You are new to the eCommerce industry and you would like to start an online business, but you don’t know what type of eCommerce business models to chose ? Choosing and applying the right eCommerce business model to your online store might be a big challenge.
Let’s enumerate the 4 big eCommerce business models as well as the 6 known types of eCommerce business revenue models.
Table of contents
The 4 Types of Ecommerce Business Models
Below are the The 4 major eCommerce Business Models
B2B: Business to Business
Business to business in eCommerce describes partnership and online transactions between at least two businesses.
Industries and organizations involved in type of eCommerce Business model are mainly the ones providing digital goods or services, wholesalers, dropshippers and distributors.
B2C: Business to Consumer
The Business to Consumer or customer is the most popular and most widespread type of eCommerce Business. This is the deepest market, where an online business deals directly with its customers.
C2B: Consumer to Business
C2B is the opposite of the the B2C business model, where an individual (generally a freelancer) sell products or services to a business.
Freelance marketplace like Fiverr is a good example of this type of eCommerce business model.
C2C: Consumer to consumer
C2C looks like the C2B, but in this type of business model, the both sides are individuals selling/buying good or services generally on marketplaces like ebay or amazon or buy using direct sales on social media like Facebook marketplace
Types Of eCommerce Business Revenue Models
Once you’ve decided on a category you will start en Ecommerce store with, you need next to chose which type of business revenue model you will opt for.
Below are the main 6 different types of eCommerce business models:
1- Dropshipping
Dropshipping is an order fulfillment method that does not require a business to keep the physical products in stock. Instead, the store (the seller) sells the product, and passes on the sales order to a third-party supplier, who then ships the order to the customer.
Dropshipping is a one of the great types of eCommerce business models for aspiring entrepreneurs to start with because it’s accessible and less costly. With dropshipping, you can quickly test different business ideas and products with limited downside and without the need to purchase them before a client places an order, this will let you learn a lot about how to choose and market in-demand products.
2- Private label
Private labeling has a portion of dropshipping. If you’ve got an idea for the perfect product, but you don’t have the starting funds or desire to build your own factory, this might be the right business model for you.
The private labeling consist basically of ordering from manufacturers and then label, market, and selling products under a private label.
3- White label
White labeling is a bit similar to private labeling. You choose a product that is already successfully sold by another company, but offers white label options, design your package and label.
White label businesses are free from the management of manufacturing and quality control, but can deal with harsh and extensive competition. White label vendors control the package design, but not the product specifications or its quality.
4- Print on Demand
The Print on Demand is in fact a subcategory of the dropshipping model, where the retailer design its own mockups using some online tools (generally provided by the dropshippers) to be printed on the products, such as t-shirts, leggings, mugs, phones cases, …
When an order is placed, the dropshipper like Printful prints the selected pre-designed product, packs it up and ships it out to the customer
5- Subscription service
The subscription service is on of the most common eCommerce model that almost everybody is using (TV & movies subscription, online paid forum community, Shopify monthly plan,…)
By definition, a subscription business model allows customers to subscribe to a service for a set period of time, weekly, monthly or annually.
This model can also be used simultaneously with a dropshipping store where the retailer can sell a subscription service along with the physical products being sold, ex : selling a membership to have access to restricted products or pages or taking advantages of some discounts.
6- Wholeselling and warehousing
Being part of the B2B model, wholeseling is a business model where an eCommerce website sell the products in bulk at discount rates.
Wholesaling and warehousing eCommerce business requires a considerable capital at the start – you need to manage inventory and stock, you will also need employees to manage the whole process from ordering, stocking, packaging, labeling to shipping.
Choosing The Right Type of eCommerce Business Model
Now that you have an idea about the different type of eCommerce business models, you need to ask yourself some questions and answer them in order to pick the one that suits your financials and you expertise.
- What’s my capital ?
- I am subject to a licence & what is the governing eCommerce law in my country ?
- Who will be my target market?
- Where and what will I sell to?
- What are the risks?
- What is my vision in the short and long term?
Once you do, you need to learn more the business model you have chosen and optimize it as you grow.
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