eCommerce is the process of buying and selling goods and services online. Modern technology makes it easy for anybody to set up an online store. No matter whether you are operating as a serious full time business or just as a side hustle. There are many different types of eCommerce businesses which we will explore in this post. So you’ll be able to find the one most suited to you and your goals.
eCommerce Business Models
There are several different eCommerce business models with 4 of the most common listed below. These business models apply to all types of business whether conducted online or offline.
Business to business or B2B is when a business sells directly to other businesses. It can include both goods and services. B2B transactions are common in the supply chain. One manufacturer sells parts or raw materials to another manufacturer which is turned into a finished product. An example is auto companies – a car manufacturer may purchase parts such as brakes direct from a brake disc manufacturer.
Business to consumer or B2C is when businesses sell goods or services direct to consumers. Examples are online retailers, manufacturers and service providers selling directly to consumers such as Amazon, Apple and Netflix.
Consumer to consumer is often abbreviated as C2C. This is the trading of goods and services from one consumer to another consumer without the involvement of a business. These transactions are usually conducted through an intermediary connecting buyers and sellers that will take a commission payment. An example is online marketplaces such as eBay.
Consumer to business or C2B is when a consumer sells directly to a business. It is a relatively modern business model that would include freelancers and contractors. For example a freelance web designer may be contracted by a business to design a new website.
More essential reading; Sales and marketing terms A-Z.
Types Of eCommerce Businesses
The great thing about eCommerce is that it can cover such a wide range of business types. A Business can be opened and operated solely online. Physical businesses such as bricks and mortar stores or manufacturers can also use eCommerce to help grow their business.
Some popular and profitable types of eCommerce businesses are listed below. These can be operated as standalone models or as hybrid models, combining 2 or more of these.
Dropshipping is a form of eCommerce where the seller doesn’t handle, store or ship the products to customers. a third party supplier handles the shipping of products.
When a customer purchases from a dropshipping store, the store then orders the product from a supplier. The supplier then delivers the product directly to the customer without the dropshipping store ever handling the product. The profit is the difference in price between what the supplier charges you and what you charge your customer.
Read our full guide to how dropshipping works.
Dropshipping can be a lucrative eCommerce business. It can allow for higher profit margins as it requires no physical premises or upfront purchase of stock. However it is a highly competitive space and you will have less control over product quality. Recommended reading; 10 dropshipping beginner mistakes to avoid.
A subscription business offers many benefits including a regular recurring income and more opportunity to up-sell and cross-sell to customers.
The subscription business model can apply to both physical and digital products and services. For example software, magazines and newspapers, food delivery, dating apps etc.
One of the most popular types of subscription businesses is the subscription box. These boxes usually contain items in a specific niche that are mailed to customers on a regular basis. Read our full guide to creating a subscription box business.
Private Labelling & Manufacturing
Private labelling is the outsourcing of sourcing, manufacturing and shipping of products to a third party. It allows a company without the ability to manufacture it’s own products to sell products under it’s own brand name.
For example, a food company has a recipe for a specific type of cake but no ability to manufacture it. A private label food manufacturer would be able to produce the cakes to the specified recipe. They are then packaged under your own brand for you to sell.
Private labelling and manufacturing can give access to the whole supply chain without having to build your own networks. It allows the buyer to have products produced to their exact specifications, including packaging and labelling.
This type of business is most suited to more well established brands.
White labelling is similar to private labelling. Products are manufactured by a third party and sold under your brand name. However the difference is that you are not able to specify changes to the product or packaging. Only the brand name to put on the label can be specified.
As per the previous example of running a food company producing cakes. With white labelling you no longer have the ability to specify the recipe. A manufacturer will produce it to their own specification but put your brand name on the label. Using this example, white labelling would be the better option if you don’t have a recipe.
White labelling gives you a simple straightforward manufacturing solution, private labelling gives you more control.
Rental And Loan
With a rental business model, products and services are loaned out rather than purchased. This can utilise the more traditional B2C model through services such as car and bike rentals.
The C2C model is being increasingly used in the rental sector for things like accommodation (AirBnB) and transport (Uber).
Hybrid business models combining rentals and subscriptions are becoming more popular. There are subscription services providing products for a time which are returned in exchange for an alternative. This is quite common with expensive luxury items that many cannot afford to purchase outright. Items such as fashion, handbags, jewellery and watches.
Online marketplaces usually offer a C2C model, acting as an intermediary connecting customers with customers. The marketplace will take a cut of any sales made through their platform as their commission payment.
Online marketplaces are popular with individuals and side hustlers. They offer a convenient way to reach customers without having to build a website. Good examples are platforms like eBay and Etsy.
Print on demand stores are another popular type of online platform. They combine the benefits of an online marketplace with white labelling and dropshipping. This gives individuals the ability to operate an online store without handling or shipping products themselves. Store owners can customize designs from a range of standard product offerings and sell them under their own brand.
Digital Only Businesses
There are many types of eCommerce businesses that operate solely in the digital space. This includes things like software and service providers and businesses offering digital only products like eBooks or music.
Businesses that provide digital only products will usually be more profitable than those offering physical products. This is because there are less costs involved for things like inventory, shipping, storage, product manufacture etc.
Many digital businesses use subscription models. They can be an effective way of providing recurring revenues and create customer loyalty. Examples of this can be seen with the likes of Netflix or Spotify.
Freelancing is a form of C2B where an individual offers their services to businesses. In recent years digital freelancing has boomed with the rise of platforms such as Fiverr.
Lots of businesses are happy to outsource work to freelancers as it can save them time and money. Digital freelance work could cover anything from marketing to web design to SEO services.
There are different pricing strategies for freelancing work but the most popular is pay per hour. They may also be paid per project.
Freelancing can be a good option for individuals with a skill to sell, offering the freedom to pick and choose your own work. Read more about the advantages and disadvantages to becoming a freelancer.
Types Of eCommerce Businesses Conclusion
To recap, eCommerce is just the trading of goods and services over the internet. It can be a more profitable form of business compared to more traditional commerce and is easily accessible for individuals.
There are several eCommerce business models with the four most common being;
- B2B – This is when one business buys directly from another business, this is common in manufacturing.
- B2C – When a business sells directly to a consumer.
- C2C – When a consumer buys from another consumer such as through online marketplaces.
- C2B – When a consumer sells directly to a business such as a freelance web designer.
Thanks to modern technological advancements, starting an eCommerce business is now more accessible than ever before.
Before starting a business you may want to view the following;
- 16 common business mistakes to avoid
- Amazing niche ideas for online stores
- Why you should hire a freelancer.
- Top eCommerce wholesalers and suppliers
- Pricing models and strategies
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