What are the different types of eCommerce Business Models?
eCommerce businesses can be broken down by business models and revenue models. Each type is defined below.
As online retail has grown and changed over the decades, we have been able to recognize and define the differences in models and strategies. If you are thinking about entering the eCommerce realm, it is important for you to do your research and determine which option(s) best fit your goals.
We have broken down and defined the types of eCommerce businesses by business classifications and revenue models below.
eCommerce Business Classifications
Business to Consumer (B2C)
The most common and traditional eCommerce business model: selling directly to consumers. The buyer’s decision making process is usually the shortest here.
Business to Business (B2B)
This model refers to when a business sells their product/service to another business. The selling cycle is usually longer than B2C, but tends to have higher order volume and customer loyalty.
Consumer to Consumer (C2C)
This model allows for consumers to directly purchase and trade goods with other consumers. The business profits from site fees and commission. These are commonly known as online marketplaces.
Consumer to Business (C2B)
This approach allows for consumers to sell their products and services to businesses. This has become a more popular approach with freelance work and social media influencers.
eCommerce Business Sourcing and Revenue Models
Drop Shipping
Drop shipping leaves every part of the supply chain to your supplier while you manage the store front. This means they are responsible for product sourcing, inventory management, shipping, etc. Drop shipping is a great option for business owners who are willing to give control over to free up resources.
Wholesaling
Wholesaling is demonstrated by taking the role of the middle man between the manufacturer and the retailer. The wholesaler profits when they sell to the retailer.
Private Labeling and Manufacturing
Have a great idea but don’t have the funds to produce it? If so, private labeling might be for you. There are offsite companies willing to create a prototype of your idea and send it to a contracted manufacturer. Once the inventory is created, it is up to you on how it will reach the end user. Some companies will ship DTC for you or you can handle it yourself.
White Labeling
White Labeling is similar to Private Labeling, except the product is already created and successful under (at least) one label. If you choose to white label a product, you can rebrand that successful product under your own brand name. This is common within beauty and wellness industries. White labeling is most successful when there is high demand for the product.
Subscription
This model is generally defined by scheduled intervals of products to consumers. Subscriptions tend to be successful in niche categories and can generate steady revenue streams.