In 2021, over 20 million active Ecommerce platforms were operating worldwide. Modern technology allowed the Ecommerce market to rise in the early 2000s with businesses like Amazon and PayPal.
The recent boom in shopping via mobile devices (also known as mobile commerce) made Ecommerce formidable. Ecommerce sales have reached more than $3.6 billion in the US alone. Amazon remains the benchmark for all budding business owners to emulate.
More people are taking the plunge and starting an Ecommerce business every day in the hopes that they can become financially independent and free to pursue their ventures. The world of Ecommerce is vast, however, with numerous types of Ecommerce models all sharing the same space. It can be challenging to know where to begin.
Before starting an Ecommerce business, you’ll want to know the traditional types of Ecommerce websites, what each entails, and how they differ from one another.
What is Ecommerce?
Ecommerce stands for electronic commerce. Essentially, any form of buying and selling via an online marketplace that results in an electronic transaction of money is an example of Ecommerce. Traditionally, commerce used to take place in brick-and-mortar stores. Now, this is no longer the case.
The rapid rise in technology means that when we talk about buying and selling via online retailers, we no longer mean just physical products that can be shipped to customers. If you have paid for a subscription service or a digital product such as an audiobook, or if a company uses services from Google, these are examples of Ecommerce sales.
What is the difference between Ecommerce and eBusiness?
Ecommerce and eBusiness are often used interchangeably, though they shouldn’t be considered the same. Ecommerce refers to any online transactions between buyers and sellers where money changes hands, regardless of whether what is bought is a product or a service. Essentially, Ecommerce can be viewed as a subset of eBusiness.
eBusiness refers to all online behaviors and actions conducted within online business organizations. They do not necessarily have to involve the exchange of money. Data collection, email or digital marketing, and the maintenance of online job boards are all examples of other behaviors that fall under the eBusiness umbrella.
What are the types of Ecommerce businesses?
Before you start your business, you must choose the most suitable Ecommerce business model for your idea. There are five Ecommerce businesses, though other business types will follow more niche models. Each category of Ecommerce model differs depending on who is buying and selling.
1. Business-to-business (B2B)
A B2B business is where one company provides a service or Ecommerce software to another company. A company will typically use Ecommerce solutions, also known as Software-as-a-Solution (SaaS), to improve its efficiency and functionality as a business.
When companies sell services and software to other businesses, the Ecommerce transactions that take place are usually in the form of recurring subscription payments. This is so the software provider can install updates and features to the service without the buyer having to purchase a new set of software each time.
A B2B model is not just reserved for services and software. For example, a company manufacturing office chairs and furniture which it sells to other companies is also considered B2B.
2. Business-to-consumer (B2C)
Of all the business Ecommerce stores, B2C businesses are the most common and obvious examples of online buying and selling. They follow the same processes as physical stores, where a business sells products and services directly to an individual consumer. More recently still, mobile apps have become an enormous component of the B2C arena.
B2C businesses traditionally started by selling physical products, but many have since moved into providing consumer services and software. Spotify delivers music streaming, Netflix offers movie streaming, and Adobe sells video and photo editing software. All follow a B2C business revenue model via subscription services.
3. Consumer-to-business (C2B)
As the name suggests, a C2B business model is where consumers sell their products or services to a business. You can most commonly find consumer Ecommerce in the freelancing industry, which has grown in popularity thanks to websites such as Upwork and Fiverr.
For C2B, a consumer may set up a business that provides their expertise from previous work experience. For example, a marketing consultant may be hired by a company to guide their staff or teach new practices and procedures before moving on to another business.
C2B companies also deal in products. They might upload a portfolio of their best work to places such as Shutterstock. Businesses can then pay to use these photos for their websites and marketing. A stock photographer is an excellent example of this.
4. Consumer-to-consumer (C2C)
C2C Ecommerce business allows customers to produce and sell products to other consumers. A classic example of this business model is a garage sale.
Instead of in-person, a C2C Ecommerce takes place on online marketplaces such as eBay, which remains one of the top Ecommerce platforms. C2C businesses usually charge commission fees to facilitate the exchange of goods between individual consumers.
Etsy is another example of a platform for C2C businesses. With Etsy, an individual can build an online store and craft or design their products to sell.
5. Government and public administrations Ecommerce
These Ecommerce business plans will generally not apply to individuals. However, some businesses provide products and services to the government or other public administrations. These are business-to-government (B2G) or business-to-administration (B2A) models.
There is also the consumer-to-administration (C2A) business model. This only occurs when a person needs to pay the government for things such as tuition fee loans.
What are the different types of Ecommerce business revenue models?
Once you have settled on a type of Ecommerce business that you wish to pursue, you will need to decide which form of revenue model will be best suited to your particular needs.
Even within the stipulations of each business type, there are several different ways that businesses deliver their goods and earn their money. The most common types of Ecommerce business revenue models are listed below.
One of the most popular Ecommerce models involves something called dropshipping. With this method, you as the business owner will advertize and sell products manufactured or designed by third-party retailers and suppliers. When a customer places an order on your website, you inform the supplier, and they ship the products directly to consumers.
A considerable advantage of this model is that the supplier takes care of inventory management and shipping. This gives the business owner more time to focus on marketing strategies and develop new product ideas. A possible downside is that you may not have a first-hand knowledge base on what you are selling, so you cannot guarantee a positive customer experience.
2. Affiliate marketing
Affiliate marketers follow many of the same strategies as dropshippers. With affiliate marketing, a business owner will partner with brands and websites to promote products to their established customer base. The affiliate marketer earns a commission when a customer clicks on an affiliate link and follows through with a sale.
This model is popular for individuals with a significant social media presence and a potential pool of customers. However, similarly to dropshipping, it only takes one poor-quality affiliate recommendation to potentially undo the trust between the business owner and the audience they have worked hard to accumulate.
3. Private labeling and manufacturing
As a potential business owner, you may have an excellent idea for a product, but you might not have the means to produce and make the product. If this is the case, you could utilize a private labeling model. This is where a third party manufactures physical products sold under a business owner’s brand and website.
The advantage for the business owner is that they still control all aspects of the product. It is also an excellent way to test products at a smaller level before a brand decides to move into manufacturing the products themselves.
4. White labeling
White label and private label business models share many characteristics. The main difference is that white labeling doesn’t usually involve the business owner’s original product ideas. A business owner using this method will sell popular products already manufactured by someone else, but like with private labeling, they will be free to use their branding and logos.
Similar to affiliate marketing, white label products can work well with business owners who have built up an audience and already have a recognizable brand that manufacturers will be able to leverage. The company also has the advantage of not worrying about manufacturing costs.
This Ecommerce business revenue model involves a business owner purchasing a product in bulk from a manufacturer. They can then attempt to sell the product to retailers at a discount while still making a profit. They could also double up as a retailer and simultaneously sell the product directly to consumers. Essentially, a business acts as the intermediary for this business transaction.
With this approach, the business owner needs access to an inventory or warehouse space and often has to take care of inventory and shipping management. This makes it a potentially tricky method to pull off. However, if the owner is prepared to do the work, the results can be awe-inspiring.
Many businesses have turned to subscription-based models in the last few years. Subscriptions are a lucrative source of recurring payments, often allowing businesses to work on new products or service features while still bringing in a passive income.
Most service or software-based online platforms use a subscription as a service (SaaS) model. A subscription model example that has become hugely popular recently is a subscription box, where consumers will pay a monthly fee to receive a package of items from their favorite brands each month.
Some online businesses will also use freemium models as their pricing strategies. For example, Spotify offers many of its services for free in a limited capacity to try and entice users to subscribe and gain access to the full service.
Which Ecommerce model is best for my business?
It’s essential to properly consider which type of Ecommerce business model you will use and how you intend to earn your revenue if you wish for your business to succeed in this highly competitive field. You will need to consider several critical considerations before coming to a final decision, such as:
- What to sell: Your business type and revenue model may depend on what you choose to sell. Some models work best for physical and digital products, whereas others cater more to service-based businesses.
- Your strengths: If you are excellent at marketing, choosing an affiliate program may be the best. Starting an Etsy store or subscription box may produce better results by creating incredible, original products. Take the time to consider what you are good at.
- Your goal: If you want to make a lot of money in a short time, then starting your own business might not be the best strategy if you plan on building your store steadily and organically. Your decisions may depend on what you ultimately want to achieve.
It can sometimes feel intimidating to get started in Ecommerce or online business ownership; indeed, there is a lot to think about. Even with all the best resources and tools, running a successful Ecommerce business is still a tricky thing to pull off.
However, as long as you take your time with your decisions and conduct your research and due diligence sensibly, we are confident that the information provided in this article can start you off on the right foot.
At Flippa, we have over twelve years of experience working with online business owners. We are now the world’s number one online marketplace for buying and selling businesses of all types, including Ecommerce. We are confident that our platform and industry expertise is second to none.
If you have an Ecommerce business that you are looking to sell and require a valuation, or if you are interested in buying an Ecommerce company through our platform, then do not hesitate to contact us today.
Frequently asked questions
What is an Amazon FBA business?
What is print on demand (POD)?
POD refers to a fulfillment process involving dropshipping products to customers after a completed sale.
What types of Ecommerce businesses can I buy or sell on Flippa?
On Flippa, you can buy or sell all kinds of products. For example, profitable Ecommerce dropshipping sites, Amazon FBA businesses, inventory holding, Shopify, and more.
Flippa also has an extensive range of SaaS businesses, marketplaces, domain names, and apps. Check out our free online business valuation tool to determine how much your business could be worth.