When planning the launch of your business, it becomes important to determine the relevant framework or model for your business. A business model is a framework that will be suitable for your business and help you gain clarity regarding the product or services you will sell and to whom you will sell.
To discover the most suitable business model, it's essential to grasp the various commonly employed types of business models. So, Let's understand the different types of business models through this blog's help.
Types Of E-Commerce Business Models
Five major divisions of e-commerce business models are common in the market among businesses.
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Business-to-consumer (B2C) models
The B2C model is when enterprises directly sell to individual consumers. Individuals purchasing an item or any product online fall under the B2C category. B2C decision-making is quicker than B2B, especially for cheaper items, resulting in lower marketing expenses, smaller average orders, and fewer repeat purchases.
B2C encompasses products and services, with innovators using technology like mobile apps, native advertising, and remarketing to enhance customer outreach and convenience.
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Business-to-business (B2B) models
In a B2B setup, businesses cater to other businesses, like a Magento development company in India, providing e-commerce website solutions to corporate clients. Buyers in this context are employees or departments procuring goods or services for their organizations.
B2B firms build relationships via intricate marketing and sales processes comprising awareness, interest, evaluation, engagement, and purchase stages.
This complexity has hindered B2B e-commerce growth compared to B2C. B2B transactions often demand more nurturing and intricate pricing, now digitally integrated.
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Consumer-to-business (C2B) models
In this model, a user visits a website featuring various business organizations offering specific services. The user submits a budget estimate for their desired service, such as a freelancer selling digital products or e-commerce development services through platforms like Upwork, Fiver, or other listing websites.
They can also hire a Magento developer in India through hiring platforms. If the offer meets the business organization and the user's needs within the stated budget, they reach out to the user or freelancer to buy their products or services.
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Consumer-to-consumer (C2C) models
A Consumer-to-Consumer e-commerce business model website facilitates individual consumers in selling assets such as homes, cars, or motorcycles or renting out rooms by listing them on the platform.
The website may offer these services for free or charge a fee. Other consumers can then browse these listings, purchase the items, or rent the rooms directly from the initial sellers.
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Business-to-business-to-consumer (B2B2C) models
It is an e-commerce business model where a product or service supplier (referred to as 'first B') provides offerings to a business entity (the 'second B'), which markets and sells these items through their online channels.
This approach differs from traditional resale models, relying on commission-based monetization by the 'second B' for each 'first B' product sold. The end consumer price is typically determined by the 'first B,' with the 'second B' earning a commission on each sale.
The B2B2C model benefits small businesses and emerging brands, leveraging the middle entity's established reputation and popularity.
The four e-commerce business models encompass government, business, and consumer interactions, each involving transactions between these entities. These models diverge in their dynamics, with government participation introducing unique challenges. G2C (government to consumer) and G2B (government to business) mirror each other, where the government provides services via digital portals to citizens and businesses, respectively.
Conversely, C2G (consumer to government) involves consumers selling products to the government, while B2G (business to government) entails businesses offering products or services, such as construction projects, to government entities.
Types Of E-Commerce Delivery Models
Once you are clear with your e-commerce business model, you need to find the delivery models that e-commerce giants use and which type of models will help you deliver your product or service to your customer in the best possible way to ensure the inventory control, goods quantity management, and many more aspects.
Below are some commonly used delivery models used by brands.
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Direct-to-Consumer(D2C)
Businesses of all sizes increasingly recognize the value of the direct-to-consumer (D2C) model in bolstering customer relationships and are eager to integrate it into their strategies. D2C involves selling products directly to customers, bypassing third-party retailers.
However, it doesn't negate the importance of retail; D2C entails managing various facets, including production, retail, distribution, marketing, customer experience, and sales.
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White label
White-label e-commerce offers a versatile virtual shop platform suitable for various industries. A specialized company designs it as a logo-free, customizable model. Businesses can label their brands and market and sell them as their own without splitting profits.
For instance, a textile factory produces plain white t-shirts and sells them to multiple clothing stores, allowing other brand or businesses to insert their label and branding and market them as their own.
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Private label
A private label product is an item a retailer has produced by a third-party manufacturer but markets and sells under its brand name. The retailer maintains complete control over all aspects of the product, encompassing its specifications, packaging, and every other relevant detail.
These private-label products are subsequently supplied to the retailer for distribution. For example, a company specializing in AR/VR software may introduce a private-label range of AR/VR hardware. These hardware products would be manufactured by an external company but sold under the original business's name.
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Wholesaling
Wholesale ecommerce involves selling goods in bulk at lower prices than retail stores. These businesses operate through online platforms like Alibaba, Udaan, and others.
Substantial commercial orders can be transported through freight or international wholesale shipping services. Wholesaling frequently integrates with e-commerce platforms.
Wholesaling is a prevalent distribution approach for B2B brands because businesses require products in bulk. Early adopters of online commerce included bulk product sellers, who leveraged the cost-efficiency and global reach of the internet to establish their digital presence.
The global e-commerce market is expected to total $6.3 trillion in 2023.
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Dropshipping
Dropshipping is an e-commerce model where the seller, operating under their brand, doesn't maintain inventory or handle shipping. Instead, they purchase products from third parties when customers order and have them shipped directly to buyers.
An instance of this is an online store specializing in mugs and cups, managing branding and orders while outsourcing shipping.
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Subscription
Subscription-based e-commerce operates on customers paying regular fees (monthly, yearly, or after specific periods) for scheduled product deliveries or ongoing service access, which gives your business a stable revenue source.
It is a good model to get long-term and recurring customers. This model provides consumers with convenience and cost savings through brand discounts. Businesses value it for predictable revenue streams based on subscriptions.
Conclusion
The e-commerce industry has much to offer to businesses and consumers due to its massive growth and huge potential in tapping the unorganized sectors. Every business model is good as it will bring you revenues, but knowing that there are different e-commerce business models, they run on business and consumer components. According to your available resources and the industry demand you want to be in, decide your business model and leverage it best.
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