork or Fiverr.
Ecommerce offers businesses an effective means of reaching a global market, but before diving in it's important to gain a thorough understanding of all the different ecommerce models available so you can select one best suited to your company and its goals.
Government-to-consumer (G2C) ecommerce involves public administration offices or agencies selling products and services directly to consumers through digital government portals, like those used for paying taxes or tuition, or official document services. This model offers value directly to its audience which helps foster greater loyalty and engagement with the brand.
3. C2C
Consumer to consumer (C2C) ecommerce refers to transactions between two consumers directly without the involvement of a business. C2C transactions often occur via third-party platforms like eBay or Facebook Marketplace that facilitate this form of commerce between buyers and sellers.
Benefits of this model for businesses include expanding their customer reach while still providing excellent service - for example, a small bakery could partner with an online food delivery service to increase geographical coverage or a freelance copywriter or influencer marketing expert could use an online platform to connect with businesses needing their expertise.
Peer-to-peer (P2P) ecommerce is another form of C2C commerce that facilitates direct transactions between buyers and sellers, including platforms like Poshmark or Facebook Marketplace or auctions. P2P models generally entail websites that connect sellers with buyers as well as take a commission per sale made.
C2C businesses frequently partner with suppliers to produce an unbranded product and then market and brand it themselves as their own brand. This strategy has proven popular for skincare and other highly specialized categories that require niche manufacturing expertise. Businesses may also opt for white label manufacturing contracts whereby bulk production takes place with branding applied later.
4. B2A
B2A (Business to Apple) is a business model and strategy in which one purchases and brand an existing third-party product to sell under their own brand name, similar to white labeling. B2A models are commonly seen in fashion and health industries; cosmetic brands purchase body cream from suppliers, then apply their own logo and packaging - often known as white labeling. B2A businesses also benefit from this model like project management tool Trello or influencer platform GRIN which use it.
Consumer-to-consumer (C2C) ecommerce is a common model that enables individuals to sell directly to other consumers through marketplaces like eBay, Craigslist and Etsy. C2C model can also be employed by freelancers or microbusinesses that offer services directly such as social media strategists, copywriters or influencers online.
C2C businesses make money through advertisements on popular social media platforms like Facebook and Twitter, or subscription services like Spotify or Netflix that provide entertainment and information at a monthly fee.
Many companies that traditionally operated in a C2C model have transitioned into wholesalers selling directly to individual consumers at reduced rates, eliminating middlemen and creating greater customer loyalty while cutting operational costs by selling directly. Warby Parker and Glossier use this strategy for selling eyeglasses at more cost-effective rates directly.
5. Freemium
Under the freemium model, a company provides consumers with free basic versions of its product while encouraging them to upgrade to premium versions that feature additional features. The freemium model can be an ideal way to build customer base before charging for subscription services like software.
Though the benefits of freemium models are numerous, they also pose some drawbacks. Converting users from free tier to paid can be challenging; this challenge can be addressed with an effective marketing campaign that emphasizes product value and highlights benefits of premium versions.
Additionally, freemium models can be difficult to scale. Therefore, businesses should carefully assess their freemium tier's potential before expanding it further and providing sufficient support to the growing user base which may prove costly.
Even with its drawbacks, the freemium model can be extremely successful when employed correctly. By offering free versions of their product and encouraging users to upgrade later on, companies can generate significant revenues without incurring too many expenses in terms of advertising or other marketing channels. This model is particularly advantageous for service-oriented businesses like video game developers and content publishers.
6. P2P
Consumer-to-consumer business models allow individuals to sell products or services directly between themselves via marketplace websites like eBay, Craigslist and Esty. Such marketplaces typically make revenue through listing fees or transaction rates.
Businesses that produce or deliver goods and services may find an advantageous subscription model advantageous, in which customers purchase the product on a recurring basis such as monthly or annually. This provides for predictable revenue that helps businesses plan more accurately while subscription services typically offer superior customer experiences that promote brand loyalty while driving growth over time.
Business-to-business (B2B) eCommerce is another form of eCommerce. Under this business model, companies purchase goods from other businesses for their internal use such as office supplies or technology that will later be sold directly to consumers. B2B eCommerce is growing increasingly popular due to rising productivity needs and collaboration needs.
Businesses using the C2C business model, like Upwork, can utilize online platforms to connect with freelancers in the C2C model, such as Upwork. This can help reduce overhead and staffing costs while opening access to a wider pool of talent. Freelancers may fill roles such as social media strategists, copywriters and digital influencers who charge an hourly rate or set flat fees; alternatively payment may also be based on per project payment terms.