In a global world, consumers and businesses can connect at a surprisingly fast rate. Buying and selling of products online, through an app or even a smart device is essential today.
If you want to set up your own ecommerce business, then you need a solid business model to ensure your venture is successful. But what are the 3 types of ecommerce business models?
In this practical guide, we take a closer look at the three key business models for ecommerce, their benefits and disadvantages as well as what skills you need for each model.
Business To Consumer (B2C) Model
The business-to-consumer ecommerce business model refers to businesses selling their services or products directly to consumers through their website.
B2C started as early as the 1980s when businesses would sell through television but online B2C quickly rose in popularity with large retailers, such as Amazon.
Today, most retailers worldwide have some form of online presence, such as a website, and they often sell their services or products directly on their site or their own app.
Pros Of B2C
With a B2C business model, your business can connect with customers directly through your website or other selling platforms.
While you will need to set up a website, you can save classic office-based operational costs, such as staffing, electricity or infrastructure, if you run your business online.
In addition, your ecommerce website will give you the option to manage your inventory, fulfill orders and track deliveries. As everything happens online, this saves you a lot of money and resources.
Plus, you can also reach a lot more customers with your marketing campaigns because there are a number of online marketing tools available.
Cons Of B2C
One of the biggest drawbacks of a B2C model is that there is a lot of competition online.
More and more retailers open an ecommerce store which can make it difficult for companies to compete, especially in popular niches, such as fashion or furniture.
In addition, a solid B2C business model also requires a good infrastructure for the whole sales process, including the website setup, warehousing, data capture and shipping.
Who Is Of B2C For?
The business-to-consumer model is only suitable for online businesses that sell their services or products to end-users of their products or services.
If you sell directly to consumers, then you are a B2C company and you can adopt a successful B2C model.
What Skills Do You Need For A B2C Ecommerce Business Model?
Similar to a classic shopping mall retailer, a B2C ecommerce business thrives with good communication and loyal customers.
You need to be able to get customer feedback (for example, through social media polls or email surveys) and integrate this feedback into your business to improve your sales strategy.
Plus, you also need to have comprehensive knowledge of your products, the unique selling points of your products, your niche and your competitors.
Business To Business (B2B) Model
Business-to-business is a form of ecommerce where businesses sell their services or products to other businesses. This could be in the same industry or niche, or businesses in different industries.
A B2B company may sell to online retailers, local businesses or wholesalers.
Similar to the B2C, business-to-business ecommerce companies can sell their products or services on their own websites or they can sell through industry portals or product supply exchanges.
With a B2B model, a business sells directly to another business. This usually means a higher order value and greater order volume.
Your customer acquisition and B2B marketing costs are lower because there are fewer people in your industry that you can market to.
As a rule of thumb, business customers in a B2B model are often much more loyal than consumers who buy from a B2C business.
However, B2B companies still need to put some work into creating loyal relationships with their customers
Cons Of B2B
Although B2B businesses often sell a lot more with better margins, they have a much smaller pool of business buyers.
This means that B2B companies continually need to find new niches and industries where they could sell their products or services.
Who Is Of B2B For
The B2B ecommerce model is suitable for any business, wholesaler, retailer or manufacturer who sells their services or products to other businesses.
What Skills Do You Need For A B2B Ecommerce Business Model?
Many of the skills you need to set up a B2B ecommerce business resemble the required knowledge for B2C, including good marketing skills, project management and the ability to listen to customers.
However, there are also a few different skills you need specifically for B2B. For example, you need to be able to create good business relationships with your customers.
You also need to understand exactly what your customers need and provide the right solution at the right time. This requires a personalized approach specific to your niche and industry.
Consumer To Consumer (C2C) Model
The consumer-to-consumer business model refers to an ecommerce platform that connects individual private consumers with each other without the need for a business.
Some of the most famous C2C ecommerce websites are ebay, Etsy and Craigslist.
Pros Of C2C
C2C is the most cost-effective business model as you don’t need any classic products. However, you may need to provide specific digital services for the customers who use your online selling platform.
Cons Of C2C
A C2C ecommerce model is fully focused on providing a digital service, so you need to make sure that your website works without fail.
This being said C2C platforms are often the prime targets of scammers and data thieves.
Who Is Of C2C For
C2C websites are mainly for consumers. If you want to create a C2C ecommerce business that connects consumers with each other, then you can make money in different ways.
You may take a cut from each sale or ask consumers to pay for listing items on your site.
What Skills Do You Need For A C2C Ecommerce Business Model?
If you want to set up a C2C ecommerce company, then you will need all the skills of a classic B2C ecommerce model, including marketing and social media skills.
You will also need to understand essential sales techniques to explain to your customers why they should advertise on your website.
Which Ecommerce Business Model Is Most Successful?
While each business model has its success stories, the most popular business model with the highest profit chances is B2C.
The classic sales process with short purchase and delivery cycles works well in a digital environment.
This being said, you can also adopt other business models for ecommerce to make your business a success.
Final Thoughts
While B2C, B2B and C2C are the main ecommerce models, there are also a few niche models, such as consumer-to-business (C2B) and business-to-government (B2G).
Whether you currently have a basic business model looking to start your ecommerce business or you want to change your ecommerce setup, you need to ensure that your company has the right business model.
It is also important to keep in mind that ecommerce and technology are continually evolving. This means that the classic ecommerce business models change and adapt to consumer and business needs.
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