Understanding the different types of e-commerce can be beneficial when selling. It can give you insight into what your day-to-day operations could look like, what opportunities lie ahead, and what challenges you need to prepare for.
Keep reading this article to learn more about the types of eCommerce. We will also give some examples of eCommerce businesses to see what they look like in practice.
Types of electronic commerce by business model
First, we’ll discuss the main types of eCommerce business models based on who the recipient of the business is.
Business to Business (B2B)
In the B2B model, companies sell to other companies. Typically, goods and services are for business use only, such as to support productivity, collaboration, office needs, or the production process. In many cases, the buyer can also purchase an item in bulk for resale.
In recent years, e-commerce has accelerated the growth of the B2B sector. The reason is that many companies are turning to online media to do business with their consumers and partners.
B2B marketplaces, like Alibaba Y amazon, have also contributed to this increase. Many eCommerce companies also have their own websites and apps to facilitate transactions.
One thing to keep in mind about B2B is that the sales cycle can be longer, between four and seven months. Companies often need much more time to decide if a product is worth buying, especially if it is essential to their operations.
Business to Business (B2B) Example – Slack
slack is a great example of a B2B business. It is an exclusive communication software for businesses and companies. Their subscription plans are suitable for companies of any size, from small activities to large companies.
Business to Consumer (B2C)
A B2C company sells directly to consumers. The goods or services are generally for personal use, ranging from groceries, clothing, electronics to streaming services.
The transaction may take place on a store, a business website, a marketplace, or other web applications.
According to , the size of the global B2C e-commerce market is increasing steadily, with an annual growth rate of 7.9%. For this reason, the new ventures that enter the market will be in great demand.
However, competition can be intense, especially in a crowded industry full of big brands.
Example of Business to Consumer (B2C) – Function of Beauty
Function of Beauty sells personal care items for individuals that allows them to customize the product formula according to their preferences. Offering a customization option is one of the ways this brand creates a unique experience relative to other B2C businesses.
Consumer to Consumer (C2C)
With the C2C type of e-commerce, a business provides an online platform for consumers to buy from and sell to each other.
These platforms can be marketplaces where people post their articles and get paid on the website. It can also be a forum for users to market their products or services, but the transaction is done in person.
The company earns revenue by charging fees for posting articles on the site. Some may also apply transaction fees, which are typically charged each time a seller makes a successful sale.
When done correctly, this eCommerce business model can be very profitable. Many people prefer to sell on third party websites, especially if they attract a large user base, such as eBay either craigslist. In addition, the configuration can take less time than the creation of an online store.
Example of Consumer to Consumer (C2C) – Facebook Marketplace
This online marketplace allows Facebook users who live in the same region to buy and sell with each other.
Sellers can list their items for free, and they have to meet the buyer face-to-face to complete the transaction. Users located in the US can also enable online payments and shipping by paying a commission for the sale.
Consumer to Business (C2B)
In C2B e-commerce, individuals offer their talents and skills to companies. Some popular examples of goods or services in this model are freelance work, affiliate marketing, and user testing.
As in C2C, the exchange between consumers and businesses is usually done on a third-party website. These platforms charge a service fee to the individual or company.
Some people also use their own resumes online and post them on search engines or on social media.
Example of Consumer to Business (C2B) – Upwork
Upwork is an online job portal that connects freelancers with companies. Charge service fees for talent, ranging from 5% and the twenty% depending on the billing amount. There are also paid plans for customers to process payments and enable additional job posting features.
Business to Administration (B2A)
This type of e-commerce business sells online tools to government agencies. Typically, the entity will use the program to manage its services, such as processing citizen applications or maintaining official records.
Business to Administration (B2A) example – OpenGov
OpenGov is a cloud software whose objective is to help local and state administrations in their daily operations. Features include management tools for budgeting, accounting, reporting, and licensing. Many government offices across the United States have used this application.
Consumer to Administration (C2A)
The C2A model refers to electronic commerce activities between individuals and the government.
These transactions usually consist of the payment of public administration expenses, such as health services, social security or taxes.
Example of Consumer to Administration (C2A) – EFTPS
This website, which is short for Electronic Federal Tax Payment System (EFTPS), allows US citizens to pay their taxes online. Users can sign up and schedule an advance payment or agree to a same-day tax payment.
Types of e-commerce by revenue model
The following types of eCommerce are based on the way the business operates and generates revenue.
drop shipping
The allows businesses to sell to consumers without having to deal with production, inventory, or shipping tasks.
In this type of e-commerce, you will work with a third-party wholesaler and sell their products online. When someone places an order, you’ll alert the supplier to deliver the item to the buyer. If the sale is successful, you will receive a portion of the profit.
This method usually has . All you need to get started is a website and a partnership with a wholesaler. You can access providers in dropshipping directories like and .
Now, a common problem is the inability to check the condition of the item before sending it to the customer. Also, competition can be stiff for companies selling a common product.
Dropshipping example – Grafomap
sell prints using an on-demand dropshipping service from . It allows customers to order a custom map with a design that they offer. Printful will produce and ship your purchase to the buyer.
Wholesale
A wholesaler buys products in large volumes from manufacturers and resells them to retailers.
Since they buy the items in bulk, they can get a discount from the supplier. In order to make a profit, they will sell the products at a higher price. Items are stored to be sold to consumers.
A wholesale business often needs warehouse space to store items. The selling process can take place on your own website or on a marketplace like amazon, Alibaba either faire.
Although wholesale often falls into the business-to-business category, some providers are open to selling directly to consumers.
Wholesale Example – S&S Activewear
is a wholesale company that sells brand name clothing to retailers. They also offer blank clothing for printing companies that make custom garments for customers.
private label
A private label company works with a manufacturer to create a product under their brand. The company will control the characteristics of the article, including its material, function and packaging.
One of the advantages of private labeling is that the product can be unique from the rest of the market. That said, it’s good practice to research the manufacturer first to determine if they are capable of meeting your requirements.
Private Labeling Example – Zadiko Tea Co.
is a tea company created by YouTuber Zach Kornfeld. He works with the manufacturer to create unique tea blends for their products and uses his own brand in his sales channels.
White brand
In white labeling, a company purchases a line of ready-made products from a manufacturer and applies its own brand to sell them.
Unlike the private label model, the company is not involved in the making of the item. However, due to the lack of involvement, the production process is often faster and more affordable. Once the items are ready, the company stores them in its own facilities.
As with dropshipping, competition can be intense if you are selling a popular product for a low price.
White label example – The Chocolate Gift
offers white label services for companies that want to resell their chocolate bars. Customers can order at least 240 items with a custom branded design.
subscription service
In this model, the company will provide a product or service on a recurring basis to a consumer in exchange for periodic payments, usually weekly, monthly or annually.
Subscription services may qualify as one of the following types:
- access. Customers can use a premium digital platform in exchange for a regular fee. Some companies provide free (freemium) access with limited features to give potential subscribers a preview of the service.
- Healing. The company customizes a number of products according to the preferences of the buyer. In many cases, the individual can try the item and purchase it. If it is not suitable for you, you can return it.
- Replacement. This subscription is usually for consumer packaged goods that people buy often, like groceries. A business will automatically replenish these items to the customer based on their order frequency preferences.
This type of e-commerce model is, and more than half of…
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