Four E-commerce business models that work in 2021
E-commerce is a thriving business in the business world. Online store sales are expected to increase steadily this decade. There are lots of opportunities for business owners in the e-commerce industry to succeed.
As an e-commerce business owner, it is not only ideal for you to know the opportunities available for you and your business, but it is equally vital that you are aware of and understand the business models that work in e-commerce.
There is plenty to be excited about when looking at the latest e-commerce trends. At the same time, unless you know and understand the fundamentals, you risk hitting a profitability wall. While there are several new and rapidly improving tools, the rules have stayed the same. If you want to innovate and beat expectations, you’ll need to know your business model and define how you’ll use it.
Below is a breakdown of the major types of e-commerce businesses, with a brief description of how they work, and why you may want to choose one over the others.
Types of E-commerce Business Models
- Business to consumer model (B2C): What is B2C? This is the most commonly known type of eCommerce business. It involves the traditional retail model where businesses sell their products or services directly to the end consumer. The market is commonly large and the sales cycle short. Order values are low and recurring orders are less common but business is conducted online instead of a physical store. Many of the most profitable eCommerce businesses are B2C.
- Business to business model (B2B): The B2B business eCommerce model involves a business selling to other businesses. With this model, order values and quantities are high, but the market to sell wholesale is generally much smaller than B2C.
- Consumer to business model (C2B): This model is not popular right now, but it is a growing and profitable field. In C2B eCommerce, the consumer sells goods or services to businesses. This is roughly comparable to a sole proprietor serving businesses. The most common forms of this model are affiliate marketing and freelancer websites.
- Consumer to consumer (C2C): The C2C model can also be called an online marketplace that allows individuals to trade, buy and sell their products and services to each other. The marketplace is hosted by the business which takes a small fee for each transaction between consumers.
Which E-commerce business models to pick
Once you’re comfortable with the different types of e-commerce business models, you should pick the one that works best for you.
Here are four considerations that can aid in making your choice:
- Choose your customers. Do you want to sell to individual consumers or businesses? This decision will drive your e-commerce business plan. Business orders generally take longer to procure, but in exchange, they tend to be larger in quantity and revenue. Conversely, consumers make quicker buying decisions, but each sale comes with less revenue.
- Know your capacities. Think about your starting capital, the product or service you want to sell, and your technical constraints. Avoid biting off more than you can chew. It’s best not to sacrifice quality for quantity, particularly when you are just starting out. Among other things, you can assure better customer service and higher customer satisfaction which will, in turn, help secure the long-term health of your business and have a significant impact on sales and profitability.
- Pick your offerings. You may be offering a service that can be done remotely or in person. Or you may want to manufacture your products or resell or distribute another business’s products. Whatever you decide, make sure you understand your costs to enable you to set suitable prices to secure a profit. It is also important to understand whether the price that you set is one that the market will bear.
- Position your business. Decide how you’ll get your products or services in front of your customers and what makes you stand out from the crowd — what makes your product or service unique. This step will be essential when it comes time to work on your marketing plan. What platforms would be used to market your products? What would be your value proposition?
There are many ways to build an e-commerce business and still make a profit. The products and services you have and your capabilities will determine what you choose to do. Whatever model you choose, be sure to start with a solid e-commerce business plan and pick the right platform.