Types of Ecommerce Business Models and how to find your Business niche?

Different Types of eCommerce business models and how to find your business niche

In this fast-evolving market, Covid-19 has impacted the way people trade. The world has swiftly shifted to electronic commerce, widely known as eCommerce. Customers and businesses have bid adieu to the traditional stores and traditional trading styles.

Although physical presence fosters a feeling of trust, the online market is slowly but steadily trying to reach the levels of trust that in-stores provide. The rise of the internet has created a whole new channel for selling goods and services across the internet.

A lot goes into eCommerce. It includes dual functions of buying and assembling goods, sourcing and accounting, warehousing and storing, and other internet essentials. There are a variety of options available in eCommerce business and that’s what makes it harder to choose the correct one.

It is complicated but choosing the best option to develop eCommerce web or mobile app for your business growth is as important as any other business aspect. Therefore, hiring Top eCommerce Development Company to take your online business to next level is the best idea.

Types of eCommerce business models – What are the characteristics of retailers?

E-Commerce - Business Models

The rapidly changing digitally globalized and technology-driven business world of eCommerce has witnessed some fundamental alterations. This article is an amalgamation of different eCommerce businesses, each of which caters to various business models.

B2C- Business to Consumer

The process of selling services or products directly to the consumers without any mediators or middle persons is known as business to consumer. Anything that we buy online from groceries, wardrobe to entertainment channels is done under B2C transaction.

During the late 1990s in the dot-com boom, B2C became immensely popular. It was mainly used by online retailers to sell products and services to consumers with the help of the internet. By leveraging trending eCommerce business strategies like native advertising, remarketing and mobile apps, Omnichannel presence, personalized experience, voice search, innovators are making the lives of customers much easier.

B2B- Business to Business

All electronic transactions of goods and services conducted between two businesses are encompassed under B2B. Chiefly, the transactions done at a wholesale level are often referred to as business-to-business ecommerce business model.

Selling goods to a business is different from selling goods to an individual consumer as it requires the participation of a bidding process by responding to purchasers’ requests for proposals.

The global B2B eCommerce market is expected to grow at a compound annual growth rate of 18.7% from 2021 to 2028 to reach $25.65 trillion by 2028. A few key players excelling in the B2B eCommerce market are Amazon, eBay, Flipkart, eWorld trade, Flex fire, Kelly search, LinkedIn, Buffer, Skype, and Qualtrics.

C2B- Consumer to Business

C2B is a new growing segment of strategic business choice that can augment a successful venture or function as a company’s entire business model. This is an eCommerce business model where consumers create value for businesses to consume that value.

In short, it allows customers to extract value from businesses and vice versa. It also involves consumers co-creating concepts and ideas with a company by influencing them on social media.

While consumers are in favor of direct payment, reduced price products and flexibility, eCommerce businesses also profit by contributing data, marketing, or naming their own price to the respective company. Because of ready access to customers that are plugged into brands with business relations that are strictly one-directional.

C2C- Consumer to Consumer

Consumer to consumer or customer to customer is eCommerce business model that enables commerce between private individuals connecting people to do business online. It helps both buyers and sellers locate each other facilitating the transaction of services and products between them.

With the lack of wholesalers and retailers, the C2C is a customer beneficiary model that keeps the prices low for buyers and margins higher for sellers. The purpose of C2C is to enable relationships and foster transactions making online interaction between customers feasible.

One of the most prominent examples of C2C eCommerce business model is eBay which has been successful since its launch in 1995.

Mixed eCommerce business models

Business management tasks have been streamlined due to the technological advancements of eCommerce. This has lead businesses to follow more than one model on a single website at a time. It is now possible for online stores to offer wholesaling or specific business-to-business services in a part of the website.

Are there any more eCommerce business model types?

Traditionally, there are five types of eCommerce, but there’s also B2G (Business to Government) and G2B (Government to Business) business models that are often lumped with B2B.

The B2G aka business to government model refers to all transactions related between public administration or government and companies. It involves a substantial amount of services in areas of social security, employment, legal documentation, social security, registry data, and fiscal.

With the government putting in the time, resources, and money for online support and services, B2A services have increased considerably in the past few years. When it comes to legal public administration, the government relies on e-services to reach most people.

The online transactions between individual consumers and government bodies or public administration are referred to as a consumer to administration or government to business eCommerce. This model is strongly associated with the idea of the feasibility of services provided by the government to the citizens. Government encompasses such electronic transactions for services in education, distance learning, social security, health, information and statistics of illnesses, filing returns and taxes.

What do you sell and to what market?

Revenue Models for eCommerce Businesses

In the value delivery process today, the customer is the center of attention, everything is done keeping the customer in mind. The products and services are and should be designed keeping in mind what are you selling in the market and more importantly who are you selling.

Delivering value to customers includes forming a strong marketing strategy, placing the marketing fix, and finding the target market audience along with other tactics for an extraordinary customer experience.

Value delivery methods- How do you generate revenue?

If eCommerce is a car, then value delivery methods are the engine. This is the part where an edge over your competitors in the retail market is found and a Unique Selling Proposition (USP) is established.

Value delivery methods are simply an approach that helps you design your products in such a way that it gives maximum value to the customer using them. It can be in the form of products, attributes, or additional benefits.

D2C-Direct to Consumer eCommerce

Direct to consumer eCommerce briefly means cutting out the middleman or mediators involved in between transactions. D2C is like a low barrier to entry eCommerce strategy that allows CPG (Consumer Packaged Goods) brands and manufacturers to sell their goods to the customers directly.

D2C eliminates the barrier between consumer and producer, giving the producer greater control over its brand and its reputation. Many upcoming consumers’ brands are opting for D2C eCommerce by building strong brand loyalty and bypassing any third-party retailers.

With the rise of the brand economy, the future of retail growth comes from direct-to-consumer relationships. A sense of attachment is built with the brand when the goods are sold directly to the customers.

White label and Private label

White label or Private label is a unique product produced by one company but sold and packaged under another company’s own brand name. Using a white label one can attach a name or brand to a specific product or service purchased from a wholesaler or distributor.

By using Private labels, a retailer creates a different product for their clients to sell by hiring a manufacturer or by themselves.

Both private labels and white label producers shelter themselves from some instability by distributing through resellers. These labels enable manufacturers to focus on production and resellers to focus on selling. Producers have B2B branding while resellers have B2C branding. These eCommerce business models drive market competition between resellers.

Wholesaling

The concept of wholesaling is that the retailer offers products in bulk at a discounted price. Traditionally, the approach of wholesaling was business to business but now the whole approach is shifting towards business to customer mode.

Wholesalers sell to merchants or other retailers among commercial, industrial, and institutional users but usually not to ultimate customers. Nowadays in B2C eCommerce, many retailers offer wholesale products to a lot of customers looking for budget-friendly options.

When it comes to wholesale eCommerce, there’s an element of selling and buying online under the B2B business model. It consists of sales and all activities in selling goods or services to those who buy for resale or business use.

Dropshipping

Dropshipping is one of the most efficient and fastest-growing methods in eCommerce. Normally, the drop shippers sell items fulfilled by a third-party retailer. Drop shippers act as a mediator by connecting manufactures and buyers closely.

Dropshipping is a popular business model in eCommerce because it is easy to get started and requires less capital too. Unlike traditional retail businesses, there’s a lot less risk involved in dropshipping and outsourcing.

Dropshipping lets you skip the hassle of managing warehousing stock, dealing with packaging, handling returns or inbound shipments, and managing inventory for accounting reasons.

Subscription or Membership service

Subscription and Membership services in eCommerce are growing at an exponential rate. Ecommerce businesses are going beyond just groceries and periodicals, with the help of online eCommerce stores.

Each and every industry is bringing savings and convenience to its customers with subscription services. It is a great way to build up recurring revenue and customer loyalty.

In the 1600s, distributing companies in England utilized membership models to convey books to their dependable clients from month to month. The trend for subscription businesses is rising and trending among leading brands.

The three essentials- What will you need to start your eCommerce business?

eCommerce Business Essentials

With all the eCommerce businesses and models as discussed earlier, eCommerce is quite complex. But at its very core, an entire eCommerce business is built on these three essentials:

Product

You need to sort out what exactly do you want to sell regardless of how you decide to source your products. Selling something you are passionate about and selling it under a niche will get the job done.

The one special quality that makes your eCommerce business stand out is your sincere interest and individual uniqueness. You can start by choosing the industry and taking notes of the profit margins in various industries.

Having an affinity for your product and industry will help in clearing rough spots easily. Choosing and selling products by getting into customers’ shoes adds value, quality, and better performance.

The pro trick is to simplify a complicated product. Nowadays, drawing attention to the superiority and simplicity of your product is more impressive than advertising its complex technologies. Harness innovation and execute logistics along with product acquisition, storage, shipping, and life cycle.

Website

An eCommerce website is a facilitating tool to flagship your online presence. To build a website is to put your identity and your product out in the world.

There are literally hundreds of eCommerce websites out there and it is difficult to cut through the clutter. For this, you’ll have to compare different eCommerce platforms and evaluate their features to what suits you and your product the best. Your eCommerce website must be innovative and include features such as:

  • Great navigation
  • Fast loading page
  • Categorization of products
  • Product information
  • Shopping cart
  • Product review
  • Comment section
  • Return and shipping
  • Privacy policy
  • Easy checkout

Along with the features let’s take a look at some important tasks that will need to be maintained from the eCommerce business owner’s end:

  • Order and customer records
  • Order status
  • Notifications and discount updates
  • Promotional events
  • Email marketing
  • Content management
  • Search engine optimization
  • Social media marketing
  • Store credits
  • Customer service
  • Refunds and exchanges
  • Payment options
  • Accounts
  • Sales tax

Security

Security is the most essential element that is often taken lightly due to its complexity. Working on the security issues right from the infancy stage of your eCommerce platform will prove out to be beneficial in the long run. Especially when it comes to handling payments online, there is a wider risk of data alteration, data loss, or any other security consequences. It is important for the protection of eCommerce assets such as unauthorized access, alteration, use, or destruction.

Anti-fraud tools are a necessity to protect your business from security threats, chargebacks, and lost inventories. Here is the list of features necessary for building a secure system:

  • Authorization
  • Authentication
  • Encryption
  • Auditing
  • Integrity
  • Confidentiality
  • Privacy
  • Non-repudiation

Finding your niche- Who are you and your customers?

A vague niche will lead you nowhere. Being specific about your eCommerce business niche helps you deliver a curated customer experience. It is important to be picky about the products that you choose for your eCommerce business as people value specialized products more than generalized stuff. The answer to finding your niche is lots of research and honesty.

Who is your client?

Who are you hoping to serve? Consider the desires of your clients when buying the kind of product, you intend to sell online. Think about their expectations and the type the product you are planning to put on the market. If you can understand your consumers’ behavioral patterns and habits, you are more likely to succeed.

Look out for the detailed points in the way things are currently done and how you intend to change them for a better experience. This is the part where you can put up innovative skills and mark your presence online.

What do you have to offer?

What makes you better than others in the market? It is no secret that the eCommerce market is huge and constantly growing so being exclusive is significantly important. For this,

  • Identify your current strengths and build around those strengths to stand out in the crowd.
  • Have a clear understanding of the elements involved in the process.
  • Be real about the things you can do yourself and the things you will need help for.
  • Know your limitations and approach accordingly.

It might be a challenging process but it will turn out to be a great help in making decisions long-term.

What does your product need?

As we have discussed the different types of eCommerce, it will guide you in choosing the right business model according to your eCommerce business needs. Various models will serve you superior to other people, contingent upon your product.

If you are fabricating your product yourself, you might need to consider memberships or wholesaling to help distribute expenses and deliver initial investments faster. On the other side, if you are a merchant or distributor of other significant products, you might need to put more attention towards direct showcasing strategies and models to develop your online customer base.

Why your product?

Last but not least, you are perfectly aware of what makes your product better, but do your customers understand what makes your product better?

To get this answer you will have to thoroughly research your competitors and make it clear for the consumers that your product is their best choice. The factors of price, convenience, and selection of your products and your competitors should be carefully evaluated.

The online shopping experience of users on your eCommerce website should not only be unique but all the aspects of eCommerce such as back-end processes, marketing, warehousing should be systematic, clear, and easy to navigate.

What are the specific platforms for each type of Ecommerce Business Model?

The actual software that runs a business website is the eCommerce platform. Ecommerce platforms can be classified in three main ways:

Open-source

Open source is software that is distributed with its source code, making it available to use, modify, and distribute with its original rights. Any developer with adequate knowledge who has access to the source code can improve and alter according to their own creativity.

One of the many advantages of open source is that it is free, which makes it feasible for eCommerce business owners under a budget. It is very much flexible for the best eCommerce developers too as they can create their own creative versions without any limitations.

This is the reason that open source is often expanded beyond the original vision of its initial developers. Some professional software developers also create applications or plugins that can be further added to the base software by the user.

SaaS

Software as a service(SaaS) is a cloud application service that represents one of the largest cloud markets growing quickly. It uses the web to deliver applications managed by a third-party vendor whose interface can be accessed on the clients’ side. Although some SaaS applications require plugins, most of them can be run directly from a web browser without any installations or downloads.

SaaS applications are easy for eCommerce businesses to streamline their support and maintenance processes as it eliminates the need to run and install apps on individual computers. Because of the web delivery model, things such as applications, data, runtime, servers, middleware, networking, storage, operating systems, and virtualization can be managed by vendors themselves.

In order to gain a competitive advantage, many large eCommerce businesses have started building SaaS as an additional source.

PaaS

Platform as a service(PaaS) is a cloud platform service that is used for applications and other development. It simply provides cloud components to software. With PaaS, skilled software developers get a framework they can build upon to customize or develop applications. PaaS makes the testing, development, and deployment of applications easier and quicker.

Although developers manage the application, eCommerce operations, or third-party providers can manage operating systems, servers, networking, storage, virtualization, and PaaS software itself. It provides line-of-business software developers a self-service portal for managing computing infrastructure from platforms installed on top of hardware and other centralized IT operations.

Using PaaS, applications inherit cloud characteristics such as high availability, scalability, multi-tenancy, and cost-effectivity.

Must Read: Best Practices to Improve Sales for eCommerce Companies

To sum up

The retail landscape has changed and to evolve with these times, the brick and mortar stores will have to adapt to the ever-changing technologies of eCommerce. Moreover, in the present era of personalization eCommerce business owners need to understand the importance of segmentation of customers to increase ROI.

Ecommerce businesses are diverse and suit all types of eCommerce business models. So, if you have a unique product and a killer idea, do not hesitate to build your online eCommerce store to mark your presence online.

No matter what your eCommerce business or product is, there is an appropriate eCommerce platform, revenue model, and eCommerce business model that can help to make your eCommerce business successful.

The eCommerce platform and eCommerce business model you choose play a vital role in giving your customers an ideal and persuasive eCommerce experience along with running your eCommerce business like clockwork.

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