Types of eCommerce Business Models and Companies That Use Them
Understanding types of eCommerce business models is the key to starting and running your online store successfully.
In this blog post, we’ll walk you through an overview of traditional and trending eCommerce business models.
Take time to research them to make sure you choose the right model for your next business.
You may have heard about B2B and B2C business models. But what exactly are they? What is the major difference between them? Let’s learn in the following parts.
B2B stands for business to business. The nature of B2B eCommerce is that it sells products and/or services online to other companies, not end customers. Those companies can be manufacturers, wholesalers, suppliers, retailers, and the like.
It’s noticed that the global B2B eCommerce market is expanding quickly. According to recent reports of Frost & Sullivan, its revenue will be predicted to reach $6.7 trillion by this year.
Take a look at the following two examples: Selini New York and Herman Miller.
Selini New York
As described in their website, Selini New York is a B2B wholesale and eCommerce company. Started as a neckwear business in 1991, Selini New York has grown and thrived to become one of the most fast-growing B2B eCommerce brands in the world. They currently specialize in menswear and accessories, both for men and women.
Herman Miller has a reputation for “contemporary interior furnishings, solutions for healthcare environments and related technologies and services.” It’s reported to gain an annual sales of over $2 billion, and this figure is still on the rise. By making use of advanced technologies, Herman Miller sets it apart from other competitors to become one of the best B2B eCommerce success stories in the world.
Unlike B2B, B2C means business to consumers. In other words, when you start a B2C eCommerce business, you sell products and/or services online to end customers. Those customers are individual people who may go to an online store to buy a pair of shoes or book a homestay for holidays. This is the business model that you’re most likely familiar with.
Below are some successful B2C examples that you may want to know.
Warby Parker is recognized as one of the biggest names in the direct-to-consumer retail market. The brand sells eyewear products directly to customers at lower prices, compared with its competitors. That helped Warby Parker disrupt the industry and expand quickly. Now it has more than 90 physical stores in the U.S. and Canada, with value at $1.7 billion.
Bonobos were born in 2007, selling well-made pants. Ten years later, the brand was acquired by Walmart for $310 million, becoming “the largest U.S. clothing brand to ever start on the web.” What makes Bonobos different is that the brand puts more focus on customer service than traditional marketings.
C2C eCommerce refers to online transactions among consumers. A C2C eCommerce business connects consumers via a platform where people can exchange their items. C2C eCommerce businesses make profits by charging transaction fees or listing fees.
Craigslist and eBay are two typical examples of this eCommerce business model.
Craigslist is a number 1 classified advertisements website with a lot of categories: jobs, housing, services, community, for sale, and discussion forums. Their revenue comes from fees for job postings and fees for apartment postings. Craigslist now makes over $1 billion in annual revenue.
eBay is one of the most popular online shopping marketplaces, and it’s now available in several different countries in the world. With eBay, you can buy from a bunch of product categories or create a seller account and start making money. As of June 2019, eBay has 182 million users worldwide.
The forth eCommerce business model in this list is C2B, meaning consumer to business. In plain words, C2B eCommerce involves online transactions between individuals and companies. Affiliate marketing services and freelance websites are considered as C2B.
The following are two well-known C2B eCommerce companies:
Google Adsense is an online advertising platform where webmasters and website owners (called publishers) can join to make money from it. Once you create a Google Adsense account and insert a code into your web page, Google will display targeted ads on your pages. Currently, Google has over 2 million publishers.
Survey Monkey is an online survey tool that allows you to create surveys and share insights with your team. About 40 million customers are using Survey Monkey.
Mobile Commerce or m-commerce refers to buying and selling products/services through mobile devices. With this business model, people can now make online transactions from anywhere and at any time.
Basically, there are many types of mobile commerce, which can be grouped into categories as follows:
- Purchase: Mobile ticketing, mobile vouchers/coupons/loyalty cards, content purchase and delivery, mobile storefront, mobile browsing, mobile purchase.
- Finance: Mobile banking, auctions, mobile brokerage.
- Marketing: Mobile marketing and advertising.
- Information: Information services, location-based services.
Here are two mobile commerce business examples:
Starbucks has offered the most popular mobile payment app in the three years 2017 – 2019, and it’s predicted to hold the same position this year. There are 23.4 million users aged at least 14, using Starbucks to make online purchases. Various supported payments and diverse loyalty programs contribute a lot to the success of Starbucks.
From an online store, ASOS has become a global eCommerce giant with 72.3 million orders and a £33.1 million profit in 2019. Some reasons for ASOS’s success are free worldwide shipping, eCommerce localization, and an effective international online sales strategy.
Resale commerce means purchasing and selling secondhand products. A recommerce company will look for old or vintage products, refurbish them if necessary, and introduce them to the market again. Cashify, Gazelle, and Bundli are examples of such businesses.
According to The 2020 topics and trends report from Facebook I.Q., buying secondhand goods become increasingly popular in the U.K. People now can buy luxury products like vintage and retro clothing with good quality at a lower price. For resellers, this is a huge opportunity to build a business and become an entrepreneur. The data also said that.
Let’s see how these recommerce brands work:
Vestiaire Collective is an online marketplace for buying and selling secondhand luxury clothes. Founded in 2009, the brand now creates a community with 7 million members from over 50 countries. Their products include vintage fashion, bags, watches, and jewelry for both men and women.
Like Vestiaire Collective, Poshmark allows you to shop online or list your items and earn money. This marketplace has over 25 million items from 5,000 brands and presented only in the U.S. It has simple categories to find needed items and various features for buyers and sellers to ease their shopping and selling experiences. It also allows users to create and share lists of picked products with the community, which makes the platform as social commerce space.
With the motto, “authenticity is everything to us,” The RealReal is the best place to buy high-quality vintage products. You can also earn good money when selling in this marketplace.
Depop is a social shopping app for Gen Z shoppers. It is considered as a combination of eBay and Instagram, which allows consumers to buy, sell, or explore the trending fashion. Depop is currently available for iOS and Android devices.
Another marketplace option to sell and buy products is Tradesy. It was made by women and for women, which means curated unique luxury goods and excellent support services exclusively for women. One of the most interesting things about this platform is that it offers the buy-now-and-pay-over-time service. This way, shoppers can buy the products they want without paying immediately. Instead, they’ll pay by installments every month.
Dropshipping, wholesaling, subscription commerce model, private labeling, and white labeling are common business revenue models. Let’s take a look at each of them.
Dropshipping is a business model where a store doesn’t keep products in its stock. Instead, it purchases products from third-party companies (also called suppliers), and then sell them to end consumers.
In the wholesaling business model, a company will buy products in bulk from manufacturers or suppliers or distributors, stock those products in their warehouse, and then sell to other store owners or retailers.
A subscription commerce business refers to selling products or services, and customers will pay monthly or yearly in the form of subscription.
Private labeling business model means products or services are produced by a manufacturer but sold under a retailer’s brand name.
White labeling is the same as private labeling in some way. The difference is that a retailer will rebrand products or services provided by a manufacturer in a way as if the retailer made those products/services by themselves.