When starting an online business, one of the most important decisions you’ll make is choosing the right eCommerce business model. This decision impacts everything from how you operate to how you reach your customers and grow. Each model has its pros and cons, and what works for one business might not be the best fit for another.
In this guide, we’ll explore the most common eCommerce business models and also see some models based on product types and revenue. This guide should help you understand which one aligns best with your product, target market, and overall business goals. Whether you’re selling directly to consumers or other businesses, understanding these options will set you on the right path to success.
Know the A to Zs of eCommerce business models here!
7 types of eCommerce business models that you should know
Business to Consumer Model (B2C)
In the Business-to-Consumer (B2C) e-commerce model, a business sells its products or services directly to end consumers who use these goods for personal and non-commercial purposes. The B2C e-commerce model is the most common among all.
- An example of this model is a person buying a pair of sneakers from an online retailer.
- Walmart is also a well-known example of the B2C eCom model. It sells a wide range of products directly to end consumers through its physical and online stores.
Business to Business (B2B)
An eCommerce model is Business-to-Business (B2B) when a business sells its products or services to another business rather than directly to end consumers. These transactions typically involve bulk purchasing, specialized services, or software solutions.
- A common example of this model is a T-shirt customizing business purchasing solid T-shirts from a T-shirt manufacturer.
- Alibaba is a well-known example of the B2B model, where businesses purchase wholesale products from manufacturers for resale or use.
Consumer to Consumer (C2C)
The Consumer-to-Consumer (C2C) eCommerce model is when individuals sell products or services directly to other individuals. These transactions usually occur on online platforms that connect buyers and sellers. The items are usually second-hand. In rare cases, the items can be new.
- An example of this model is a person selling second-hand PlayStation on a platform like Facebook Marketplace.
- eBay is a famous example of the C2C model, where users buy and sell items directly to each other through online auctions or direct sales.
Consumer to Business (C2B)
The eCommerce model is called Consumer-to-Business (C2B) when an individual consumer offers products or services to businesses. This is common in freelance work, where individuals sell their skills or products directly to companies.
- An example of this model can be a graphic designer offering their services to a company.
- Freelancer.com is a well-known C2B platform where individuals provide various services to businesses looking for specific skills.
Business to Government (B2G)
The Business-to-Government (B2G) eCommerce model involves businesses providing products or services to government entities. These transactions usually involve specialized products or services delivered through contracts.
- A common example of this model is when an IT company provides its services to a government agency.
- A well-known example of this model is IBM, It provides technology solutions to government sectors worldwide.
Consumer to Government (C2G)
An eCommerce model is called the Consumer-to-Government (C2G) model when individuals interact directly with the government, typically for services or making payments.
- A common example of this model can be a person paying taxes online on the government’s portal.
- A well-known example of this model is The IRS website, where citizens can file taxes.
Direct to Consumer (D2C)
The Direct-to-Consumer (D2C) eCommerce model is when a business sells its products directly to consumers, bypassing any intermediaries like retailers or wholesalers. This model is common with brands that sell via their own online platforms.
- Warby Parker, an eyewear brand that sells directly to customers through its website, is a well-known example of the D2C model.
Revenue Models Shaping eCommerce Growth
Direct Selling
Direct selling is a way for companies to sell products or services directly to end consumers without going through retail stores or middlemen. This usually happens in non-traditional settings like the customer’s home, their workplace, or even online.
Here are the key points about direct selling:
- Personalized Shopping Experience: Direct sellers offer personalized recommendations to customers, making the shopping experience more interactive.
- Income Opportunities: Direct selling provides job opportunities for people who may not find traditional work easily. This includes homemakers, retirees, or individuals looking for part-time or flexible jobs.
- Complex Products: It works well for companies selling high-value or complicated products that need a personal demonstration to show their full benefits.
White Labelling
White Labelling is the rebranding of a ready-made product or service that you can sell as your own, without the hassle of building it from scratch. These solutions are customizable, so you can adapt them to suit your business needs, whether it’s software, websites, or marketing tools.
Have you ever been to a Decathlon store? Most of their products are white-labeled!
Even services like logistics or customer support can be white-labeled, allowing you to expand your offerings while maintaining your brand identity.
Wholesale Distribution
Wholesale e-commerce is the process of selling products online between wholesalers and their business customers, such as retailers. This model simplifies transactions by allowing both parties to manage orders online, cutting out extra costs like shipping physical documents or handling paper payments.
With wholesale e-commerce, businesses build direct, ongoing relationships. Retailers can browse products through a wholesaler’s website catalog, view relevant details, and place their orders with specific wholesale terms, all online. This makes the process faster, easier, and more efficient for both wholesalers and retailers.
Dropshipping
Dropshipping is an e-commerce business model where retailers sell products without keeping any inventory. When a customer places an order, the retailer forwards it to a supplier, who then handles the shipping directly to the customer.
This setup benefits both retailers and suppliers. Retailers can focus on customer service and marketing, while suppliers manage the inventory and logistics. Dropshipping is a popular method worldwide, used by both wholesalers and manufacturers to streamline sales.
An example is Oberlo, which integrates with Shopify to allow sellers to find products from suppliers and add them to their stores.
Subscription Models
Subscription models allow customers to sign up for recurring deliveries or services, providing businesses with a steady stream of revenue. This approach is widely used in industries like software (SaaS), entertainment (streaming services), and direct-to-consumer (DTC) products like meal kits or grooming supplies.
Netflix and Dollar Shave Club are popular examples of subscription-based services.
Freemium to Premium
Freemium models offer basic services or products for free, with the option to upgrade to a paid version with enhanced features. This model is widely used in digital services, particularly in apps or software platforms, where the goal is to attract users with free content and then entice them to pay for more advanced features.
Spotify and Zoom use this model, where users can enjoy free services but are encouraged to upgrade to premium versions for better features or an ad-free experience.
Opportunities and Challenges in eCommerce (2024 and Beyond)
The eCommerce market is expanding at an incredible pace, with 2.71 billion people shopping online and online transactions steadily accounting for a larger share of total retail sales each year. This rapid growth presents both significant opportunities and unique challenges. In this section, we’ll explore the key factors shaping this dynamic landscape.
Let’s talk about the bright side of eCommerce
Save on initial expenses and upfront costs: When you start your eCommerce business, you don’t need a physical store to operate from or employees. If you start a dropshipping business, you won’t even need a place to store your products—just computer access. You can use the cash savings from not having rent and staffing costs to help grow your business.
Generate web traffic to reach a broader audience: Online sellers don’t need to rely on foot traffic or traditional ads. You can boost traffic to your eCommerce store by using SEO, social media marketing, and email marketing. And with more people migrating to online shopping, and supply chains getting better, the opportunities are limitless!
Conduct sales round the clock without a physical store: With an eCommerce store, you can sell products 24/7. The ease of handling payments online while focusing on expanding your offerings or enhancing your presence is our favorite perk!
Enhance scalability for business growth: e-commerce stores are easy to scale up as products increase in popularity or as you expand your offerings, without the investment needed for physical store expansions.
Collect advanced customer data: Online shopping metrics such as cart abandonment rates and customer lifetime value provide invaluable data. Analyze these insights to outperform yourself in terms of the customer experience which will then help you improve conversions.
Now let’s take a look at the challenges you might face
While online selling is a great alternative to in-store sales, it does have some challenges:
Cybersecurity threats: Without proper security, your eCommerce store could expose sensitive customer data, leading to legal and trust issues. Prioritizing security measures can reduce the risks of cyber attacks.
Logistics with manufacturing and shipping: Managing a busy online store requires solid organization and collaboration with third-party logistics companies. Connecting your store to supply chain solutions can streamline this process.
Technical issues: ECommerce websites can face disruptions due to server problems. But traditional brick-and-mortar stores also face challenges like staffing issues or power outages.
Remote customer service: Online customer interactions don’t have the personal touch of face-to-face service. However, personalizing online interactions can still improve customer engagement and satisfaction.
Know the different types of eCommerce websites
Single-Brand Sites
These are websites where a company sells its products directly to customers. This direct-to-consumer (DTC) approach allows brands to control their sales process and customer experience.
Multi-Brand Online Stores
These stores offer products from different brands, making it easier to manage a wide variety of items and cater to more customer needs.
Affiliate Sites
These websites earn money by promoting products from other companies. When visitors click on affiliate links and make a purchase, the site owner earns a commission.
Marketplaces
Platforms like Etsy and Amazon let businesses sell their products alongside other sellers. You can either build your marketplace or join existing ones to reach a larger audience.
Take a look at the different eCommerce platform technologies
Choosing the right eCommerce platform is more than a technical choice, it’s a critical decision that impacts your growth and customer experience. In 2024, with so many options available, it’s essential to pick a platform that aligns with your business goals and scales with your needs. Let’s explore the key platform types and how each can power your eCommerce success.
1. Software as a Service (SaaS)
SaaS platforms are known for their cost-efficiency and scalability. They take care of server management and software updates, so you can focus on growing your business.
SaaS eCommerce platfroms are easy to set up and require little technical expertise, making them perfect for businesses looking for quick deployment. However, they offer limited customization, so if you need highly specific features, this may not be the best fit.
For companies that want to grow rapidly without worrying about infrastructure, SaaS platforms are a great option.
2. Open Source
Open-source platforms provide complete control and flexibility. With these, you can customize everything—from design to back-end operations—making them ideal for businesses with unique requirements.
The downside? These platforms require technical expertise. You’ll need a dedicated development team to handle server management, security, and updates. This increases both time and costs in the long run.
Open-source is best for businesses that need full control and have the resources to manage the platform internally.
3. Platform as a Service (PaaS)
PaaS solutions offer the best of both worlds: customization and managed infrastructure. This means you can tailor the platform to your needs while relying on external support for infrastructure maintenance.
However, PaaS platforms come with a higher price tag and longer setup times due to the level of customization and integrations required. They work well for businesses that need to connect multiple systems—such as CRM, ERP, and marketing tools—across different channels.
If you’re looking for a solution that offers deep integration capabilities, PaaS is a solid choice.
4. Headless Commerce
Headless commerce offers an API-first approach, separating the front end from the back end. This provides unmatched flexibility, allowing businesses to create custom front-ends for various devices, such as websites, mobile apps, or IoT products.
While this freedom lets you deliver a unique customer experience, it requires significant technical investment. You’ll need a strong development team to build and maintain the front end, especially when it comes to omnichannel experiences.
Headless commerce is ideal for businesses that need to deliver highly personalized and adaptable customer interfaces across multiple channels.
5. Enterprise Solutions
Enterprise platforms provide complete control over every aspect of your business. They are designed for large operations with complex needs, such as managing huge product catalogs, multi-channel selling, and global transactions.
These platforms offer deep customization and can integrate with virtually any system, but they come with steep costs and longer implementation timelines. Only larger enterprises with the resources and need for such infrastructure should consider these platforms.
For businesses that need to manage large-scale, complex eCommerce operations, enterprise solutions are a go-to choice.
Factors to consider to make sure you choose the right eCommerce model
Knowing your target audience will give you a head start
When selecting an eCommerce model, it’s essential to understand your audience. Knowing who your customers are and what they want will help you choose between the options that we listed earlier. Ask yourself, are they individual shoppers or businesses buying in bulk? Also to gain clarity, create a simple profile of your ideal customer.
Select an eCommerce model that better aligns with the type of product you have
Select an eCommerce model that better aligns with the type of product you have Selling clothes might align better with a business-to-consumer (B2C) model, while software sales could be more suited to a business-to-business (B2B) approach. To refine your selection, make a list of your products and categorize them based on whether they target individuals or businesses.
Know your competition and act accordingly
It’s crucial to analyze the competition in your market. Look at what other businesses are doing; if the market is crowded, you may need a unique approach to stand out. Take the time to research competitors’ websites and identify the eCommerce models they use, which can help you find gaps in the market that you can fill.
Are you aware of your costs?
Cost considerations are another vital aspect of your decision. Different models come with varying expenses, such as shipping, handling, and payment processing fees. Creating a budget to estimate these costs for each model will help you understand which option is more affordable for your business.
Since we are all online, pay attention to the technology used
Some eCommerce models may need more advanced platforms or tools, so check what you might need to run your chosen model and ensure that you have the budget to support it. Additionally, think about the future growth of your business. Reflect on your long-term goals to determine if the model can support your vision for growth.
Customer experience is everything in 2024 and beyond
The customer experience you aim to provide is equally important. Consider how your chosen model will impact your customers’ shopping experience. Decide on the type of experience you want to create—whether it’s fast and efficient or more personalized—so that you can design your model accordingly.
Stay Informed About Regulations
Be mindful of any regulations that may affect your business model, especially if you plan to sell internationally. Research the legal requirements associated with your chosen model and consider consulting a legal expert if necessary to ensure compliance.
Align with Your Marketing Strategy
Lastly, ensure that your eCommerce model aligns with your marketing strategy. Evaluate how you plan to promote your products and see how each model fits within that strategy. It’s also essential to assess the resources you have available, including time, money, and staff. By making a list of your current resources, you can determine which models can work best for your capabilities.
By considering these factors and taking these steps, you’ll be well-equipped to choose the right eCommerce model that aligns with your business goals and sets you up for success.
How we can help you at SellersCommerce?
SellersCommerce offers an advanced eCommerce platform tailored specifically for suppliers, distributors, and manufacturers. With powerful features like custom online stores, flexible catalog management, and streamlined ordering processes, SellersCommerce helps you deliver a seamless buying experience for both individual and group orders. Take your private ordering experiences to the next level—explore SellersCommerce today and see how easy managing your B2B eCommerce experiences can be!