SEVEN E-COMMERCE BUSINESS MODELS EXPLAINED AND ANALYZED: BEST PRACTICES, PAIN POINTS, DIFFERENCES, AND EXAMPLES
In the world of e-commerce, acronyms such as B2B, B2C, C2C, B2B2C, DTC, and B2G get thrown around as if the acronyms don’t leave everyone tongue-tied and brain-fried. Incomprehension of the meaning of these terms can perpetuate confusion and distract from key takeaways that benefit businesses a hundredfold.
Chaos typically ensues when trying to decipher each e-commerce category. The attempt can seem more like a science experiment or mathematical formula gone wrong. Gain an in-depth understanding of each e-commerce business model, its strengths and weaknesses, focal points, and best practices to avoid setting the lab (business) ablaze.
Due to its ability to conveniently connect consumers to online storefronts, e-commerce has become one of the fastest-growing business models. Unsurprisingly, it has permanently altered the chemistry of the sales industry in the process.
According to BigCommerce, “In 2013, e-commerce made up 6 percent of retail sales in the United States, and by 2025, experts predict that e-commerce sales will make up nearly 22 percent of total purchases in the U.S.”
E-commerce is more than the future of business and sales. It has also become a fairy godmother for small businesses allowing them to gain even more exposure in new ways. Unfortunately, while lowering barriers to entry for many, the popularity of e-commerce has made it even more challenging to stand out. It is essential to structure business plans with even more diligence than ever before. Choosing the best formula or even creating a hybrid to fit unique needs will make it easier to conquer the ever-changing sales environment and leverage success to rapidly propel forward. Ironically, the most arduous task starts with something everyone should do a little more often, read.
Business Model Types
Most businesses fall into one of the following model types: B2B, B2C, DTC, C2B, B2B2C, C2C, or B2G. Many even operate within multiple models. Remember the previous mention of hybrids and the feeling of being brain-fried? Hold onto the keyboard. Regardless of what model a business falls under, being familiar with all models lays the foundation for formulating an effective business plan and shapes vital interactions between other business models.
B2B businesses focus time and energy wholly on buying from or selling to other companies. This model is ideal for producers, resellers, agencies, or consultants who operate on consistent large-scale purchases, constant innovation, and dedication to customer relationships. From wholesalers to software as a service (SaaS), every business interacts with a B2B in some way. Due to larger budgets, the sales cycle runs on a more protracted process, with dues typically paid on a net 30-day basis. As a result, maintaining client relationships is vital. The most successful B2B businesses, such as Salesforce, Microsoft, and Mailchimp, prove that patience and persistence go a long way.
“Salesforce first went public in 2004. Since then, the company has consistently grown revenue each year. In 2021, annual revenue stood at $21.25 billion — a 221.3-times increase since 2004,” according to Backlinko.
Take note that the best B2B companies focus on SEO optimization, lead generation, and networking to shape the guidelines for new businesses.
Consumer behavior is the primary driver for B2C businesses, with sales occurring directly between the company and its consumers. The most popular model among the seven mentioned, B2Cs are estimated to make around 6.3 trillion U.S. dollars in global sales by 2024 compared to a meager 1.3 trillion U.S. dollars in 2014, according to Statista. Many different types of companies succeed in the B2C business model, such as:
- Direct sellers like Amazon, Target, and Walmart
- Online intermediaries such as Expedia, Etsy (also can be categorized as a C2C), and Travigo
- Advertising-based platforms like Huffington Post and The Guardian
- Community-based forums such as Facebook Groups
- Fee-based streaming services like Netflix and Hulu
Unlike B2B, in the B2C model, there are more potential customers and a shorter sales cycle. With these benefits come more responsibilities. B2C companies such as Amazon, Etsy, and Netflix succeed by making social media marketing, website usability, and SEO optimization the focal point of any business plan.
Direct-to-Consumer (D2C or DTC)
The DTC, also referred to as D2C, model differs from B2C by avoiding the middleman and selling products directly to consumers without a sales platform. For example, Casper sells mattresses directly to customers instead of working with retailers such as Mattress Firm or Walmart. Here’s a fun tongue-twister: all DTC models are B2C, but not all B2C models are DTC.
Think of C2B exactly as B2C, but reversed. In the C2B business model, consumers are the sellers, and businesses are the buyers. Platforms like Shuttershock or Fiverr allow freelancers and independent contractors to deliver services to other businesses securely.
Increasing in popularity, B2B2C models combine all B2B and B2C qualities with mutually beneficial results. This model allows multiple businesses to partner up, providing services to consumers and increasing sales revenue and client relationships. Tapping into individuals and companies as consumers creates the opportunity to build a more extensive client base. With more clients and awareness comes brand credibility. Naturally, a larger audience requires more time and effort to maintain relationships, fulfill orders, and stay organized.
E-commerce boutiques, gift shops, or collectives are great examples of the B2B2C model. Stores can work with multiple individual businesses to curate unique stock. One example would be a DTC such as Bombas utilizing its e-commerce website but also stocking products in a smaller gift store. The B2B2C model is the best of both worlds. By creating a funnel of consumers from other businesses, companies can spend less money without stepping on toes.
Consumer-to-Consumer or Customer-to-Customer (C2C)
C2C differs from all of the previously mentioned models. Customers are the main focus on both the sales and consumer front. In a C2C business model, customers purchase goods from other customers via a third-party platform. The model is mutually beneficial, low cost, and easy to set up thanks to consumers doing most of the product supplying and selling. Although the model gives little control over product quality, it helps sellers reach larger audiences who generate fee-based revenue. The most successful C2C businesses focus on customer service and sustainability practices. For example, in popularity, ThredUp has surpassed other reselling platforms, such as Poshmark, Tradesy, and Mercari, by highlighting its dedication to sustainability.
“We are on a mission to build a generation-defining company that changes the way the world shops,” says CEO James Reinhart. “We believe every brand will have a resale strategy, and ThredUp will be the premium provider of end-to-end resale services.”
Other companies spearheading e-commerce in the C2C model include Etsy, Craigslist, Venmo, Airbnb, eBay, and Facebook Marketplace. Sustainability is a promising new wave in the C2C world.
With Government-related models, different processes and laws come into play. B2G businesses sell to local or federal government entities. Common industries involved include construction, software development, and healthcare. Although the sales cycle is typically slower than in the B2B model and requires more laws and regulations, the reliability and consistency of working with the government is an overarching benefit for most businesses. Sistine Solar, Senseware, and OpenGov are a few top B2G companies that serve as great examples.
Regardless of which model or models a business falls under, the customer’s needs, purchasing habits, and potential must always be at the forefront of any marketing decisions.
Call in a Professional
POLA Marketing’s data-driven methods can relieve e-commerce business owners from the time-consuming work of finding the right marketing strategy. Our team can create an individualized approach that increases customers’ experience and online sales for the furtherance of any e-commerce store. For more information, contact us at (https://polamarketing.com/contact/).