different types of e business model

10 Types of Ecommerce Business Models That Work Right Now

Darren DeMatas

November 27, 2023

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Ecommerce business models of all types are thriving. Sales from online stores are expected to increase 385% this decade.

It’s easy to get caught up and excited in the latest ecommerce trends , but unless you know the fundamentals, you’ll hit a profitability wall without knowing it.

A booming ecommerce business takes intuition, knowledge of your market, a solid business plan , and careful research into products and business models. But one of the biggest hurdles most newcomers to the space face is easy to solve. Many would-be ecommerce business owners just don’t know how ecommerce businesses are set up and what different types of ecommerce are available to them.

If you want to ease into an ecommerce juggernaut, I’d suggest you start a hybrid ecommerce, affiliate store. More on that later.

You’ll need to familiarize yourself with each type of ecommerce model before you start your ecommerce business :

You’ll also need to identify an ecommerce platform that suits your preferred business model’s needs. In this post, I’ll walk you through the jargon.

Major Ecommerce Business Classifications

Electronic commerce encompasses all online marketplaces that connect buyers and sellers. The internet is used to process all electronic transactions.

The first thing to think about is the type of business transaction you’re going for. When you think about how you want to sell online, who do you see yourself selling to? Is your business B2B, B2C, C2C, or C2B?

Do you have an idea for a type of ecommerce business that you’ve been thinking about for a while? Do those acronyms make your head spin? Let’s take a look at the most common ways online transactions occur or you can check out a ton of these ecommerce business examples to understand the type of business you’re going after.

B2B: Business to Business Ecommerce

A business-to-business (B2B) model focuses on providing products from one business to another . While many ecommerce sites in this niche are service providers, you’ll find software companies, office furniture and supply companies, document hosting companies, and numerous other ecommerce business models under this heading.

B2B ecommerce examples you may be familiar with include the ExxonMobil Corporation and the Chevron Corporation, Boeing, and Archer Daniel Midlands. These businesses have custom, enterprise ecommerce platforms that work directly with other businesses in a closed environment. A B2B ecommerce business typically requires more startup cash.

B2C: Business to Consumer Ecommerce

The B2C sector is what most people think of when they imagine an ecommerce business. This is the deepest market, and many of the names you’ll see here are known quantities offline, too. B2C ecommerce sales are the traditional retail model, where a business sells to individual online shoppers, but buying is conducted online as opposed to in a physical store.

Examples of B2C businesses are everywhere. Exclusively online retailers include Newegg.com, Overstock.com, Wish, and ModCloth, but other major B2C model brick-and-mortar businesses like Staples, Wal-Mart, Target, REI, and Gap.

C2C Ecommerce

B2B and B2C are fairly intuitive concepts for most of us, but the idea of C2C is different. What does a consumer-to-consumer ecommerce business look like?

Created by the rise of the ecommerce sector and growing consumer confidence in online business, these ecommerce websites allow customers to trade, buy, and sell items in exchange for a small commission paid to the site. Opening a C2C site takes careful planning.

Despite the obvious success of platforms like eBay and Craigslist, numerous other auction and classified sites (the main arenas for C2C) have opened and quickly closed due to unsustainable models.

C2B: Consumer to Business Ecommerce

C2B is another model most people don’t immediately think of, but that is growing in prevalence. This online shopping business is when the consumer sells goods or services to businesses, and is roughly equivalent to a sole proprietorship serving a larger business.

Reverse auctions, service provision sites like UpWork, and several common blog monetization strategies like affiliate marketing or Google AdSense also fall under this heading.

Government / Public Administration Ecommerce

The models listed above are the primary ecommerce retail structures, but they aren’t the only ones. Other types involve government/public administration conducting transactions with businesses or consumers.

• B2G (also called B2A) , for businesses whose sole clients are governments or type of public administration . One example is Synergetics Inc. in Ft. Collins, Colorado, which provides contractors and services for government agencies.
• C2G (also called C2A):  typically individuals paying the government for taxes or tuition to universities.

Two sectors that are closed for entrepreneur owners but are growing include G2B for government sales to private businesses, and G2C, for government sales to the general public.

Types Of Ecommerce Business Revenue Models

The next most important thing to think about is how you want to handle inventory management and sourcing products. Some people like the idea of making their own products and others hate the idea of their garage full of boxes.

1. Dropshipping

The simplest form of ecommerce, drop shipping lets you set up a storefront and take the customers’ money through credit cards or PayPal. The rest is up to your supplier. This frees you from managing inventory , warehousing stock, or dealing with packaging, but there are disadvantages. For example, quality control.

If your sellers are slow, product quality is lower than expected, or there are problems with the order, it’s on your head (and in your reviews).

Many dropshippers use Shopify and Spocket . Its quick and inexpensive to set up. A popular model is to set up a quick store and drive traffic with Facebook Ads. Margins are thin and if you can squeeze out some profit here, more power to you. I’m holding off on drop shipping for now, but you can make money with it.

2. Wholesaling and Warehousing

Wholesaling and warehousing ecommerce businesses require a lot of investment at the start – you need to manage inventory and stock, keep track of customer orders and shipping information, and invest in the warehouse space itself.

DollarDays is an online wholesaler with a massive product catalog that includes more than 260,000 products. They employ a key strategy for retailers in this space – by offering case prices AND piece prices, they can sell to the general public and to retailers. This gives them a higher profit margin than a strictly wholesale model.

Solutions For Wholesalers

Wholesale businesses are all about volume. You’ll need to push products out to eBay, Amazon, Google, etc. BigCommerce includes all this in their Basic plan for $29 month. No tinkering needed. If you have dev skills, you can use X-Cart .

3. Private Labeling and Manufacturing

If you’ve got an idea for the perfect product, but don’t have the cash or desire to build your own factory, this might be the right business model for you. Companies that manufacture products offsite for sale send the plans or prototypes to a contracted manufacturer who produces the product to meet customer specifications and can either ship directly to the consumer, to a third party such as Amazon, or to the company selling the final product.

On-demand manufacturing allows you to quickly change suppliers if you encounter problems with product quality. The startup costs are minimal, and if you’re interested in potentially opening your own production facilities later, this is a good way to test a new product or concept.

• The Complete Guide To Finding The Best Private Label Manufacturers
• 29 Private Label Product Ideas to Kickstart a $100K+ Brand

4. White Labeling

White labeling is similar. You choose a product that is already successfully sold by another company, but offers white label options, design your package and label, and sell the product. This is common in the beauty and wellness industries, but more difficult to encounter in other niches.

One problem with white labeling is demand. You’re stuck with whatever you order, and most of these companies set a minimum production quantity. If you can’t sell it, you’ll have to live with it. Consider this option when you’re willing to work full time on your business and know your product is in demand.

A common type of white labeling is Print On Demand. Read more about how to start a print on demand business .

5. Subscription

One of the most popular and successful pure ecommerce brands is the Dollar Shave Club. Other examples of subscription services include Stitch Fix, Blue Apron, and Nature Box. On the local level, community-supported agriculture boxes are popular.

These companies rely on a subscription model that delivers customers a box of products at regular, scheduled intervals. Subscription companies have relatively reliable income streams and can easily incentivize customers to purchase additional subscriptions or encourage their contacts to subscribe.

Picking the right products and niches can be difficult . Successful subscription boxes tend to fall into a small handful of product categories: health and grooming, beauty, fashion, and food.  Outside of these areas, few subscription companies thrive.

Recurring Online Billing Software

I love the idea of a subscription based e-commerce model. Both Shopify and BigCommerce need additional, paid apps for subscription based ecommerce. So you’ll need something like WooCommerce Subscriptions (WordPress) or X-Cart to handle this.

• 21 Product Research Tips To Uncover Legit Ecommerce Market Opportunities
• How To Start Your Own Clothing Line (Tips From 14 Fashion Pros)
• How to Sell Your Successful Ecommerce Business
• How to Sell A Shopify Store (Free Guide)

What Model Fits Your Idea Best?

Now that you know what ecommerce businesses , product options, platforms, and business classifications exist, you’re ready to get started. Take a look at your business plan.

No matter what eCommerce business model you choose, chances are you are going to need outside funding at some point in order to scale your business . Funding solutions like  Payability  specialize in eCommerce businesses and offer both accelerated daily payouts when marketplaces pay on terms and capital advances based on future eCommerce sales.

If you found this article useful, please give it a share.  Keep reading the Ecommerce CEO blog for tips to help you succeed in ecommerce, from choosing your online platform to marketing your products and site. Maybe you want to know how to find your niche.

If there’s a topic you would like to see covered that you don’t see in our archives, leave a comment below.

What Is The Most Popular Type Of E-Commerce?

Business-to-consumer (B2C) is the most common type of ecommerce business model. This type of business is what most people generally think of when they imagine an ecommerce company. A B2C company sells its products to end users rather than manufacturers or other businesses.

What Kind Of Online Business Is Most Profitable?

Some types of online businesses that have been known to be profitable include e-commerce stores selling high-demand products, software-as-a-service (SaaS) companies offering subscription-based services, affiliate marketing websites promoting popular products or services, and online education platforms offering specialized courses or certifications. It’s worth noting that success in any online business requires a solid strategy, efficient execution, and continuous optimization based on customer feedback and changing market trends.

Which Hosting Company Should I Choose For My Ecommerce Website?

There are many hosting companies to choose from, and the best one for your ecommerce website will depend on your specific needs and budget. Some popular options for ecommerce websites include: 1. Shopify 2. Wix 3. ShopWired 4. BigCommerce Ultimately, the best hosting company for your ecommerce website will depend on factors such as your budget, website traffic, security needs, and preferred platform. It may be helpful to do some research and compare different options before making a decision.

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7 Types of eCommerce Business Models: Everything You Need to Know

Table of contents, what is ecommerce, why are there so many types of ecommerce models, selecting your ecommerce business model, 7 popular ecommerce business models, conclusion: your business plan starts with your model, which ecommerce platform is best, how we optimize each model, key takeaways.

• An eCommerce business model refers to the structure and strategy that a company uses to conduct online transactions with customers.
• There are several different eCommerce business models, including B2B, C2C (marketplace), B2C, B2G, C2B, D2C, and B2B2C.
• Businesses may combine these models. For example, Amazon is both B2C (selling directly) and C2C (other vendors selling via Amazon Marketplace).
• Finding the right eCommerce platform for a particular business is a vital part of starting a business.

As more businesses embrace digital technologies, it is important to understand the different types of eCommerce business models and their implications for business operations.

Online business models are characterized by their unique characteristics which include operational flexibility, cost savings, scalability, and customer convenience. These characteristics enable companies to quickly scale up or down in response to market conditions or customer preferences.

In this article, we explore all these topics in greater detail so that readers can make informed decisions about the different types of eCommerce , so let's get started.

ECommerce is the process of buying and selling goods or services over the internet. It involves a wide range of activities, including setting up an eCommerce store, designing and developing an eCommerce website, marketing products and services, processing orders and payments, managing customer service inquiries, and more.

ECommerce businesses are becoming increasingly popular with consumers who are looking for convenience, variety, and competitive prices. ECommerce business models provide companies with an opportunity to expand their reach by reaching customers from all over the world.

By engaging in eCommerce activities, businesses can increase their market share and profitability while reducing costs associated with a physical presence in the marketplace.

ECommerce business models are diverse, as we'll discuss below. Each type of eCommerce business offers its own unique advantages to its users.

Businesses must consider various factors when selecting an eCommerce model such as customer preferences, competitive landscape, cost structure, and user experience when determining which model best suits their needs.

Generally speaking, the three most common types of eCommerce models—business-to-business, consumer-to-consumer, and business-to-consumer—make up the bulk of businesses you'll find online.

Other business models include B2G, C2B, D2C, and B2B2C, each of which serves niche needs.

Each of these models has its own unique set of advantages and disadvantages that should be considered when deciding which type best suits an individual or company's needs.

The choice of which eCommerce model best suits an individual or company's needs depends on a variety of factors including cost efficiency, accessibility, customer service levels, delivery options, payment methods, and scalability among others.

Taking all these into account will help ensure that the chosen model maximizes profits while providing customers with an enjoyable experience that promotes loyalty over time.

Having a clear understanding of popular eCommerce business models is a great start to selecting the best model for your business.

How Are You Different?

The most important factor in this decision is understanding what sets your business apart from the competition, and how you can leverage that unique characteristic to make your eCommerce model successful.

What Are the Challenges?

It is also essential to identify any challenges that you may face when setting up an online store and determine whether or not these will have an impact on which eCommerce model you choose.

Which Model Is Right for You?

It is recommended that entrepreneurs take time to evaluate each of the different eCommerce models available before deciding on one. This evaluation should include assessing the advantages and disadvantages of each model, as well as their suitability for different types of eCommerce businesses.

It's important to consider the scalability of any given model and its potential for growth over time. Understanding the potential risks associated with different models can help entrepreneurs make informed decisions when selecting their own eCommerce website and business model.

As online shopping continues to grow in popularity, it is important for businesses to understand the different eCommerce business models available and how they can be used to benefit their organizations.

Each one has advantages and disadvantages that should be considered when deciding which one best suits your organization’s needs.

B2B (Business-to-Business)

Business-to-business (B2B) eCommerce is a type of electronic commerce where businesses transact with other businesses. This business model has become increasingly popular in recent years, as more companies are recognizing the cost and time-saving benefits associated with conducting transactions online.

How B2B Works

The most common example of B2B eCommerce is when a manufacturer sells its products to wholesalers, retailers, or other manufacturers. In this model, the buyer typically purchases large volumes of products at discounted prices in order to benefit from economies of scale.

This type of transaction is beneficial for both parties as it allows buyers to access high-quality products at lower costs while sellers can meet their customers’ demands quickly and efficiently.

B2B Hybrid Models

In addition to traditional B2B models, there are also hybrid models such as consumer-to-business (C2B) which involve consumers selling products or services directly to businesses. This type of strategy has become especially popular among small business owners who lack the resources or capital to purchase large volumes of stock from suppliers. By connecting directly with consumers, small business owners can save money on inventory costs while still providing quality products and services to their customers.

Through this model, companies can make use of B2B eCommerce software to access new markets, increase customer satisfaction levels, reduce operational costs, and maximize profits. As such, B2B has become an invaluable tool for modern businesses looking to remain competitive in today’s digital marketplace.

B2C (Business-to-Consumer)

Now let's look at the difference between B2B and B2C eCommerce . This model involves selling products and services directly to consumers, rather than to other businesses. B2C has become increasingly popular in recent years due to the convenience that it offers customers.

Some of the advantages that come with using a B2C model include:

• Increased customer access: B2C stores are available 24 hours a day, 7 days a week, allowing customers to shop at their own convenience.
• Lower costs: Operating an online store is typically cheaper than maintaining a physical store since there are no overhead costs or inventory management costs associated with it.
• Increased product selection: ECommerce businesses offer customers a wider range of products to choose from compared to traditional brick-and-mortar stores.
• Personalization: Online stores can customize their offerings based on customer preferences and past purchases, providing customers with a more personalized shopping experience.
• Global reach: With an online store, businesses can easily reach customers all over the world without having to build physical locations in each country.

In order for businesses to successfully use the B2C model, they must ensure that their websites are optimized for mobile devices and maintain good customer service practices.

They should also invest in digital marketing campaigns to attract new customers and keep existing ones engaged. By doing so, companies will be able to maximize their potential profits and establish themselves as leaders in the eCommerce B2C industry.

C2C (Consumer-to-Consumer)

What is C2C? In this model, other consumers are the primary buyers and sellers of goods. Instead of a seller selling directly to customers, in this model, customers are selling directly to other customers. This setup provides convenience for customers who do not have access to traditional retail stores or those who just prefer to buy from other consumers.

This type of eCommerce business model presents unique opportunities for people who would otherwise struggle to make money from their product or service due to a lack of access to a physical store or website. It also eliminates the need for middlemen like wholesalers and distributors, allowing everyone involved in the transaction more control over how they price their products and services.

The C2C eCommerce business model sometimes called a C2C marketplace model, has become increasingly popular in recent years due to its ease of use and low-cost structure. Customers are able to quickly find what they need without having to worry about dealing with complicated online payment systems or waiting days or weeks for their items to arrive through traditional shipping methods.

C2C examples include Amazon Marketplace, Etsy, Facebook Marketplace, and eBay. All in all, this type of business model is proving invaluable for anyone looking for an innovative way of making money from their products or services while simultaneously providing convenience and value for customers.

B2G (Business-to-Government)

B2G (business-to-government) is an eCommerce business model where companies transact with government agencies on goods and services. It is a growing sector, driven by the need for agencies to use eCommerce as an efficient means of procuring goods and services.

Companies that provide these goods and services can receive government contracts for the supply of goods or services at competitive prices. This model has advantages for both parties, as it enables a government agency to purchase the necessary goods or services more quickly and cost-effectively from online vendors.

For companies, business-to-government provides access to a large potential customer base in the form of government agencies. Through this model, companies can build relationships with agencies through successful bids for contracts.

Government contracts offer stability and are often long-term agreements that allow businesses to plan their growth better. These transactions can also bring a company greater visibility due to the public nature of doing business with governments.

C2B (Consumer-to-Business)

The C2B (consumer-to-business) eCommerce business model is a relatively new concept that enables consumers to offer their goods and services to businesses. It is an online marketplace that connects buyers and sellers, allowing businesses to purchase goods and services from individual consumers on a large scale.

One example of this model is when entrepreneurs pitch inventions to potential investors for funding. In this case, the consumer is offering their invention or product to the business in exchange for monetary compensation.

Another popular form of C2B eCommerce is subscription services such as streaming platforms or digital content providers. In this type of service, the customer subscribes to access exclusive content from the provider on a regular basis. This type of service allows customers to access content without having to purchase it outright, giving them more freedom and flexibility with how they consume media.

D2C (Direct-to-Consumer)

This model allows companies to bypass traditional third-party retailers, giving them greater control over their product distribution and customer relationships. It also enables them to offer products at lower prices since they are not reliant on a middleman.

An example of this successful business model is Dollar Shave Club, an online subscription model service that offers razors and other grooming products directly to customers, without going through a different online retailer.

Benefit to Businesses

The D2C model offers numerous advantages for both the business and consumers. For businesses, it reduces overhead costs associated with retail outlets, while allowing them to build stronger relationships with customers through tailored messaging and personalization strategies.

Benefit to Consumers

Consumers benefit from more product options at lower prices, as well as better customer service due to direct contact with the company itself. Furthermore, D2C can be used for marketing purposes by creating brand loyalty and increasing brand visibility on social media platforms.

The D2C business model provides businesses with a viable option for achieving success in the eCommerce industry. By offering products directly to consumers at lower prices and emphasizing personalization strategies, companies can gain a competitive advantage in today’s online marketplaces while providing customers with a greater value for their money.

B2B2C (Business-to-Business-to-Consumer)

This model involves businesses selling products to other businesses, who then sell the same product to consumers. This creates a two-level distribution system that provides an additional layer of convenience for customers.

At its core, the B2B2C business model is centered around business deals. Businesses can access larger volumes of goods at lower prices, while suppliers have access to larger markets. Companies are able to build relationships with both buyers and sellers, making it easier to secure better deals in the future.

The third-party supplier is also able to benefit from this relationship as they can access higher quality goods at lower prices and avoid dealing with individual consumers. It differs from B2B in that there can be a dozen steps of B2B before finally reaching the consumer when mining, manufacturing, and wholesalers are considered.

In conclusion, it can be seen that there are many different types of eCommerce business models available for businesses to choose from. Each model has its own advantages and disadvantages, allowing entrepreneurs and business owners to select the best option for their unique situation.

By taking some time to research the various models and understand their individual nuances, business owners can make informed decisions that will help them achieve long-term success in their eCommerce endeavors.

No matter which business model you choose, Clarity Ventures can help make it successful. The Clarity eCommerce Framework, CEF , offers an excellent platform that can handle any type of successful eCommerce business model out there...or any combination of models.

Built with APIs in mind, CEF lets you pick and choose the best supplemental software out there. Instead of being stuck with what your platform dictates, you can choose the best software for payment hubs , inventory management, ERP, CRM, shipping, and much more.

We'd love to show you how it works. Get in touch for a free, no-pressure discovery process. We'll help you create a plan to get your project off on the right foot.

Which business model is best for eCommerce?

The best business model for eCommerce depends on the specific goals and resources of the business.

A model growing in popularity is the marketplace model (C2C, or consumer-to-consumer), where the eCommerce platform acts as an intermediary between buyers and sellers, earning a commission on each transaction. This model allows for a wide variety of products and services to be offered, and the platform can benefit from network effects as more buyers and sellers join the marketplace.

What category of eCommerce is Amazon?

Amazon is a multi-category eCommerce platform that offers a wide range of products and services. Originally focused on selling books, it has expanded to sell nearly every type of physical product, including electronics, clothing, groceries, and more.

In addition to physical products, Amazon offers digital products and services such as streaming video, music, and e-books through its Prime membership program.

Amazon also operates as a marketplace, allowing third-party sellers to offer their products alongside Amazon's own inventory.

What is the most common type of eCommerce?

The most common type of eCommerce is business-to-consumer (B2C) eCommerce. This refers to online transactions between businesses and individual consumers. B2C eCommerce includes online retailers such as Amazon, Walmart, and Target, as well as smaller online shops.

Consumers can browse and purchase products directly from these businesses' websites, and the products are shipped directly to the consumer's home. B2C eCommerce has become increasingly popular in recent years due to the convenience of online shopping and the wide variety of products available.

What is consumer-to-business C2B?

Consumer-to-business (C2B) is a type of eCommerce in which individual consumers offer their products or services to businesses. In a traditional business-to-consumer (B2C) model, businesses offer products or services to consumers. However, in C2B eCommerce, consumers can sell their products or services to businesses.

This model is often used by freelancers or small businesses that offer specialized services, such as graphic design or copywriting. C2B eCommerce platforms, such as Upwork and Fiverr, allow businesses to browse and purchase services from a pool of individual contractors.

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Understanding the Different Types of Ecommerce Business Models

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Innovative ecommerce businesses have transformed the way we shop today and redefined what is possible.

In 2013, ecommerce made up 6% of retail sales in the U.S., and by 2025, experts predict that ecommerce sales will make up nearly 22% of total purchases in the United States. 

Ecommerce is a business model that allows businesses and consumers to make purchases or sell things online. There are many different types of ecommerce business models to choose from, and today it’s easier than ever for creative founders to use them to make their ideas a reality.

If you want to innovate and defy expectations — if you're going to separate your business from all of the others online — you’ll need to know what business model works best for you and how you can leverage that into greater success.

The Most Common Types of Ecommerce Business Models

If you're starting an ecommerce business, odds are you'll fall into at least one of these four general categories. Each has its benefits and challenges, and many companies simultaneously operate in several.

Knowing what bucket your idea fits in can help you think creatively about what your opportunities and threats might be. 

No matter your growth stage or business model, BigCommerce can position your business for its maximum potential. If you're interested in learning more, contact sales to request a demo .

B2C (Business-to-consumer). 

B2C businesses sell directly to their end-users. Anything you buy in an online store as a consumer — from wardrobe and household supplies to entertainment — is done as part of a B2C transaction.

The decision-making process for a B2C purchase is much shorter than a business-to-business (B2B) purchase, especially for lower-value items. Because of this shorter sales cycle, B2C businesses typically spend less marketing dollars to make a sale while having a lower average order value and fewer recurring orders than their B2B counterparts.

B2C includes both products and services as well. B2C innovators have leveraged technology like mobile apps, native advertising and remarketing to market directly to their customers and make their lives easier.

B2B (Business-to-business).

In a B2B business model, a business sells its product or service to another business. Sometimes the buyer is the end-user, but often the buyer resells to the consumer. B2B transactions generally have a longer sales cycle, but higher-order value and more recurring purchases.

Recent B2B innovators have made a place for themselves by replacing catalogs and order sheets with ecommerce storefronts and improved targeting in niche markets. 

In 2021, 60% of B2B buyers were millennials — nearly double the amount from 2012. As younger generations enter the age of making business transactions, B2B selling in the online space is becoming more important.

B2B2C (Business-to-business-to-consumer).

B2B2C stands for Business-to-Business-to-Consumer. It is a business model where a company sells its product or service in partnership with another organization to an end customer. 

Unlike when you white label a product — where a company rebrands an item to present it as its own — the end customer understands that they are buying a product or using a service from the original company

B2G (Business-to-government).

Business-to-government (B2G) is an ecommerce model where a business sells and markets its products to government entities or public administrations — whether local, county, state or federal.

This model relies on the successful bidding of government contracts. A government agency will typically put up a request for proposal (RFP) and ecommerce businesses will have to bid on these projects. 

While a more secure business model, B2G differs from other businesses or consumers. The bureaucratic nature of government agencies often leads to a much more glacial pace, which can limit potential revenue streams. 

C2B (Consumer-to-business).

C2B businesses allow individuals to sell goods and services to companies. In this ecommerce model, a site might enable customers to post the work they want to be completed and have businesses bid for the opportunity. Affiliate marketing services would also be considered C2B.

The C2B ecommerce model’s competitive edge is in pricing for goods and services. This approach gives consumers the power to name their prices or have businesses directly compete to meet their needs.

Recent innovators have used this model creatively to connect companies to social media influencers to market their products.

D2C (Direct-to-consumer).

A direct-to-consumer business sells its own product directly to its end customers, without the help of third-party wholesalers or online retailers. 

As opposed to other business models such as B2B2C, there is no middle man between the consumer and a business. 

C2C (Consumer-to-consumer).

C2C ecommerce businesses — sometimes referred to as online marketplaces — connect consumers to exchange goods and services and typically make their money by charging transaction or listing fees. 

C2C businesses benefit from self-propelled growth by motivated buyers and sellers, but face a key challenge in quality control and technology maintenance.

Online businesses like Craigslist, Walmart, Alibaba and eBay pioneered this model in the early days of the internet.

Value Delivery Methods for Ecommerce Innovation

A value delivery method is how a product is designed in order to bring the most value to customers who are using it. If your business model is the car, your value delivery method is the engine.

Here are some of the most popular delivery methods taken by industry leaders and market disruptors:

White label.

White labeling is when a company brands and sells a product under its own name and logo, but it is manufactured or purchased from a third-party distributor. This can help boost brand visibility while minimizing manufacturing costs. 

White labeling is popular within heavily reproduced industries such as fashion and cosmetics. 

Private label.

A private label product is one that a retailer gets produced by a third party but sells under its own brand name. The retailer controls everything about the product or products. That includes the product's specs, how it’s packaged and everything else besides. 

Private label products are then delivered to the retailer to sell. As far as consumers are concerned, they’re the company’s ‘own brand’ products.

Wholesaling.

Wholesale ecommerce is a B2B ecommerce model where, instead of selling your products individually to consumers, you sell them in bulk and at a discount to other businesses — essentially as the intermediary between the manufacturer and the distributor or retailer.

In a wholesaling approach, a retailer will typically offer its products at a significant discount.

Dropshipping.

One of the fastest-growing methods of ecommerce is dropshipping . 

Typically, dropshippers market and sell items fulfilled by a third-party supplier, like AliExpress or Printful . Dropshippers act as a middle man by connecting buyers to manufacturers. Easy-to-use tools can allow users to integrate inventory from suppliers worldwide for their storefronts.

Subscription service.

As early as the 1600s , publishing companies in England used a subscription model to deliver books monthly to their loyal customers.  

With ecommerce, businesses are going beyond periodicals and fruit-of-the-month clubs . Today, virtually every industry has seen the arrival of subscription services to bring convenience and savings to customers.

Selecting Your Ecommerce Business Model

As seen above, there are several different types of ecommerce business models and value delivery methods to choose from. Deciding on a business model can be difficult, so here are a few questions that can help you create a business plan that will set your company apart: 

What are you selling?

An advantage of the online marketplace is that there will always be a market for what you want to sell — you just need to know exactly what that is. 

Before a business can take off, you need to understand what is currently being sold online and what you are interested in tapping into. 

Physical Products

Physical products are the most commonly sold commodity on ecommerce stores and often achieve the highest sales. 

From car parts to novels to electronics and gadgets, your entry into the online market won’t be difficult if you know what product you want to build. 

Digital Goods

As the world moves further into a digital marketplace, selling digital goods and products has never been easier. 

Because of the nature of digital goods, what you can sell and how much of it is determined almost entirely by your business. Want to sell an eBook? A web design? As long as you’re not infringing on any copyrights, the world is your oyster.

Another result of the broader move into the digital marketplace is how much easier selling services has become. 

Before online marketplaces, selling services typically occurred through newspaper ads or word of mouth. Now, service-based businesses can create their own websites to market themself.

Furthermore, the popularity of marketplaces such as Facebook Marketplace, Etsy and Amazon allows for accessible advertisement avenues. It takes just a few clicks to find a group looking for just the kind of services you may offer.  

Who is your customer?

Who are you looking to serve?

Consider the expectations of your customers when purchasing the type of new product you plan to sell. You’re most likely to succeed if you understand their behaviors and habits and find ways to improve them or save money.

To accomplish this, you’ll need to look for pain points in how things are currently done at your company. This is an opportunity for innovators to carve out a space to improve customer relations and overall satisfaction.

What are you capable of?

What do you know better than anyone else?

Build around your existing strengths and the pieces that are energizing to you. Be realistic about what elements you can do yourself and what you will need to find help for.

Uncovering your limitations can be challenging, but it will help you make better long-term decisions.

What is best for your product?

Depending on your product, different models will serve you better than others.

For example, if you are manufacturing your own products, you may want to consider wholesaling or subscriptions to help cover production costs and break-even more quickly.

If you are a distributor of other people’s products, you’ll want to invest more heavily into direct marketing and strategies to grow your customer base.

What is your positioning?

You understand what makes your product better, but will consumers? Evaluate your competition and make sure it’s clear why your product is the best choice.

Are you competing on price? Selection? Convenience?

Your unique value should be clear from your back-end processes, warehousing, marketing and your website’s shopping experience.

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The Final Word

In recent years, the ecommerce market has exploded in popularity and innovation. 

For businesses looking to take the next step into the digital world, understanding what business models to use and how to leverage them can make the difference between a successful business and one you never hear about again. 

With the help of BigCommerce, you won’t have to worry about the second option. Our solution is designed to help businesses build, innovate and grow — without hassle and with the help of industry experts. 

Your commerce, without limits.

FAQs for Ecommerce Business Models

What is b2b2c ecommerce, can you have a b2b and b2c ecommerce store, can all business types create an ecommerce website, browse additional resources.

Jun 28, 2023 | 13 minute read

Take a Deep Dive Into the 6 Types of eCommerce Business Models

written by Kirsten Aebersold

Editor’s Note: The post was originally published in 2018. It was most recently updated in 2023 to reflect the current state of eCommerce business models

Today, no matter your industry, you’re probably doing business online. Whether you’re brand is B2B, B2C, B2B2C , or some other configuration, your business success is affected by your eCommerce business strategy.

In 2023, eCommerce is projected to make up about 20% of overall global retail sales.Decades ago, it would have seemed unfathomable for one in five retail sales to occur online,, but with online shopping becoming more common, the share of eCommerce sales is expected to grow even more.

The shift to digital is real, and businesses not already selling online will need to break into the eCommerce landscape sooner rather than later. Deciding on a suitable eCommerce business model is one of the first and most important steps.

Not taking the time to evaluate your business and understand your target market can lead to wasted money and unrealized revenue. On the other hand, digital advertising, SEO, and content marketing effectively drive traffic and revenue and help you realize a large ROI. Still, these tactics are best situated within t a well-planned eCommerce business strategy.

Whether you’re just starting to explore eCommerce models or already have an established digital commerce venture and want to expand your online presence, it’s important to know which model best fits your needs and requirements.

What is an eCommerce Business Model?

Electronic commerce, or eCommerce, is a business model that lets businesses and consumers buy or sell online. There are six major eCommerce 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)

We’ll review each of these six business classifications in-depth. We’ll also explore the five primary delivery models that you’ll need to consider when launching or expanding your online store.

eCommerce Business Models: Business to Consumer (B2C)

As the name implies, business to consumer (B2C) is when a company markets its products or services directly to end users. It is the most widely known form of commerce. You complete a B2C transaction every time you purchase food from a grocery store, eat dinner at a restaurant, watch a movie at a theater, and get a haircut. You are the end user of the products and services these companies sell.

There are five different subsets of the eCommerce B2C business model:

• DTC eCommerce is where manufacturers maintain full control of the eCommerce strategy to sell directly to consumers without a retailer or distributor in the middle.
• Online intermediaries bring sellers and consumers together and take a cut of each transaction.
• Advertising-based models are when Information is given away for free and money is made from advertising on the site.
• Community-based sites make money from targeting ads to users based on their demographics and location. Facebook is a prominent example.
• Fee-based models are when companies sell information or entertainment to consumers for a fee, such as Netflix or subscription-based newspapers.

In recent years, online B2C sales have increased. As a result, many traditional brick-and-mortar retailers have been incorporating digital channels to reach consumers where they shop.

This hybrid approach is when companies have both a traditional brick-and-mortar presence and an online shopping platform. Many companies integrate these approaches with an omnichannel eCommerce strategy to improve the customer experience. For example, many companies now let you order your products online and pick them up at one of their local stores. Many companies also allow customers to return products they bought online to local stores to ensure a quick and easy refund or exchange.

ITo successfully implement the B2C eCommerce model, businesses must have an eCommerce platform that can adjust to customer needs without service delays or runaway costs.

eCommerce Business Models: Business to Business (B2B)

As the name implies, business to business (B2B) is when a company markets its products or services directly to other businesses. B2B eCommerce can be broken down into two methodologies, vertical and horizontal.

Vertically oriented businesses sell to customers within a specific industry. With a horizontal approach, you are selling to customers across many industries. Each method has its own pros and cons, such as industry expertise and market depth (vertical) versus wide-spread market coverage and diversification (horizontal).

Both can be lucrative pathways, but your strategy will depend on your products and customers, so consider them carefully.

Historically, B2B businesses were behind their direct-to-consumer counterparts, especially when it came to commerce innovation and digital sales. The problem lay in price negotiation and collaboration, as many businesses were used to leveraging sales representatives as the primary revenue-generating channel.

The modern B2B buyer has become tech-savvy and now shares many of the same demands and buying habits as the average consumer. Convenience, flexibility, personalization, and integrated experiences are expected in B2B commerce – providing them is business-critical.

Despite the slow adoption of digital strategies, B2B brands have focused more and more on eCommerce to keep up with consumers. A recent report by Gartner uncovered a recent dramatic shift with B2B digital commerce initiatives surpassing B2C. Gartner predicts that "by 2025, 75% of B2B manufacturers will sell directly to their customers via digital commerce."

Check out more of the top trends in B2B eCommerce that you should consider for your 2022 strategy..

eCommerce Business Models: Business to Government (B2G)

Business to government (B2G) is when a company markets its products and services directly to a government agency. This agency could be a local, county, state, or federal agency.

An example of a B2G relationship is when an ammunition manufacturer sells ammunition to the US Army. An example of a local B2G relationship is when a private engineering company sells its engineering services to a county government to develop a new water and sewer system for the community. In B2G, companies typically bid on projects when governments announce requests for proposals (RFPs).

Interacting with government agencies differs greatly from working with other businesses or consumers. Due to having to deal with bureaucracies, business deals tend to move much slower than in other sectors. eCommerce companies can bid on government contracts, the same as other companies. Unlike many B2C transactions, however, many government agencies will not go directly to an eCommerce website and place an order.

Governments are more likely to place orders directly and quickly if the cost is low and the service is uncomplicated. An example of B2G eCommerce would be if a local government agency places an order directly from an online store for a part to repair a piece of equipment.

eCommerce Business Models: Business to Business to Consumer (B2B2C)

In B2B2C eCommerce, one business sells products, services, or goods to another company. The receiving business then sells to a consumer. An example of a B2B2C arrangement is when a wholesale distributor sells merchandise to retail stores that then sell the merchandise to consumers. The B2B2C model comprises three actors: the first business (the business of product origin), an intermediary, and the end user or consumer.

There are several different ways the B2B2C model can be used in eCommerce. For example, a company could partner with another company to promote its products and services, giving the partner a commission for each sale.

The primary advantage of the B2B2C business model for eCommerce companies is the acquisition of new customers. This is an important consideration for new eCommerce companies that need a way to grow their customer base rapidly.

eCommerce Business Models: Consumer to Business (C2B)

Typically, commerce strategies are framed from the business’s perspective to start. However, models that start with consumers, including the consumer to business (C2B) model, are gaining popularity.

In the C2B eCommerce business model, individuals sell goods and services directly to companies. A common example are websites that allow individuals, such as contractors or freelancers, to share work or services they’re skilled in. Often, businesses will put in a request or a bid for that person’s time and will pay the person through that platform.

One of the most recognizable examples of a C2B business is Upwork , a freelancing platform that connects organizations directly with talent. Called a “marketplace for work,” Upwork gives businesses the ability to find and source project support, ranging from software development and content creation to UX design and even financial needs such as bookkeeping or filing tax returns.

A newer C2B eCommerce example is that of influencer marketing platforms such as Upfluence or GRIN . Similar to Upwork, both of these platforms connect businesses with individuals selling services. However, in this case, people are ultimately selling the ability to expand a brand's reach and visibility through promotion across their social media networks.

eCommerce Business Models: Consumer to Consumer (C2C)

Another eCommerce business model is consumer to consumer (C2C). The rise of digital commerce has turbocharged C2C, with companies such as eBay, Craigslist, and Esty offering notable C2C eCommerce marketplaces.

In C2C eCommerce, consumers sell goods or services directly to other consumers. This is most often made possible by third-party websites or marketplaces that facilitate transactions on behalf of buyers and sellers.

These eCommerce marketplaces allow smaller businesses, or even hobbyists, to sell their products at their own pricing without maintaining their own online storefront.

Top Five Delivery Frameworks for Your eCommerce Business

Once you determine which model best fits your business, the next step is to identify the delivery method that will meet your needs and requirements. After all,, only some businesses manufacture their own products or maintain their own inventory and warehouses.

Here are five of the most common approaches businesses are using today:

1. Drop Shipping

Drop shipping is an order fulfillment method in which a business’s products are stocked, packaged, and shipped by a third-party supplier.

With drop shipping businesses, the team that stands up the storefront doesn’t have to worry about managing inventory, stocking warehouses, or handling shipping. Instead, they can focus on their front-end customer experience and building their customer network.

One of the biggest caveats to this approach that you need to consider is that your business will have absolutely no control over the supply chain. If products arrive damaged or late, or the quality is lower than expected, it will reflect poorly on your brand. While the onus is on the drop shipper to deliver, you’re the one that is in direct contact with the end consumer and ultimately responsible for handling support requests and managing the relationship.

2. Subscriptions Services

With a subscription model, you commit to continue sending your products to customers over an extended period at consistent, predetermined intervals. There are different types of subscriptions , such as product discovery or unlimited services, so pricing, billing, and account management will depend on your business, your products, and your customer’s consumption behaviors.

Take ButcherBox , for example. ButcherBox is a subscription company that sends consumers farm fresh, organic meat and seafood products monthly. Customers can pick from a list of curated boxes or customize their own and can choose from different box sizes that will send higher or lower quantities of food.

Food is a category of consumer goods that tends to perform well with subscriptions, along with fashion, beauty, or even pet products.

3. Wholesaling

Businesses that leverage wholesaling manage all parts of delivery aside from the manufacturing of the product. With wholesaling, you order goods directly from the supplier and are responsible for warehousing, inventory management, stocking, tracking customer orders, and shipping. Wholesale eCommerce is most common in the B2B space, but can also be leveraged as part of a B2C eCommerce strategy.

4. Private labeling

In private labeling, a business will hire a third-party manufacturer to create products based on their own unique ideas and designs. Private labeling will save you from having to build your own factory and manufacture your products while also giving you exclusive rights to sell your own goods.

Once your goods are manufactured, you can either have the manufacturer ship directly to the customer, to an online marketplace, or back to you for you to handle. Initial costs can vary, so private labeling is best for brands with resources and specific product designs or ideas.

5. White Labeling

With white labeling, you brand and sell a product under your own name and logo, but it’s manufactured and purchased from a third-party distributor.

White labeling is common in the fashion and health industries, particularly with cosmetics, essential oils, and companies that sell CBD online.

White labeling can boost your brand visibility, keep you from having to manufacture your own products and allow you to take advantage of the knowledge and expertise of the distributor.

Want to Learn More About the Top eCommerce Solutions?

Check out our guide comparing the top 4 eCommerce software solutions.

How Should You Choose Your eCommerce Business Model?

Now that you’ve familiarized yourself with various eCommerce business models, product management, and delivery methods, you can start the process of choosing your model. As you choose an eCommerce business model, you should:

• Understand your customer: Who are they? What are their buying habits and purchasing behaviors? What are their pain points? Building your ideal customer profile (ICP) with this information is important to choosing the right eCommerce business model.
• Understand your value proposition: What makes you different, and in what areas do you beat the competition? Is it your pricing, customer service, or product selection? Also, be honest about what you don’t do well. Knowing your strengths and weaknesses is vital to your business strategy. Being honest about them with potential customers will build trust and brand loyalty.
• Create a strategy for selling your products: Sell your product in a way that makes sense for your customers. For example, if you create your own products, then you’ll probably want to consider wholesale or a subscription service. If you’re selling someone else's goods, you’ll need to focus more on building your brand and customer base.

Choose the Best eCommerce Business Model for Your Business with Elastic Path

Starting an eCommerce business can be an exciting and lucrative venture, but choosing the right business model can be challenging. First, you need to consider your target audience’s needs and preferences and choose the best model to support your target market.

Once you’ve identified your target market and the correct model needed to serve your customer base , you can focus on building and optimizing your eCommerce infrastructure and marketing tactics to fine-tune your business and maximize revenue.

Getting eCommerce right is essential but difficult. If you need support in deciding between aB2B, B2C, or B2B2C strategy, we’re happy to help. Talk to one of our experts today to learn what type of eCommerce business model is best for your business.

Check out some of our other great content here

How to de-risk social commerce (and stay true to your brand)

User-Friendly Composable Commerce — Does it Exist?

Demystifying Commerce Performance: Get a Report That Speaks Everyone’s Language

Gartner: 20 tips for increasing revenue.

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Ecommerce business models and how to take your business online

Ecommerce is booming, but many business leaders are still unsure whether it’s a fit for their business model or what it looks like to make the leap. Between the tight competition, cybersecurity concerns, and wondering if your customer experience will still be up to par, it’s important to make sure ecommerce will work for you before jumping in.

And if your business is just getting started, it’s important to know the basic types of business models and how they work in ecommerce. This understanding will help guide some basic business decisions you’ll have to make, especially at the beginning.

The truth is, ecommerce is the future for every business model. Knowing how it works best with yours can help you continue to outperform the competition and continue driving growth long-term. This article will help get you started as we explore:

• Business-to-consumer (B2C) models
• Business-to-business (B2B) models
• Consumer-to-business (C2B) models
• Consumer-to-consumer (C2C) models
• Consumer-to-government (C2G) models
• Business-to-government (B2G) models
• Business-to-business-to-consumer (B2B2C) models
• Government-to-business (G2B) models
• Government-to-consumer (G2C) models

Ecommerce delivery models

• Examples of ecommerce business models
• Ecommerce business FAQ

Six common business models in ecommerce

Traditional business models haven’t changed, but when it comes to ecommerce specifically, each one has a unique fit.

B2C — business-to-consumer

Business-to-consumer is a business model in which businesses sell directly to the consumers who purchase the goods for themselves. No third party, such as a wholesaler, is involved. A B2C example might look like a clothing company that sells bathing suits to women.

The B2C buyer journey is short and simple. The consumer becomes aware of a need or want, they consider their options, and they make a purchase.

B2C business models may be the easiest to translate into the ecommerce space, and B2C businesses have been many of the first types of businesses to do so. The buyer journey doesn’t need to change at all in a digital environment — the last two stages simply happen online rather than in a physical store.

B2C ecommerce brands are meeting their audiences online in dozens of ways. Because the model adapts so seamlessly to digital marketplaces, many B2C brands are at the forefront of ecommerce technologies and trends. They are engaging audiences and increasing sales through social media selling, personalized ecommerce experiences, mobile apps that bridge digital and physical spaces, and more.

B2B — business-to-business

In a B2B model, businesses sell to other businesses — such as SaaS brands that sell productivity software to other companies. The buyer is an employee (or an entire department) purchasing a product or service on behalf of their company. Retailers, producers, and agencies are all examples of B2B companies.

B2B businesses aim to create relationships through a marketing and sales process that is more complicated than most B2Cs’. The B2B sales funnel typically includes awareness, interest, evaluation, engagement, and purchase stages.

That added complexity is why B2B ecommerce growth has been slower than that of B2C ecommerce. B2B buyer cycles often require more nurturing, and pricing models are sometimes more complicated — and all those nuances have become digital.

B2B sellers reach online buyers using robust content strategies that deliver case studies, thought leadership content, PDFs, and more to target audiences at every stage of the funnel. Account-based marketing (ABM) strategies have emerged and matured in a B2B ecommerce environment to help these brands reach audiences effectively.

C2B — consumer-to-business

In C2B business models, consumers create value and businesses benefit from that value. Think about your company hiring a freelance writer or simply reading customer reviews that share ideas for innovation. That’s consumer-to-business. C2B flips the traditional business model on its head to focus on value (not necessarily a physical product) that originates with the consumer.

Often this ecommerce model uses an intermediary to meet audiences online, such as a platform where businesses can browse consumer profiles and choose whom to hire — like Upwork, Fiverr, or an influencer marketing platform. Even online review platforms count as C2B ecommerce because they provide both data for businesses to use and feedback on how the business could improve.

C2C — consumer-to-consumer

C2C transactions don’t involve a business at all. Instead, C2C business is between two consumers, with a third-party company enabling the purchase. Consumers will publicly share items for sale. Then other consumers can browse the listings or postings, decide what they’d like to buy, and contact the seller.

While newspaper classifieds could be considered C2C, today this business model is primarily online. Examples of C2C ecommerce include:

• Auction platforms like eBay
• Exchange of services platforms such as dog walking app Rover
• Exchange of goods platforms like Etsy
• Payment platforms such as PayPal

C2C platforms are convenient for both buyers and sellers, and the platforms earn their share by charging a small amount for each transaction — like a seller’s fee to list items.

C2G — consumer-to-government

In C2G business models, consumers conduct transactions with the government, such as a citizen paying taxes. These transactions might also be related to education or Social Security.

A C2G business model fosters communication between consumers and the government. It gives consumers a direct line to share feedback or information with public sectors, making it easier for citizens to use government-sponsored services.

B2G — business-to-government

Business-to-government is a complex business model in which a government buys products, services, or information from companies. This might look like a telecommunications company or engineering business offering its services to a government agency.

B2G can apply to local, state, federal, or international governments. The process works a little differently than other business models — in most cases, the government does not go directly to an ecommerce website to purchase. Instead, a government agency looking for a product or service will put out a request for information (RFI) and request for proposal (RFP) so relevant businesses can share what they have to offer. The administration will then decide which company to work with. B2G comes with lots of laws, regulations, and documentation to govern transactions and business relationships.

However, B2G ecommerce transactions do sometimes take place on websites with a marketplace model, where businesses share their products or services and government entities can choose whom to work with at their leisure.

Three additional ecommerce business models

While the six previous business models are the most common, other business models are transitioning to ecommerce spaces too.

B2B2C — business-to-business-to-consumer

In the B2B2C business model, companies work with other companies to reach new customers. For instance, if you’re creating a new product you might join forces with another business to use a service like an ecommerce website. Together, both you and this other business will be able to increase your respective customer bases.

A good real-world example is Instacart. Grocery stores partner with Instacart to reach more customers together, with Instacart enjoying the stores’ existing customer bases and grocery stores profiting from the digital experience Instacart provides.

B2B2C ecommerce utilizes marketing campaigns on various digital platforms to reach its audience, just like B2C businesses. This model is scalable and flexible.

G2B — government-to-business

G2B models are government agencies that offer services to businesses. This might look like business licenses, electronic forms, or registering a startup online. Businesses act as the customer in G2B purchase cycles. It’s the government’s job to offer valuable and convenient digital services and information.

Typically, digital government portals are used to carry out this ecommerce business model. The government provides helpful business services that companies can use online. From business permits to government contracting to taxes, government agencies seek to make processes available online to their business audience.

G2C — government-to-consumer

In the government-to-consumer model, a government sells to consumers. This setup describes the relationship between public administration and residents.

For example, the consumer might need official documents or simply information from the government. Other examples include educational services, employment help, and voting. Whatever the case may be, the G2C model delivers value from a government agency to the residents it represents.

With G2C ecommerce, all communication and transactions take place online. Similar to G2B models, the government provides federal and regional websites and e-platforms where consumers can make payments, access helpful information, and find resources.

An ecommerce delivery model is the process or system by which goods and services get to the buyers. Some delivery models lend themselves well to specific types of ecommerce businesses. It’s important to choose the best kind of delivery for your ecommerce business model, so the process will run as smoothly as possible and your customers will be happy.

D2C — direct-to-consumer

Direct-to-consumer delivery does not use any third parties like retailers or distributors. Instead, brands send their products straight from their warehouse to customers. For example, if you sell directly to consumers via your own website, this is a D2C delivery model.

The D2C delivery model works well for B2B, C2C, and some B2C brands (although many B2C businesses use a retailer, which is the opposite of D2C). Brands using D2C models are able to control the entire buying experience, which often leads to happier customers and higher revenue.

White label

White label delivery is when a brand uses a third-party platform that doesn’t look like a third-party platform to buyers — the platform does not use its own branding or logo. Meanwhile, customers have full visibility into details such as shipping cost and delivery time.

White label apps are easy to integrate with your brand. White label shipping is often used for online retail.

Private label

A private label is an ecommerce delivery method companies use to take third-party products, package them as their own, and ship the items out to customers. Brands that use private label delivery do not have to stock inventory themselves, and they enjoy extra flexibility in how they fulfill orders. This is a type of D2C business model with no intermediary.

Because private label delivery is a type of D2C, it’s a good fit for the same types of business models.

Wholesaling

Wholesaling occurs when a brand sends large quantities of its product to another company for resale. Large commercial orders might be sent via freight shipping or international wholesale shipping. Wholesaling often involves ecommerce platforms.

Wholesaling is a common delivery model among B2B brands. Individual customers rarely need to order a large quantity of a product, and you usually can’t place a wholesale order from a business unless you meet a high minimum order quantity (MOQ).

Dropshipping

Dropshipping is a delivery model where a shopper places an order with a retailer, the retailer processes the order, and the retailer sends that order to a wholesaler who then ships the items to the customer. Dropshipping is used exclusively for ecommerce. It doesn’t work for brick-and-mortar stores because these retailers don’t keep inventory on hand.

The dropshipping delivery model is most commonly used by B2C businesses because it’s an easy way to sell small quantities directly to consumers. But B2B dropshipping is possible too — especially for seasonal or especially expensive items that the seller does not want to stock.

Subscription

In a subscription model, customers pay a regular, recurring fee and receive items on a set schedule — such as once a month or once a week. Customers choose the products they’d like to auto-ship and how often they want to receive their purchases, and they pay a set amount based on the frequency they chose.

Subscriptions work well for ecommerce models such as B2C, B2B, and C2B. In many cases, a business that purchases a subscription is subscribing to a service or resource (such as a premium membership to a digital tool or a budget of freelancer hours) rather than a product.

Ecommerce model examples

Check out how these ecommerce models and delivery models play out in the real world.

1. Virgin Atlantic Airlines — B2C business, D2C delivery

Virgin Atlantic Airlines is a B2C brand. Since the airline’s services are provided directly to customers, Virgin Atlantic uses a D2C delivery model.

And Virgin Atlantic does B2C ecommerce well because the company creates outstanding customer loyalty. With a goal of being the most-loved travel company, Virgin tapped into the power of ecommerce to build a better website and design a strong digital experience. The success of that ecommerce customer experience has helped the company thrive online.

2. Norfolk County Council — G2C business, D2C delivery

The Norfolk County Council helps run the town of Norfolk, England, where it serves 900,000 residents. The council operates as a G2C business to provide residents with information and services, such as legal documents.

During the COVID-19 pandemic, Norfolk County had to turn to an entirely ecommerce model. The agency struggled to keep its operations and services running, so the council streamlined its offerings via automation. Norfolk saved 4.5 days each month and reduced the time it took to prepare legal documents from 45 minutes to just 12 minutes, proving that even government bodies can succeed with ecommerce.

3. RCS MediaGroup — B2C business, subscription delivery

RSC MediaGroup has over 70 brands across Italy and Spain, including newspapers, magazines, television, and more. The brand’s subscription model is a major source of revenue.

RCS wanted to improve its ecommerce model and boost revenue by sending customers the right messages at the right times, so the media group turned to customer data to improve brand engagement . RCS mined information from its CRM solution, ecommerce solution, and customer website behavior to create detailed customer profiles. This enabled the company to deliver more personalized, cross-channel experiences as an ecommerce brand.

E-business model FAQ

Here are a few fast facts about ecommerce business models.

What is ecommerce?

Ecommerce is any type of commercial transaction that takes place over the internet. Sellers list products and services on ecommerce platforms, and buyers purchase the goods. The first ecommerce transaction took place in 1994. Now, Statista reports total ecommerce revenue is projected to reach $1.3 trillion by 2025.

What are the four traditional types of ecommerce?

Some consider business-to-consumer (B2C), business-to-business (B2B), consumer-to-consumer (C2C), and consumer-to-business (C2B) the “four traditional” types of ecommerce. Business-to-government (B2G) is often grouped into B2B, but brands that sell to governments understand there are big differences in this kind of ecommerce model. Ecommerce models that involve the government are often more complex, dealing with more regulations, laws, and documentation.

Which ecommerce business model is most successful?

B2C is a highly successful business model for ecommerce because the traditional sales process is undisturbed and because the short purchase cycle has moved easily to digital environments. It’s also the most common ecommerce model. However, almost every basic business model can be adapted to work well for ecommerce.

Are there different tools and software for different e-business models?

At the core, all ecommerce business models need the same types of tools — a content management system (CMS), a digital payment processing system, and a way to track analytics. However, there are certain tools that may lend themselves better to one model or another, like a payment solution designed specifically for government offices or a CMS that’s set up for B2B businesses.

Choose the right business model for ecommerce success

Any business model can work in ecommerce, which is good — because ecommerce is the future.

Discover how other brands with your business model are winning in ecommerce. Then consider where you can make tweaks to bring your own company up to speed and succeed in ecommerce too.

As the leader in digital commerce, Adobe Commerce can help you build multichannel ecommerce experiences for B2B and B2C from a single platform. From segmentation to advanced experience management to visual merchandising tools, all aspects of ecommerce are made easy. To learn more, take an interactive product tour or watch this overview video .

6 different ecommerce business models you should be aware of

Learn the different types of ecommerce business models before building your business plan. Your chance of success is knowing which model is best for you.

Choosing and applying the right ecommerce business model to your online store might be a bigger challenge than you thought. Especially if you’re new to the industry. Your greatest chance of success starts with knowing which model best fits your target niche, resources, and capabilities. Let’s take a look at the 4 major ecommerce classifications and 6 proven ecommerce business models.

People mainly still think of the B2C (business-to-consumer) private label model — selling privately branded retail products to individuals — when we talk about ecommerce. But ecommerce has more options than we realize. 

Here are 4 major ecommerce classifications and 6 proven models to consider before making a plan. 

4 major classifications of ecommerce

Let’s take a look at the 4 major classifications of ecommerce.

1. Business-to-business (B2B)

Business-to-business (B2B) ecommerce describes online transactions between businesses. Organizations involved in the B2B model are mainly wholesalers, manufacturers, and distributors. Despite not being the most prominent form of ecommerce, the global B2B ecommerce market is projected to reach 6.7 trillion USD by 2020 .

Here are 3 questions to ask yourself before launching a B2B business:

• Does your target market prefer bulk ordering?
• Do your clients require specific sizes, materials, or other specifications?
• What are your competitive advantages? 

Potential competitive advantages can be uncovered by asking yourself more questions about your business model, including:

• Do you control the manufacturing? 
• Can you offer competitive pricing while maintaining efficient ROI?
• What are your inventory and supply chain management capabilities?

2. Business-to-consumer (B2C)

B2C ecommerce is a more traditional ecommerce model that most are familiar with. In B2C, online retailers market and sell products directly to end consumers. While B2B can be more complex, B2C business is as simple as ordering a book or camera online. 

B2C online retailers serve a wide audience and prioritize modern marketing and sales strategies like ads-based marketing, influencer marketing, and social media. B2C ecommerce business owners spend more time on optimizing traffic, promoting campaigns, and sales conversions than on negotiating quotes and terms or managing order production and fulfillment.

3. Consumer-to-business (C2B)

C2B is less well-known and intuitive than B2B and B2C. In the C2B model, individuals (consumers) sell products or services to a business. 

Most typical C2B businesses are freelancer platforms like Upwork and Fiverr . In this digital and social age, influencer-matching marketplaces like Ifluenz are on the rise as new, innovative forms of C2B.

4. Consumer-to-consumer (C2C)

C2C ecommerce businesses facilitate transactions between consumers. In C2C platforms, individuals can sell, buy, and exchange goods or services. Consumer-to-consumer connecting platforms earn profits by charging listing and transaction fees.

Unlike B2B and B2C, C2C extensively deals with a third-party business to facilitate transactions, protect consumers, and manage quality control. 

Since the early days of the Internet, Amazon, eBay, and Craigslist have been the largest C2C ecommerce websites in the world. Recent innovators like Depop are taking advantage of social media to expand their reach.

Shape your customer's experience every step of the way, and build a modern ecommerce website — all without writing a single line of code.

6 ecommerce business models growing in 2021

Once you’ve decided on a category, the next thing to tackle is choosing an ecommerce model for your business. The last few decades have seen a lot of ecommerce startups rising and falling. 

Here are 6 different types of ecommerce business models:

1. Private label

Many new ecommerce entrepreneurs have great product ideas but no internal resources or capacity to manufacture products themselves. So they order from manufacturers and then label, market, and sell products under a private label. 

Recent projections suggest the ecommerce private label market will quadruple in the next 5 years to meet growing demands. Here are 2 of the most convincing reasons that make private label a solid choice: 

• Private-label products are developed, branded, and sold by one company, separating it from competitors. Private-label brand owners own the design, specifications, production technique, and have exclusive rights to sell under a private brand. Since they’re the only supply source, private labels with good marketing can create a demand hype and charge premium prices 
• Private-label products typically enjoy very high profit margins. Brand owners take control of the manufacturing and operation costs so they can minimized the cost of goods sold (COGS). And since they’re the only sellers in the market, they can make strong margins from premium prices

There are some roadblocks and risks to consider for private label ecommerce businesses: 

• Finding the right private label manufacturers to collaborate with is a challenge. To minimize the cost per unit, many entrepreneurs travel halfway around the world to developing countries like China and Vietnam. They pay a lot of upfront capital to order large batches and lower per-unit costs
• Manufacturers can’t guarantee defect-free batches, even when a prototype is perfect, so running and managing quality control is necessary to avoid expensive problems
• Selling branded products online that are only sold by one vendor limits customer access 

2. White label

Like the private-label model, white label retailers apply their brand names and resell generic products purchased from a supplier.

White-label businesses are free from the management of manufacturing and quality control, but deal with extensive competition. White-label vendors control package design, but not product specifications or quality. Since any reseller can sell these products, competitors hardly have an edge in terms of unique selling points and use marketing strategies and distribution channels to differentiate themselves.

Another obstacle white-label business owners deal with is inventory management. Most suppliers set a minimum order quantity to achieve economies of scale by increasing production. As a reseller, understanding the demand of your white-label products is critical. Mismanaging inventory can leave white labels stuck with large batches of unsold inventory. 

3. Dropshipping

In recent years, dropshipping has emerged as a genius retail fulfillment model for ecommerce beginners to launch with little to no capital. Dropshipping allows businesses to market and sell products online without stocking inventory. As orders are placed, dropshippers purchase items from suppliers who then ship products directly to customers.

The benefits of the dropshipping ecommerce model are considerable:

• Dropshipping businesses don’t need to pay for warehouse space, order or manage stock, pack or ship products, track inventory, or handle returns
• Dropshippers can start with a small budget and scale up as they’re ready with little financial risks
• Dropshippers don’t have to worry about manufacturing or inventory and fulfillment management and can invest resources into site design, customer support, and marketing and sales strategies

Dropshipping risks include:

• With no product control, a bad supplier can burden customer-support teams and damage the trust and credibility of a business
• While the supplier manages the fulfillment process, the business owner still needs to deal with delivery tracking issues 
• Since anyone can start a dropship business, the competitiveness is fierce. Low prices and large advertising and Google SEO budgets can mean low profit margins

Dropshipping isn’t a stress-free ecommerce model — it comes with several complexities to plan for. But the obvious advantages offer opportunities for new, ambitious, online entrepreneurs to start from zero and make something big.

4. Print-on-demand

The print-on-demand model is similar to dropshipping — businesses sell custom designs on a variety of products like t-shirts, hoodies, leggings, mugs, phone cases, and canvases. When an order is placed, a third-party manufacturer prints the selected design on a product, packs it up in branded packaging, and delivers directly to the customer. 

Dropshipping and print-on-demand models share common benefits:

• Up-front capital is not required making it a business with low startup costs . Print-on-demand businesses only pay fees to third-party suppliers as orders are shipped
• Inventory management is taken care of and orders are automated by professional third-party printing suppliers like Printify and Printful ‍

To earn an edge in this increasingly competitive market, you’ll need strong graphic design skills, excellent marketing strategies, and top-notch customer support. ‍

Lovimals and My Face Socks are examples of successful, fast-growing print-on-demand websites.

5. Subscription service

Imagine you’re a busy professional, short on time — a meal delivery service that ships to your front door might be exactly what you’re looking for. The beauty of and demand for convenience has given rise to the fast-growing subscription-service ecommerce revenue model.

By definition, a subscription business model allows customers to subscribe to a service for a set period of time, typically monthly or annually. When the subscription period expires, customers can cancel or renew, enjoying convenience and savings on repeat orders.

This model has advantages that make it tempting as an ecommerce venture: 

• Owners can reduce order abandonment rates and maintain high customer retention and loyalty
• Owners can plan inventory and delivery in advance 
• Owners can enjoy high margins and lower inventory risks

Healthy Surprise is an example of a food subscription service websites. Other potential products for a subscription model are books, videos, training courses, and consumer goods that need to be replaced regularly like electric toothbrush heads. 

6. Wholesaling

As the name suggests, wholesaling is a business model where an ecommerce store offers products in large quantities at discount rates. Wholesaling used to be mostly a B2B business practice. But thanks to the internet, anyone can offer wholesale as a C2B or B2C practice.

Wholesale in ecommerce companies is quickly rising. Take for example Beard & Blade doubling their revenue in the last 2 years and Laird Superfood increasing their annual revenue 550% .

Securing business partners for wholesale ecommerce requires tremendous effort in both traditional and modern sales channels like telesales, trade shows, advertising, and influencer marketing.

Choose the right ecommerce business model

Start your decision-making process by asking yourself some important questions: 

• Who is your target market?
• What do you want to sell? 
• How much can you invest in your startup?
• What are you capable of?
• How do you want to position your business in the short term and long term?

Understanding the basics is important, but planning and innovation will help you stand out and scale quickly in today’s competitive ecommerce industry.

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Moving Your Brick-n-Mortar Store Online: An Evergreen Guide

12 steps to move your brick and mortar store online, types of ecommerce business models: definition & examples, how to sell food online: wait, it is this easy (2021 tutorial).

• How To Sell Art Online: Be The Next Andy Warhol (2021 Tutorial)
• How To Sell Wine Online: 5-Step Definitive Guide (+ 3 Examples!)

When was the last time you purposefully purchased something in a brick-and-mortar store? My guess is at least a few years ago. Why? Because online shopping, or eCommerce, has changed the way we consume forever.

It was projected that eCommerce sales would make up 15% of total purchases in the US by 2021. And here we are, witnessing a whopping 21.3% in 2020 . Considering the many, many types of eCommerce business models surfacing still, we can safely assume the percentage will just keep on rising.

And if you’re a business owner/founder, it’s now easier than ever to turn your ideas into reality. Businesses are constantly defying the old ways and moving on to make the big bucks .

But before you try to innovate and exceed expectations, you have to learn the ropes and know your types of eCommerce models. So, in this article, we’ll guide you through the key types of ecommerce business models as well as give you examples of each type, including some innovators. Let’s start!

I. Traditional eCommerce business models

01. c2c – customer to customer.

C2C is an eCommerce model where consumers are free to trade goods and services with one another in an online environment. Most popular examples include Craigslist and eBay – the pioneers of this model in the early days.

The way C2C businesses make a profit is through charging transaction fees or listing fees.

This eCommerce model benefits a lot from motivated buyers and sellers, who help it grow while earning for themselves. But that is not to say operating a C2C business is easy, for you will have to face the big competitors since this model has been around quite a while. And to attract the most consumers, you will have to pay extra attention to tech maintenance as well as quality control; the last thing you want is a PR nightmare.

02. B2C – Business to Customer 

This is the utmost wide-known and traditional type of eCommerce model. B2C businesses sell their products and services directly to their customers. Traditional brick-and-mortar stores are the perfect examples of this business type. And regarding eCommerce, have you ever ordered anything from Amazon?

Anything you buy in an online store, literally anything, can be considered a B2C transaction. B2C businesses don’t have to spend as much on marketing when compared to B2B since most services and goods they offer have much less value. Think about it, it’s much easier for you to decide you want to buy a new pair of headphones than for a company to make a decision to purchase service from a new water caterer.

But a shorter sales cycle means B2C businesses will have to make the extra effort at maintaining good relationships with their customers. Since Word of Mouth marketing has become more and more important in brand advocacy, it’s wise to invoke positive emotional responses from consumers.

A large majority of eCommerce businesses use B2C models, like this one:

or this one

Read more: Best B2C Online Stores For Inspiration  

03. B2B – Business to Business

B2B is a form of transaction between businesses, typically involving manufacturers and wholesalers, or wholesalers and retailers. In the context of eCommerce, it usually comes down to buying and purchasing services. One of the most popular examples is, you guessed it, Amazon, offering businesses a platform accessible to customers.

Another example is Samsung, which plays an important role in Apple’s production of the iPhone (ironic, right?)

B2B transactions have a longer sales cycle since they deal with higher-value services, often with recurring orders. Careful planning and effective communication help this type of eCommerce business succeed. Such interactions rely on a company’s account management personnel, ensuring professional business relationships.

B2B innovators are aiming to improve their eCommerce storefronts and targeting niche markets. You can find all sorts of niche businesses like CRM software and animation for eLearning. If you are planning to enter this playing field, do keep in mind that the decision-makers are getting younger, with 73% of millennials are involved in the tech purchasing process for their companies, and a third is actually the decision-maker. Stay up-to-date if you want to succeed.

Another example of B2B eCommerce is Lair Superfood . They sell to both consumers (B2C) and businesses (B2B). A B2B eCommerce website typically requires more resources and larger investment than B2C, since you need a more powerful backend management system to handle wholesale order management, warehouse and inventory management, etc, or to create an automated wholesale portal that customers can access anytime they like.

04. B2B2C – Business to Business to Customer 

This type of eCommerce business model is a bit funny, for it is actually a combination of B2B and B2C, instead of its own standalone. In essence, B2B2C is a collaboration between 2 businesses that create mutually beneficial service and product delivery channels.

To further clarify this model, Business A who is developing a product, partners with Business B who provides a specific service – an eCommerce website. Business B has access to many consumers and therefore provides Business A with many leads and sales, making Business A’s product accessible to many customers. What does Business B remind you of? Yes, Amazon again. And Business A is just any other vendor on Amazon like Samsung or Apple.

05. P2P – Peer to Peer

A P2P service is a decentralized platform where consumers can interact directly with one another without the middleman. This enables them to transact directly with one another.

Without the presence of a third party, there’s a greater risk that the service provider/seller may fail to deliver, or the buyer may not pay. The risk is to replace added transaction fees. Hence, P2P platforms offer services to ensure quality of the transactions like payment processing, information about buyers and sellers, and quality assurance to their users.

Popular examples of P2P services are online marketplaces like that of Facebook’s, cryptocurrency and blockchain like where you might trade Bitcoin, file sharing like Napster, etc.

Facebook Marketplace is a prime example of P2P model

II. Innovative eCommerce Business Models

01. dropshipping.

Dropshipping is a retail method where a store doesn’t keep the products in stock. There is no inventory for the store to extract goods from. Instead, when receiving an order from a customer, an eCommerce entrepreneur using dropshipping model will purchase the product from a third party, or the supplier, who will then handle the shipping. Dropshipping, in short, is an inventory-free retail model where your suppliers take care of most of the manual work for you – the inventory management and delivery.

Dropshipping is currently the fastest growing type of eCommerce business model. Many entrepreneurs are opting this method for there are many benefits. Less capital is required to start a dropshipping business, low overhead expenses, you’d have a wide range of products to sell, and it’s easier to test and scale.

That said, dropshipping is certainly not without its flaws. Since it’s a fast growing business model, you’d have a handful of competitions, resulting in lower margin profit. You also don’t have control over the products since you’re just sending orders to the suppliers themselves, and if they make a mistake, you’ll be the one to take responsibility.

Meowingtons is one of the most successful Droshipping stores – specializing in selling cat goodies.

02. White label and Private label

These 2 terms can be used interchangeably. White labeling is when the supplier/manufacturer removes the brand or logo from their end products and instead uses the branding requested by the purchaser. The supplier in this case is usually the third party.

Private labeling can be considered an exclusive version of white labeling, as a retailer hires a manufacturer to create a unique product for them to sell. White label and private label products don’t always need to be tangible items, they can also be services, as usually seen in banking.

The most apparent examples of white labeling include companies like Whole Foods and Walmart, who benefit from selling their own branded products that have been created by other manufacturers.

This business model offers discounted sales and quality, generating a larger profit for companies, but can lead to monopsony and copycatting, which can prove to be troublesome sometimes.

03. Print-on-Demand

Print-on-demand is a retail fulfillment method that’s similar in nature to dropshipping. Basically, a customer buys a product on a retail site (like Shopify) and the order is immediately sent to the print provider who stocks the physical product, prints the design, and ships the product to the customer.

No more need for storage space, expensive local printers, or dealing with large-scale shipping. The store owner eliminates the demand for bulk inventory and instead focuses on the actual design and marketing of the product. Products can range from customized t-shirts to tote bags or even books.

This eCommerce business model is somewhat a derivative from dropshipping, since printing and shipping is carried out by your supplier. That said, Print-on-Demand is a helpful model with many advantages. If you have an established social media presence, i.e you’re a Youtuber, cartoonist or an influencer, it’s easy to monetize the audience you’ve already built since PoD doesn’t require too much capital to start. This also means you can create original products for a niche of customers, and easily test your ideas.

Notable mentions of this business model include Printful . Printful is a POD platform that allows you to create and sell your own custom-designed product online, whether on a marketplace like Etsy, Amazon, or on your own online store integrated with Printful.

03. Subscription Model

This business model has been around since as early as the 1600s within the printing and publishing market. With the advent of eCommerce, we have seen countless services surfacing using this method. Most streaming services like Netflix, Hulu, HBO Go, etc. fall into this category.

Companies don’t just offer only monthly subscriptions like old newspapers, but went a few steps further as to offer daily, semi-annual and annual subscriptions that you can cancel anytime you want.

Some examples of popular subscription business products include:

• Protein powder
• Baby supplies
• Organic food

The list goes on, but beauty and consumables have shown to be the heavy-hitters, while books, plants, and other collectibles also make effective choices.

The best way to get your head around Subscription box businesses is to look at some successful stores that use the business model. One of our favourite examples is Snacknation

Snacknation sells delicious and healthy snacks boxes. Every month, you’ll receive 8 snacks from their specially curated selection of tasty bars, nuts and seeds, chips, jerky, and sweets.

04. Wholesaling

Simply put, this type of eCommerce model involves selling products in bulk to retailers, who in turn sell them to customers. Wholesaling has been around for as long as anyone can remember, and eCommerce just innovated it. Traditionally, wholesaling is a B2B practice, but many retailers have shifted it to a B2C model.

eCommerce wholesaling enables you to increase your sales without increasing your marketing budget, since the retailers will do most of the job for you. It also makes new markets more accessible by reducing the risk in expansion. Lastly, eCommerce wholesale can reduce your storage needs, since either the wholesaler or retailer can accept to store the goods in their inventory.

III. How to choose the right eCommerce business model?

Before starting your eCommerce business, you have a few questions to ask yourself. The choices you make can heavily affect your success, so do keep in mind that this is just a brief entry-level guide to help you kickstart your eCommerce business. To choose the right type of eCommerce model, further research is greatly recommended.

01. Who is your customer? 

Customer is the first and foremost pillar of building your eCommerce business. So who do you plan to sell to? What are the demographics?

This question is to determine whether your business is going to deploy the B2B model or the B2C model; only after you’ve decided on this can you go further and choose the niche market.

02. What type of products do you want to sell? 

Do you plan to sell products or services? What type of products are you keen on?

If you plan to sell ready made products, you might want to consider traditional models as well as dropshipping or wholesaling.

If you plan to sell customized products, go for white/private label or Print-on-Demand.

If you’re offering services, you might want to consider a subscription business type.

03. How much capital are you willing to put into your business? 

If you’re running low on capital, dropshipping and Print-on-Demand is going to be the optimal types of eCommerce model. In case you want to pursue the more conventional types, do keep in mind that you will suffer some loss when you first start, and profit can only be expected after a few months, or even longer.

04. How do you want to acquire your products? 

This will help you decide how you distribute your products. Do you have a storage with plenty of inventory slots lying around? Or can you only afford to distribute the products straight from your supplier to your customers?

05. Who might you compete against? 

eCommerce has been around for a few years, and thus you can be fairly sure that there is already a giant in your niche market. A B2B business might be a safer bet if your product or service is super niched, but it won’t be easy to run. Dropshipping or Print-on-Demand, for example, offers you a wider variety of goods to sell, and might give you a safety net to fall back on in case you can’t compete against the big guys.

We’ve covered the common types of eCommerce business models, as well as some tactics to kickstart your business. We sure hope this gives you the main idea of what you need to do.

That said, planning is no joke, and innovation is seriously needed to survive in this shark tank. Prepare yourself, get out there and get yourself some customers. We believe in you!

Learn more:

• The Art Of Selling Clothes Online: An Ultimate Guide
• Selling Food Online Made Simple: Step-By-Step Tutorial
• How To Sell Art Online & Finance Your Creativity

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Legitimacy Unveiled, Truth Revealed

6 Types of eCommerce Business Models You Need To Know

Last Updated: May 16, 2022

Are you related to e-commerce business but don’t know the types of eCommerce business models? Stay connected!

Many people know only about e-commerce and its basics but very few of them know the types of e-commerce business models, so in this post, I’ll talk about them.

There are 6 types of eCommerce business models:

• B2C: Business-to-Consumer
• C2B: Consumer-to-Business
• B2B: Business-to-Business
• C2C: Consumer-to-Consumer
• B2A: Business-to-Administration
• C2A: Consumer-to-Administration

Let’s discuss the types of e-commerce with diagrams and examples so you can understand them better.

First, take a look at the infographic and then we’ll talk in detail about them.

Now let’s talk about them in more detail.

1. Business To Consumer (B2C)

Business-to-consumer or B2C e-commerce consists of the sale of goods and services to the general public.

In this type, customers or consumers can visit the website and purchase goods online using credit cards.

B2C Example

Let’s say we have a company, and we want to sell our goods or services online through our website or any other online resource, then it can be referred to as the B2C model.

An excellent example of it is Amazon or eBay . We can call their business, Business To Consumer model.

2. Consumer To Business (C2B)

Consumer-to-business or C2B e-commerce consists of the sale of goods and services to the business organization via the website.

In this business model, the consumer creates value, and the businesses consume that value.

C2B is a complete reverse of the B2C model; if we reverse the process of the Business-to-consumer e-commerce model, we can call it the Consumer-to-business model.

C2B Example

For example, a customer places some of their services or products on the website.

If the services or products create value for the business organization, then they order these services or products, but in most cases, services.

Suppose, a customer charge 100$ for a specific service and a business organization need that service because it can help them in some way so that they can order that service.

Whenever the deal is done, they receive services or products, and the customer receives money.

An example of the C2B business model is freelancing sites like Fiverr , Freelancer .

3. Business To Business (B2B)

Business-to-business or B2B takes place between two businesses where one business provides services to other businesses.

The business organization, also known as the manufacturer of the products, sells products to wholesalers, and the wholesaler re-sells them.

B2B Example

For example, there are two businesses:

• Business Organization or Manufacturer

A wholesaler goes to the Business Organization’s website or any other online resource and orders products in bulk.

The Business Organization processes the order and supplies the products to the wholesaler.

When the wholesaler receives the products, then the wholesaler can sell those same products at a high price to their customers, and it can be referred to as a business-to-business or B2B model.

An excellent example of it is Alibaba .

• Importing & exporting products are easy and comfortable, and you don’t have to go physically because you can order the products online.
• The determination of buyers and sellers is easy.
• B2B clients order more products than retail clients.
• You can get the information about the Trade Guides and also make your business successful.
• Business-to-business sales have a high potential to make more money than business-to-people sales.

4. Consumer To Consumer (C2C)

Consumer-to-consumer or C2C e-commerce takes place between two consumers where one consumer sells an item through an online auction while the other consumer purchases the item by offering the highest bid.

C2C Example

For example, consumer 1 wants to sell a car, so he/she can places his/her car on a website like OLX or eBay, while customer 2 wants to buy that car.

So, customer 2 can contact customer 1 and buys the car from him/her.

5. Business To Administration (B2A)

Business-to-administration or (B2A) takes place between companies, public administration, or government agencies.

In this e-commerce business model, there are dealings between companies and public administration using the internet.

Government agencies (administration) use central websites to trade and exchange information with various business organizations.

B2A includes different services, and some of them are fiscal measures, social security, legal documents, and other government-related operations.

B2A Example

An excellent example of a B2A model is Accela ; it’s a software company that provides government software solutions and public access to government services for permitting, planning, licensing, public health, and so on.

6. Consumer To Administration (C2A)

The Consumer-to-Administration or C2A e-commerce business model encompasses electronic transactions online between individuals and the public administration.

The C2A e-commerce model helps the consumers to post their queries and request information regarding public sectors directly from their local governments/authorities.

It provides an easy way to establish communication between the consumers and the government.

C2A Examples

Some of the examples of C2A are disseminating information, distance learning, distribution of information through social security, electronic tax filing, payment of health services, etc.

Wrapping Up!

There’s no doubt that eCommerce is growing at an unprecedented rate all over the world because it provides flexibility and gives more happiness than physical shopping.

Therefore, as I already said, you must know about these 6 types of e-commerce business models.

If you’re still confused or would like to express your opinion, please let me know in the comments section below.

FURTHER READING

• What To Sell On Etsy – 11 Top Selling Items on Etsy
• Printful vs Printify – Which is Best For POD?
• Etsy vs eBay: The Ultimate Guide to Make Your Decision Easier

About Arslan Javed

Arslan Javed is the founder of Ecomsay. He has years of experience in scrutinizing online businesses and has made it his mission to establish this platform as your one-stop trusted source for verifying the legitimacy of online businesses and platforms.

I have read your blog on Types of ECommerce Models.It was very informative & helpful for new beginners and new people but I have some points to share with you and other people. There are several types of ecommerce models, including: 1. Business-to-consumer (B2C) 2. Business-to-business (B2B) 3. Consumer-to-consumer (C2C) 4. Consumer-to-business (C2B) 5. Business-to-government (B2G) 6. Consumer-to-government (C2G) 7. Subscription-based 8. Dropshipping 9. White label and private label These are some of the extra points I thought to include in your article.

I didn’t understand about B2A and C2A.more explainations please

how can i reference my assignment showing that this info…is from you

Hi Arslan I hope you’re doing great, i would like to thank you for your amazing job and for the useful informations in this article, you helped me a lot THANK YOU!

Welcome, Nihad 🙂

Good example to explain e commerce it help me understand easily thank you

You’re welcome, Shyam 🙂

Hi Arslan! It is okay, i use the image on your website for my education on youtube. Thank you.

Hi Joe, It’s okay you can use but don’t forget to give the credits 🙂

Last c2a had mistake ,its Consumer-to-consumer has been written instead of Consumer-to-Adminstration

Spelling mistake fixed, Avi. Thanks for letting me know 🙂

THANKS A LOT , it just made my school project so easy on ecommerce

You’re welcome, Stella 🙂

Precious information, thanks!

You’re welcome, Salah-Eddine 🙂

Super good information about e-commerce

Hi Surya, Thank you!

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8 Types of Business Models & the Value They Deliver

• 26 May 2016

You want to start a company but aren’t sure about a viable business model. How might you create something that people are willing to pay for and could earn you a profit?

Before diving into potential strategies, it’s important to understand what a business is and does. At its heart, a business generates value for its customers. A business model is a specific method used to create and deliver this value.

What Is Value in Business?

A successful business creates something of value . The world is filled with opportunities to fulfill people’s wants and needs, and your job as an entrepreneur is to find a way to capitalize on these opportunities.

A viable business model is one that allows a business to charge a price for the value it’s creating, such that the business brings in enough money to make it worthwhile and continue operating over time. Whatever the business is offering must also satisfy the customer’s needs and quality expectations.

It’s important to note that value is subjective. What’s valuable to one person may not be to another. Moreover, the concept of value excludes any moral judgments about the intrinsic worth of an offering. For example, while most would agree that human life is more valuable than sports, some professional athletes make far more money than the average brain surgeon.

Nonetheless, the concept of value provides a useful bedrock on which to begin building your business model. In particular, consider what forms of value people are willing to pay for. Here are eight potential business models and the forms of value they deliver—as well as the pros and cons of each—to help you get started.

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8 Types of Business Models to Explore

A product is a tangible item of value. To run a successful product-focused business, try to produce the item for as low a cost as possible while maintaining a reasonable level of quality. Once the item is produced, your objective should be to sell as many units as you can for as high a price as people are willing to pay to maximize profit.

Products are all around us. From laptops to books to HBS Online courses (products don’t have to be physical), products are a classic form of value with high upside if you can get them right.

• Pros: Many products can be easily duplicated. Thus, firms can achieve economies of scale after bearing some upfront costs of production.
• Cons: Physical products need to be stored as inventory, which can increase costs. They can also be damaged or lost more easily than, say, a service.

Related: How to Create an Effective Value Proposition

A service involves offering assistance to someone else for a fee. To make money from your service, provide a skill to others that they either can’t or don’t want to do themselves. If possible, repeatedly provide this benefit to them at a high quality.

Like products, services are in abundance, especially in the knowledge economy. From hairdressers to construction workers to consultants to teachers, people with lucrative skills can earn good money for their time.

• Pros: If you have a skill in high demand or a skill that very few others have, you can charge a fair price for your time and stand out in your field.
• Cons: If you don’t charge enough for your services, or many people have your skill, your business may not be as lucrative.

3. Shared Assets

A shared asset is a resource that many people can use. Such resources allow the owner to create or purchase the item once and then charge customers for its use. To run a profitable business around shared assets, you need to balance the tradeoff of serving as many customers as you can without affecting the overall quality of the experience.

For instance, think of a fitness center. A gym typically buys treadmills, ellipticals, free weights, bikes, and other equipment and charges customers monthly membership fees for access to these shared assets. The key is to charge customers enough to maintain and, if needed, replace their assets over time. Finding the right range of customers is the key to making a shared asset model work.

• Pros: This model provides people access to a lot of assets they wouldn’t otherwise have access to. In addition, many people are willing to pay a lot for access to trendy social spaces.
• Cons: Because they don’t own the assets, customers have little incentive to treat your resources well. Make sure you have enough in your budget for quick fixes, if necessary.

4. Subscription

A subscription is a type of program in which a user pays a recurring fee for access to certain specified benefits. These benefits often include the recurring provision of products or services. Unlike a shared asset, however, your experience with the product or service isn’t affected by others.

To have a successful subscription-based offering, build a subscriber base by providing reliable value over time while attracting new customers.

The number of subscription services has exploded in recent years. From magazines to streaming services to grocery and wine delivery subscriptions, businesses are turning to the subscription-based model, often with great success.

• Pros: This model provides certainty in the form of predictable revenue streams, making financial forecasting a bit easier. It also benefits from a loyal customer base and customer inertia (for instance, customers may forget to cancel their subscription).
• Cons: To run this model, your business operations must be strong. If you can’t deliver value consistently over time, you may want to consider a different business model.

5. Lease/Rental

A lease involves obtaining an asset and renting it out for an agreed-upon amount of time in exchange for a fee. You can lease virtually anything, but it’s in your best interest to rent assets that are durable enough to be returned in good condition. This ensures you can lease the good multiple times and, perhaps, eventually sell it.

To profit from leases, the key is to ensure that the revenue you get from leasing the asset before it loses value is greater than the purchase price. This requires you to price the rental of the item strategically and potentially not lease to those who may not return it in good condition. This is why many rentals of high-value items require references, credit checks, or other background information that can predict how someone may return the leased item.

• Pros: You don’t have to have a novel idea to make money using a lease business model . You can purchase assets and rent them to others who wouldn’t buy them for full value and earn a premium.
• Cons: You need to protect yourself from unexpected damage to your assets. One way to do so is through insurance.

6. Insurance

Insurance entails the transfer of risk from a customer to a seller of an insurance policy. In exchange for the insurance company (the seller of the policy) taking on the risk of a specified event occurring, they receive periodic payments ("premiums" in insurance lingo) from the policyholder. If the specified event doesn’t happen, the insurance company keeps the money, but if it does, the company has to pay the policyholder.

In a sense, insurance is the sale of safety—it provides value by protecting people from unlikely, but catastrophic, risks. Policyholders can take insurance out on almost anything: life, health, house, car, boat, and more. To run a successful insurance company, you have to accurately estimate the likelihood of bad events occurring and charge higher premiums than the claims you pay out to your customers.

• Pros: If you calculate risk accurately, you’re guaranteed to make money using the insurance business model.
• Cons: It can be difficult to accurately calculate the likelihood of specific events occurring. Insurance only works because it spreads risk over large numbers of policyholders. Insurance companies can fail if a large portion of policyholders is impacted by a widespread, negative event they didn’t see coming (for example, the Global financial crisis in 2007 and 2008).

Related: 5 Steps to Validate Your Business Idea

7. Reselling

Reselling is the purchasing of an asset from one seller and the subsequent sale of that asset to an end buyer at a premium price. Reselling is the process through which most major retailers purchase the products they then sell to buyers. For example, think of farmers supplying fruits and vegetables to a grocery store or manufacturers selling goods to a hardware store.

Companies make money through resale by purchasing large quantities of items (usually at a bulk discount) from wholesalers and selling single items for a higher price to individuals. This price raise is called a markup.

• Pros: Markups can often be high for retail sales, enabling you to earn a profit on the items you resell. For example, a bottle of water might cost 10 cents to produce, whereas a customer may be willing to pay $1.50 or more for the same bottle.
• Cons: You need to be able to gain access to quality products at low costs for the reselling business model to work. You’ll also need the physical space to store inventory to manage sales cycles.

8. Agency/Promotion

Agents create value by marketing an asset, which they don’t own, to an interested buyer. They then earn a fee or a commission for bringing the buyer and seller together. Thus, instead of using their own assets to create value, they team up with others to help promote them to the world.

Running a successful agency requires good connections, excellent negotiation skills , and a willingness to work with a diverse set of individuals. One example is a sports agent who promotes players to teams and negotiates on their behalf to get the best deal. In return, they typically receive compensation equal to a certain percentage of the contract.

• Pros: You can highly profit from expertise and connections in your industry, be it publishing, acting, advertising, or something else.
• Cons: You only get paid if you seal the deal, so you have to be able to live with some uncertainty.

Setting Your Business Up for Success

These eight types of business models each have pros and cons and deliver value in their own ways. If you’re looking to start a business and need a place to start, one of these could be the best fit for your venture and entrepreneurial skill set .

Interested in honing your entrepreneurial skills? Explore our four-week online course Entrepreneurship Essentials and our other entrepreneurship and innovation courses to learn the language of the business world.

This post was updated on February 19, 2021, and is a compilation of two posts, previously published on May 26, 2016, and June 2, 2016.

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Yarilet Perez is an experienced multimedia journalist and fact-checker with a Master of Science in Journalism. She has worked in multiple cities covering breaking news, politics, education, and more. Her expertise is in personal finance and investing, and real estate.

The term business model refers to a company's plan for making a profit . It identifies the products or services the business plans to sell, its identified target market , and any anticipated expenses . Business models are important for both new and established businesses. They help new, developing companies attract investment, recruit talent, and motivate management and staff.

Established businesses should regularly update their business model or they'll fail to anticipate trends and challenges ahead. Business models also help investors evaluate companies that interest them and employees understand the future of a company they may aspire to join.

Key Takeaways

• A business model is a company's core strategy for profitably doing business.
• Models generally include information like products or services the business plans to sell, target markets, and any anticipated expenses.
• There are dozens of types of business models including retailers, manufacturers, fee-for-service, or freemium providers.
• The two levers of a business model are pricing and costs.
• When evaluating a business model as an investor, consider whether the product being offered matches a true need in the market.

Investopedia / Laura Porter

A business model is a high-level plan for profitably operating a business in a specific marketplace. A primary component of the business model is the value proposition . This is a description of the goods or services that a company offers and why they are desirable to customers or clients, ideally stated in a way that differentiates the product or service from its competitors.

A new enterprise's business model should also cover projected startup costs and financing sources, the target customer base for the business, marketing strategy , a review of the competition, and projections of revenues and expenses. The plan may also define opportunities in which the business can partner with other established companies. For example, the business model for an advertising business may identify benefits from an arrangement for referrals to and from a printing company.

Successful businesses have business models that allow them to fulfill client needs at a competitive price and a sustainable cost. Over time, many businesses revise their business models from time to time to reflect changing business environments and market demands .

When evaluating a company as a possible investment, the investor should find out exactly how it makes its money. This means looking through the company's business model. Admittedly, the business model may not tell you everything about a company's prospects. But the investor who understands the business model can make better sense of the financial data.

A common mistake many companies make when they create their business models is to underestimate the costs of funding the business until it becomes profitable. Counting costs to the introduction of a product is not enough. A company has to keep the business running until its revenues exceed its expenses.

One way analysts and investors evaluate the success of a business model is by looking at the company's gross profit . Gross profit is a company's total revenue minus the cost of goods sold (COGS). Comparing a company's gross profit to that of its main competitor or its industry sheds light on the efficiency and effectiveness of its business model. Gross profit alone can be misleading, however. Analysts also want to see cash flow or net income . That is gross profit minus operating expenses and is an indication of just how much real profit the business is generating.

The two primary levers of a company's business model are pricing and costs. A company can raise prices, and it can find inventory at reduced costs. Both actions increase gross profit. Many analysts consider gross profit to be more important in evaluating a business plan. A good gross profit suggests a sound business plan. If expenses are out of control, the management team could be at fault, and the problems are correctable. As this suggests, many analysts believe that companies that run on the best business models can run themselves.

When evaluating a company as a possible investment, find out exactly how it makes its money (not just what it sells but how it sells it). That's the company's business model.

Types of Business Models

There are as many types of business models as there are types of business. For instance, direct sales, franchising , advertising-based, and brick-and-mortar stores are all examples of traditional business models. There are hybrid models as well, such as businesses that combine internet retail with brick-and-mortar stores or with sporting organizations like the NBA .

Below are some common types of business models; note that the examples given may fall into multiple categories.

One of the more common business models most people interact with regularly is the retailer model. A retailer is the last entity along a supply chain. They often buy finished goods from manufacturers or distributors and interface directly with customers.

Example: Costco Wholesale

Manufacturer

A manufacturer is responsible for sourcing raw materials and producing finished products by leveraging internal labor, machinery, and equipment. A manufacturer may make custom goods or highly replicated, mass produced products. A manufacturer can also sell goods to distributors, retailers, or directly to customers.

Example: Ford Motor Company

Fee-for-Service

Instead of selling products, fee-for-service business models are centered around labor and providing services. A fee-for-service business model may charge by an hourly rate or a fixed cost for a specific agreement. Fee-for-service companies are often specialized, offering insight that may not be common knowledge or may require specific training.

Example: DLA Piper LLP

Subscription

Subscription-based business models strive to attract clients in the hopes of luring them into long-time, loyal patrons. This is done by offering a product that requires ongoing payment, usually in return for a fixed duration of benefit. Though largely offered by digital companies for access to software, subscription business models are also popular for physical goods such as monthly reoccurring agriculture/produce subscription box deliveries.

Example: Spotify

Freemium business models attract customers by introducing them to basic, limited-scope products. Then, with the client using their service, the company attempts to convert them to a more premium, advance product that requires payment. Although a customer may theoretically stay on freemium forever, a company tries to show the benefit of what becoming an upgraded member can hold.

Example: LinkedIn/LinkedIn Premium

Some companies can reside within multiple business model types at the same time for the same product. For example, Spotify (a subscription-based model) also offers a free version and a premium version.

If a company is concerned about the cost of attracting a single customer, it may attempt to bundle products to sell multiple goods to a single client. Bundling capitalizes on existing customers by attempting to sell them different products. This can be incentivized by offering pricing discounts for buying multiple products.

Example: AT&T

Marketplace

Marketplaces are somewhat straight-forward: in exchange for hosting a platform for business to be conducted, the marketplace receives compensation. Although transactions could occur without a marketplace, this business model attempts to make transacting easier, safer, and faster.

Example: eBay

Affiliate business models are based on marketing and the broad reach of a specific entity or person's platform. Companies pay an entity to promote a good, and that entity often receives compensation in exchange for their promotion. That compensation may be a fixed payment, a percentage of sales derived from their promotion, or both.

Example: social media influencers such as Lele Pons, Zach King, or Chiara Ferragni.

Razor Blade

Aptly named after the product that invented the model, this business model aims to sell a durable product below cost to then generate high-margin sales of a disposable component of that product. Also referred to as the "razor and blade model", razor blade companies may give away expensive blade handles with the premise that consumers need to continually buy razor blades in the long run.

Example: HP (printers and ink)

"Tying" is an illegal razor blade model strategy that requires the purchase of an unrelated good prior to being able to buy a different (and often required) good. For example, imagine Gillette released a line of lotion and required all customers to buy three bottles before they were allowed to purchase disposable razor blades.

Reverse Razor Blade

Instead of relying on high-margin companion products, a reverse razor blade business model tries to sell a high-margin product upfront. Then, to use the product, low or free companion products are provided. This model aims to promote that upfront sale, as further use of the product is not highly profitable.

Example: Apple (iPhones + applications)

The franchise business model leverages existing business plans to expand and reproduce a company at a different location. Often food, hardware, or fitness companies, franchisers work with incoming franchisees to finance the business, promote the new location, and oversee operations. In return, the franchisor receives a percentage of earnings from the franchisee.

Example: Domino's Pizza

Pay-As-You-Go

Instead of charging a fixed fee, some companies may implement a pay-as-you-go business model where the amount charged depends on how much of the product or service was used. The company may charge a fixed fee for offering the service in addition to an amount that changes each month based on what was consumed.

Example: Utility companies

A brokerage business model connects buyers and sellers without directly selling a good themselves. Brokerage companies often receive a percentage of the amount paid when a deal is finalized. Most common in real estate, brokers are also prominent in construction/development or freight.

Example: ReMax

There is no "one size fits all" when making a business model. Different professionals may suggest taking different steps when creating a business and planning your business model. Here are some broad steps one can take to create their plan:

• Identify your audience. Most business model plans will start with either defining the problem or identifying your audience and target market . A strong business model will understand who you are trying to target so you can craft your product, messaging, and approach to connecting with that audience.
• Define the problem. In addition to understanding your audience, you must know what problem you are trying to solve. A hardware company sells products for home repairs. A restaurant feeds the community. Without a problem or a need, your business may struggle to find its footing if there isn't a demand for your services or products.
• Understand your offerings. With your audience and problem in mind, consider what you are able to offer. What products are you interested in selling, and how does your expertise match that product? In this stage of the business model, the product is tweaked to adapt to what the market needs and what you're able to provide.
• Document your needs. With your product selected, consider the hurdles your company will face. This includes product-specific challenges as well as operational difficulties. Make sure to document each of these needs to assess whether you are ready to launch in the future.
• Find key partners. Most businesses will leverage other partners in driving company success. For example, a wedding planner may forge relationships with venues, caterers, florists, and tailors to enhance their offering. For manufacturers, consider who will provide your materials and how critical your relationship with that provider will be.
• Set monetization solutions. Until now, we haven't talked about how your company will make money. A business model isn't complete until it identifies how it will make money. This includes selecting the strategy or strategies above in determining your business model type. This might have been a type you had in mind but after reviewing your clients needs, a different type might now make more sense.
• Test your model. When your full plan is in place, perform test surveys or soft launches. Ask how people would feel paying your prices for your services. Offer discounts to new customers in exchange for reviews and feedback. You can always adjust your business model, but you should always consider leveraging direct feedback from the market when doing so.

Instead of reinventing the wheel, consider what competing companies are doing and how you can position yourself in the market. You may be able to easily spot gaps in the business model of others.

Criticism of Business Models

Joan Magretta, the former editor of the Harvard Business Review, suggests there are two critical factors in sizing up business models. When business models don't work, she states, it's because the story doesn't make sense and/or the numbers just don't add up to profits. The airline industry is a good place to look to find a business model that stopped making sense. It includes companies that have suffered heavy losses and even bankruptcy .

For years, major carriers such as American Airlines, Delta, and Continental built their businesses around a hub-and-spoke structure , in which all flights were routed through a handful of major airports. By ensuring that most seats were filled most of the time, the business model produced big profits.

However, a competing business model arose that made the strength of the major carriers a burden. Carriers like Southwest and JetBlue shuttled planes between smaller airports at a lower cost. They avoided some of the operational inefficiencies of the hub-and-spoke model while forcing labor costs down. That allowed them to cut prices, increasing demand for short flights between cities.

As these newer competitors drew more customers away, the old carriers were left to support their large, extended networks with fewer passengers. The problem became even worse when traffic fell sharply following the September 11 terrorist attacks in 2001 . To fill seats, these airlines had to offer more discounts at even deeper levels. The hub-and-spoke business model no longer made sense.

Example of Business Models

Consider the vast portfolio of Microsoft. Over the past several decades, the company has expanded its product line across digital services, software, gaming, and more. Various business models, all within Microsoft, include but are not limited to:

• Productivity and Business Processes: Microsoft offers subscriptions to Office products and LinkedIn. These subscriptions may be based off product usage (i.e. the amount of data being uploaded to SharePoint).
• Intelligent Cloud: Microsoft offers server products and cloud services for a subscription. This also provide services and consulting.
• More Personal Computing: Microsoft sells physically manufactured products such as Surface, PC components, and Xbox hardware. Residual Xbox sales include content, services, subscriptions, royalties, and advertising revenue.

A business model is a strategic plan of how a company will make money. The model describes the way a business will take its product, offer it to the market, and drive sales. A business model determines what products make sense for a company to sell, how it wants to promote its products, what type of people it should try to cater to, and what revenue streams it may expect.

What Is an Example of a Business Model?

Best Buy, Target, and Walmart are some of the largest examples of retail companies. These companies acquire goods from manufacturers or distributors to sell directly to the public. Retailers interface with their clients and sell goods, though retails may or may not make the actual goods they sell.

What Are the Main Types of Business Models?

Retailers and manufacturers are among the primary types of business models. Manufacturers product their own goods and may or may not sell them directly to the public. Meanwhile, retails buy goods to later resell to the public.

How Do I Build a Business Model?

There are many steps to building a business model, and there is no single consistent process among business experts. In general, a business model should identify your customers, understand the problem you are trying to solve, select a business model type to determine how your clients will buy your product, and determine the ways your company will make money. It is also important to periodically review your business model; once you've launched, feel free to evaluate your plan and adjust your target audience, product line, or pricing as needed.

A company isn't just an entity that sells goods. It's an ecosystem that must have a plan in plan on who to sell to, what to sell, what to charge, and what value it is creating. A business model describes what an organization does to systematically create long-term value for its customers. After building a business model, a company should have stronger direction on how it wants to operate and what its financial future appears to be.

Harvard Business Review. " Why Business Models Matter ."

Bureau of Transportation Statistics. " Airline Travel Since 9/11 ."

Microsoft. " Annual Report 2023 ."

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The Power of Online Sales: Demystifying the Ecommerce Business Model

13 Minutes Read

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Learn How to Start an Ecommerce Business and Drive Online Sales

Antonio Del Cueto, CPA

May 8, 2024

Have you ever wondered how the digital marketplace has transformed the traditional shopping experience and what it means for the future of buying and selling? In an era where clicking replaces queuing, and digital carts are filled from the comfort of our homes, how does this shift impact both consumers and businesses alike?

By 2027, the e-commerce market is expected to surpass $7.9 trillion , signaling a massive transformation in conducting transactions globally. In this article, you will explore the essence of ecommerce—its evolution, key components, and future trends. Discover how ecommerce reshapes industries worldwide and what it could mean for your shopping habits or business strategies.

Further reading: Ultimate Guide: How to Start an Ecommerce Business in 2024 for Beginners and Experts

Understanding ecommerce fundamentals, brief history and evolution of online sales.

Ecommerce's roots trace back to the 1960s with the advent of Electronic Data Interchange (EDI) to transfer documents. The real transformation began with the public introduction of the internet in the 1990s, propelling online shopping into the mainstream through pioneers like Amazon and eBay.

Today, ecommerce encompasses everything from mobile commerce to electronic funds transfers and beyond, making it easier than ever for consumers to buy and sell goods and services online.

Types of Ecommerce Models

Understanding different ecommerce business models is vital for anyone interested in participating in ecommerce, whether you’re looking to start selling today or plan to grow your business online. Here are the primary models:

• Business to Business (B2B Ecommerce): This type of ecommerce involves transactions between two businesses, like manufacturers selling to wholesalers. B2B ecommerce platforms offer substantial opportunities for businesses to expand by supplying products or services to other businesses.
• Business to Consumer (B2C Ecommerce): The most common model, B2C ecommerce, involves businesses selling goods and services directly to consumers through an online store. Major ecommerce companies like Amazon and Alibaba are leading examples, showcasing a wide range of products to customers worldwide.
• Consumer to Consumer (C2C): Platforms such as eBay and Craigslist exemplify the C2C model, where individuals can sell products and services to each other online. This type of ecommerce platform facilitates an online marketplace where users can engage in buying and selling of goods, often with the platform taking a small commission.
• Consumer to Business (C2B): In a twist on traditional business structures, the C2B model sees consumers offering products or services to businesses. This can include freelance work, digital products, or other services, often mediated through platforms that help businesses thrive by finding the right solutions for their needs.

Key Components of a Successful Ecommerce Business

Website and mobile app functionality.

In today's digital marketplace, the functionality of your ecommerce website and mobile app is integral. These platforms serve as the primary storefront for your online business, enabling customers to easily browse and purchase products or services.

For businesses that sell through both brick-and-mortar and online stores, ensuring a seamless integration and a consistent user experience across all platforms can significantly increase ecommerce sales.

Whether you operate a large enterprise ecommerce system or a small online store, the functionality of your site directly influences customer satisfaction and your revenue model.

Importance of User Experience and Design

The user experience (UX) of your ecommerce site is vital for retaining customers and encouraging repeat business. A successful ecommerce website must be not only functional but also inviting and easy to navigate. This includes thoughtful design elements that create an enjoyable online shopping experience.

Good ecommerce design goes beyond aesthetics, involving clear categorization of products, optimized search functionality, and responsive customer interaction points. Businesses vying in competitive markets will find that superior UX design can be a distinguishing factor that sets their ecommerce store apart from others.

Secure Payment Gateways and Data Security

Secure payment gateways are a backbone of successful ecommerce operations, ensuring that customers can safely and conveniently make purchases online. Integrating robust security measures into your ecommerce platform helps protect against fraud and builds trust with your buyers. This trust is integral, especially for businesses operating solely online without a physical presence.

Adhering to ecommerce revenue models and security standards like PCI DSS not only protects your business and customers but also supports your business as it grows. Data security isn't just about protecting financial information—it's about securing all customer data, which is essential as ecommerce allows a greater reach across various social media platforms and markets.

Advantages and Challenges of Ecommerce

Benefits of running an ecommerce business.

Ecommerce has fundamentally transformed how businesses showcase and sell products or services online, providing several compelling advantages:

• Broader Reach: Ecommerce enables businesses to extend their reach far beyond traditional boundaries. An online store that allows global access means that small- and medium-sized businesses can attract customers from all over the world, not just locally.
• Lower Operational Costs: Unlike brick-and-mortar locations, ecommerce stores can operate with significantly lower overhead. This reduction in costs enables businesses, especially startups and small enterprises, to allocate resources more efficiently and scale as the business grows.
• Increased Convenience: The convenience of ecommerce allows customers to make purchases 24/7, providing a seamless buying experience that traditional physical stores cannot match. This aspect is particularly appealing in today's fast-paced world where time is a premium.
• Data-Driven Customer Insights: Modern ecommerce platforms offer powerful analytics tools that help businesses understand customer preferences and behaviors. This data is invaluable for refining marketing strategies and enhancing product offerings, ultimately driving better sales performance.

Common Challenges Faced by Ecommerce Businesses

Despite the many benefits, ecommerce also presents unique challenges that can impact a business owner's ability to succeed:

• Logistics and Shipping: Effective management of logistics is key, particularly for businesses engaged in dropshipping or selling a wide variety of types of products. Challenges in this area can include managing inventory levels, optimizing shipping routes, and ensuring timely delivery—all vital to maintaining customer satisfaction.
• High Competition: The ecommerce space is crowded, with many ecommerce brands vying for consumer attention. Standing out requires innovative ecommerce marketing strategies and a commitment to building a strong brand identity.
• Customer Service: Delivering excellent customer service online is often more challenging than in a face-to-face setting. Ecommerce businesses need robust systems to handle customer inquiries and complaints efficiently, ensuring a positive customer experience.
• Security and Data Privacy: With the rise in cyber threats, securing an ecommerce site and protecting customer data are paramount. A breach can severely damage a brand's reputation and consumer trust.
• Adapting to Market Trends: Keeping up with ecommerce trends and statistics is essential for staying relevant. Whether it's adopting new technologies or responding to changes in consumer behavior, ecommerce businesses must be agile and proactive.
• Technical Challenges: Maintaining a smoothly functioning ecommerce website requires technical expertise. Issues like website downtime, slow loading times, and poor user interface design can deter potential sales and harm a business’s reputation.

Further reading: The Ultimate Guide: Understanding the Dropshipping Business Model

Future trends in ecommerce, predictions for the growth of ecommerce.

The ecommerce landscape continues to evolve, with significant growth expected in the coming years. As more consumers opt to shop online, the potential for businesses to expand their reach and increase sales of goods or services is substantial.

This growth is not just beneficial for large enterprises. Small business owners can also capitalize on the expanding digital marketplace. The scalability of ecommerce can serve as a pivotal sales model for businesses of all sizes.

Technological Advancements Impacting Ecommerce

Several emerging technologies are poised to dramatically influence how ecommerce takes place:

• Artificial Intelligence (AI): AI is reshaping ecommerce by personalizing the customer experience and optimizing business operations. From AI-driven recommendations to automated customer service, the integration of AI can help your business enhance efficiency and customer satisfaction.
• Virtual Reality (VR) and Augmented Reality (AR): These technologies are revolutionizing the online shopping experience by allowing customers to visualize products in a highly interactive manner. Whether it’s trying on virtual outfits or placing furniture in your home via AR, these tools are adding a new dimension to ecommerce.
• Blockchain: Known for its security features, blockchain technology offers transparency and efficiency in transactions, which is increasingly important in ecommerce today. It ensures that the buying and selling of goods or services online are secure, fostering trust among consumers.

How Businesses Can Adapt to Future Changes in the Online Marketplace

Adapting to the fast-paced changes in ecommerce requires businesses to be agile and forward-thinking:

• Embrace Cutting-Edge Technologies: To remain competitive, businesses need an ecommerce guide to online technology integration that outlines how to effectively use AI, VR, AR, and blockchain. Understanding how ecommerce works with these technologies can provide a significant advantage.
• Optimize for Mobile and Beyond: Given the shift towards mobile commerce, ensuring your ecommerce site or app offers an exceptional mobile shopping experience is beneficial. This involves more than just responsive design. It means thinking mobile-first in every aspect of your digital strategy.
• Leverage Data for Customer Insights: Advanced data analytics are critical for understanding consumer behavior and personalizing the shopping experience. By analyzing data, ecommerce businesses can fine-tune their marketing strategies and product offerings to better meet the needs of their customers.
• Prioritize Customer-Centric Initiatives: Implementing customer-centric strategies, such as enhanced customer support and personalized user experiences, can differentiate your brand in a crowded market. Selling products to customers online offers unique opportunities to build relationships and loyalty through personalized interactions.
• Sustainability as a Core Value: In today’s market, sustainability is not just a trend but a business imperative. By adopting eco-friendly practices and promoting them on your ecommerce site, you can attract a growing demographic of environmentally conscious consumers.

Key Takeaways

• Seller's Realm : Ecommerce allows sellers to reach global markets, transcending geographical limitations.
• Exploring Benefits : Take time to explore the myriad benefits of ecommerce, from expanded customer reach to reduced overhead costs.
• Pros and Cons : Understanding the advantages and disadvantages of ecommerce is vital for informed decision-making in this type of business.
• Ecommerce Essentials : Key components of ecommerce include online storefronts , secure payment gateways, and efficient logistics systems.
• Branding Matters : In starting an ecommerce business, choosing a memorable business name is essential for building brand recognition and trust among customers.

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