Types of ecommerce business models you should know to start highly profitable ones
Do you have a plan to open an ecommerce business? So you don’t miss this article. Because many ecommerce entrepreneurs don’t have any ideas about how ecommerce businesses are set up or types of ecommerce that are available to them. To solve that problem, in this blog, ArrowTheme will show you Types of ecommerce business models you should know to start highly profitable ones. Thus, let’s get started.
Major types of ecommerce business classifications
The first thing to consider is the type of business you have to choose for your business. Are you a B2B, B2C, C2C, or C2B company? If you don’t have any idea about them. So don’t worry. Because we will explain one by one for you.
B2B – Business to business
A firm selling its product or service to another business is a B2B model. The buyer is sometimes the ultimate user, although most of the time the buyer resells to the consumer. Moreover, the recent B2B innovators have used ecommerce sites instead of using catalogs and order sheets as period. Millennials will account for over half of B2B buyers in 2020, nearly double the number in 2012.
B2C – Business to consumer.
B2C business model is the traditional retail method. It is a company that sells to individuals over the internet rather than at a physical store. Because the B2C model is the most popular business model, it includes a wide range of options. Furthermore, a B2C purchase has a lot shorter decision-making process than a B2B buy, especially for lower-value items. Therefore, B2C companies spend less money on marketing to generate a sale. However, B2C businesses also have a lower average order value and fewer recurring purchases than B2B companies.
C2B – Consumer to business
C2B is another model that most people aren’t familiar with, although it’s becoming more common. In this type of business model, the customer can sell services or products to businesses. In addition, the competitive advantage of the C2B model lies in the price of products and services. Because this model allows customers the opportunity to choose their own price. Moreover, businesses have to compete directly for their business. Recently, this business model has been creatively used to connect businesses with social media influencers in order to sell their products.
C2C – Consumer to consumer
An online marketplace is often known as a C2C business. C2C lets consumers trade, buy, and sell products in exchange for a nominal fee paid to the site. Opening a C2C site needs careful preparation. In the early days of the internet, companies like Craigslist and eBay pioneered this business model.
Ecommerce for Government / Public Administration
Types of ecommerce mentioned above are the most common. Besides that, there are some other kinds involving the government or public administration doing business or consumer transactions:
- B2G (also known as B2A): For companies whose sole customers are governments or other types of public administration. For example, a company that supplies contractors and services to government agencies.
- C2G (also known as C2A): persons who pay taxes or university fees to the government.
Revenue models for ecommerce businesses
The second most critical consideration is how you want to handle inventory control and product sourcing. The following are some revenue models for ecommerce businesses.
Dropshipping is one of the most popular ecommerce methods. This kind of ecommerce allows you to set up an online shop and accept payments from customers using credit cards or PayPal. Therefore, your provider is in charge of the rest. As a result, this will help you in reducing the inventory management, stock warehousing, and packaging. However, it’s all on you if your vendors are slow, the product quality isn’t what you expected, or there are issues with the order (and in your reviews).
Warehousing And Wholesaling
Ecommerce enterprises that include wholesaling and warehousing need a large initial investment. Because you must handle inventory and stock, keep records of customer orders and delivery information, and invest in warehouse space.
It’s all about volume in the wholesale industry. You need to send items to Ebay, Amazon, Google, and other sites. All of this is included in BigCommerce’s $29 monthly Basic plan. There’s no need for tinkering. Because you are able to use X-Cart if you know how to code.
Manufacturing And Private Labeling
In case you have a great product idea but lack the funds or ambition to create your own facility. So this model may be the correct business model for you. Companies that make things for sale offsite give the blueprints or prototypes to a contracted manufacturer, who then manufactures the product to client requirements and ships it directly to the consumer, a third party like Amazon, or the firm selling the final product.
Moreover, if you have a problem with product quality, on-demand manufacturing allows you to easily switch providers. Because the initial expenses are low. Therefore, if you plan to develop your own manufacturing facilities later, this is a good approach to test a new product or concept.
White labeling is the same. You can pick a product that is already being sold effectively by another company but has white label options, create your own packaging and label, and sell the product. This is rather popular in the health and cosmetics industries, but less so in other industries.
Furthermore, demand is one issue with white labeling. Because most of these businesses impose a minimum order amount. Therefore, your company knows the product is in high demand.
Print On Demand is a popular kind of white labeling.
The Dollar Shave Club is one of the most well-known and profitable pure ecommerce businesses. Stitch Fix, Blue Apron, and Nature Box are examples of subscription services. These businesses operate on a subscription model, in which clients receive a box of products at regular intervals. In addition, subscription businesses have constant revenue streams and may easily attract customers to acquire more subscriptions or refer their friends to do so.
It can be difficult to choose the proper items and niches. Health and grooming, cosmetics, clothing, and food are among the most popular product categories for subscription boxes. However, few subscription businesses succeed outside of these sectors.
How to select types of ecommerce models for your business?
Here are some questions to help you come up with a strategy that will set your business differently.
Who is your target market?
Who do you want to serve? Firstly, you have to consider what they expect from the kind of product you plan to sell before making a purchase. If you can understand their routines and habits and seek ways to improve or save money, you’re more likely to succeed. Furthermore, you need to seek for pain spots in the way things are now done to do this.
What do you think you’re capable of?
Be honest about what you can do individually and what you’ll need to hire someone to help you with. Knowing your limitations can be difficult. However, it will help you make better long-term choices.
What is the most suitable option for your product?
Different models will serve you better than others depending on your goods. In case you’re a distributor of other people’s products. So you’ll want to put more money into direct marketing and customer-acquisition efforts.
What is your positioning?
You know what makes your product superior, but do your customers? Besides that, you have to analyze your competition and be sure to explain why your product is the best option.
You’re ready to get started now. Because you know about types of ecommerce. So take a look at How to start an ecommerce business in 2021. Whatever eCommerce company model you choose, you’ll almost certainly require outside investment at some time in order to scale your operation.
Please share this information if you find it useful. Continue reading other blogs for guidance on anything to help you succeed in ecommerce. Let’s CONTACT US if there’s a topic you’d like to have explored that isn’t covered in our articles. Please take note that, ArrowTheme also provides Shopify Packages to help you in building your ecommerce website. So let’s discover.