Types of Ecommerce Business Models

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Ecommerce is at an all-time high, and the competition is fierce. It can be difficult to know how to stand out from the crowd and what infrastructure is necessary to deliver a world-class customer experience.  

If you apply the right ecommerce business model to your online store, this will give you the best chance of success. It is important to know which business model best fits your needs and requirements. Here are some types of ecommerce business models. 

What is an ecommerce business model?

Ecommerce is a business model that allows businesses and consumers to sell or make purchases online. At its core, a business model explains what products or services a company sells, how it will market, what expenses it faces, and how it will turn a profit. 

The most common model is a business-to-consumer (B2C) model. It is what many people think about when they imagine an ecommerce business – a business that sells to individual consumers. A business-to-business (B2B) model focuses on selling products from one business to another. This type of model includes service companies, software providers and many other ecommerce businesses. There are too many other business models to offer much detail here – freemium models, leasing models, franchise models and crowdsourcing models.

Business to consumer (B2C)

The B2C ecommerce model is the most widely known one. There are five different B2C business models. 

  • Direct selling model: Direct selling is when consumers buy products directly from online retailers. 
  • Online intermediaries: Online intermediaries bring together buyers and sellers and take a cut of each transaction.
  • Advertising, community or fee-based models: Some websites offer free content and make money from advertising. Social media platforms are community-based sites that make money from sending users targeted ads based on their demographics. A fee-based model involves selling information or entertainment for a fee. Netflix or subscription-based newspapers are some examples. 

To implement a B2C ecommerce model successfully, businesses must have an adjustable platform that can quickly adapt to customer needs. Customers expect customization, fast speed, an integrated experience and much more from businesses today. 

Vue Storefront is an open source ecommerce frontend that takes a future-proof, headless design approach. Headless design involves separating all units that perform particular services, such as decoupling the front end from the back end. All the separate units ‘talk’ via APIs. A Progressive Web App (PWA) enables mobile-first ecommerce transformation in a convenient, quick and affordable way. 

Adjusting a storefront with PWA enables it to run smoothly as a web page and as a native app. Instead of building a separate website and native mobile app, a team can build one app that operates well on any device. 

Business to business (B2B)

B2B commerce can be broken down into vertically or horizontally oriented businesses. Vertically oriented businesses sell to other businesses in a specific industry. Horizontally-oriented businesses sell to a variety of other businesses in many industries. Both models can be lucrative, but your choice will once again depend on your products and customers. Modern B2B buyers expect convenience, personalization, flexibility and integrated experiences as much as B2C customers.

Franchise model

Many people are familiar with the franchise model. A franchise is an established business blueprint that the franchisee buys. The franchiser works with the franchisee to help with financing, marketing and other business operations. The franchisee pays the franchiser a percentage of the profits. Mcdonald’s and Starbucks are examples of this model. 

Best delivery methods

  • Drop shipping: Drop shipping is an order fulfillment process. You sell products. You don’t have to make yourself through your store. A third-party supplier stocks, packages and ships products. All you need is a storefront, and you don’t have to worry about stocking a warehouse, managing inventory or handling shipping. All you need to do is focus on the frontend experience for customers. One disadvantage is that you don’t have control over the supply chain. You are in direct contact with the customer, and you are responsible if products arrive late or are damaged. You manage customer support and handle any queries. 
  • Subscription services: With a subscription service, you commit to sending products to customers on a regular basis. Your pricing, billing etc., will depend on your business and your products. Food, beauty, fashion and pet products tend to work well with subscription services. 
  • Wholesaling: Businesses order goods from a supplier. They are responsible for warehousing, managing inventory, tracking customer orders and shipping. The only thing they don’t handle is the manufacturing of products. Wholesale commerce is leveraged in the B2B and B2C space. 
  • Private labeling: Businesses can hire third-party manufacturers to create products based on their ideas. They don’t have to manufacture their own products. A manufacturer can ship products directly to the customer or to you to handle. This method can be a great way to get started and test ideas. 
  • White labeling: White labeling gives you the opportunity to sell a product under your own name that you purchase from a third-party distributor manufacturer. This often happens in the health and cosmetic industry. You can take advantage of the expertise of the distributor and add your own name and logo. 

How to choose an ecommerce business model?

Some key criteria will affect the ecommerce business model you choose. The first will be your customers. Building your ideal customer profile will help you to choose the right model. Think about their buying habits and their pain points. 

What makes you different from your competitors? Is it your prices, product quality or customer service? Knowing where you excel is vital to your business strategies. 

You need to sell your products in a way that makes sense to your customers. If you create your own products, you may want to consider a subscription or wholesale business. If you’re selling someone else’s products, building your brand reputation and customer base will be very important. 

Conclusion

The above information will help you to identify the best business model to serve your target market. The essential elements include a viable target market, a competitive advantage and a unique selling proposition. Without these, generating any revenue is unlikely. Once you know what route to pursue, you need to build and optimize your ecommerce infrastructure. You also need to fine-tune your marketing tactics if you want to maximize your revenue.