Take a look back at how you shopped ten years ago.
If it was time to buy a new mattress, where did you go to buy clothes? Where did you shop for groceries?
Our way of shopping has been transformed by innovative ecommerce businesses.
According to experts, by 2021, ecommerce sales in the India. will account for 14% of the total purchases. Ecommerce sales accounted for 6% of retail sales in 2013, and 9% in 2017.
We see every year new businesses dethroning “the way we’ve always done it” monoliths because it’s easier than ever for creative founders to come up with their ideas.
Despite the advent of many new tools and rapid improvements, there are still some rules to follow. If you want to defy expectations and innovating, you’ll need to know your business model and what you plan to do.
A review of ecommerce’s most important business models, some examples of innovators, and some principles of innovation will be covered in this article.
Ecommerce Business Models: Four Traditional Types
Table of Contents
There is a good chance you will fall into at least one of these four general categories when starting an ecommerce business.
Most companies operate in more than one of these categories at the same time, and each has its benefits and challenges.
You can think creatively about your opportunities and threats when you know what bucket your big idea fits into. Contact sales to schedule a demo if you would like more information. BigCommerce can position your business for maximum potential, regardless of your stage of growth or business model.
1. Business-to-consumer, or B2C.
A business that sells to its customers is referred to as a B2C business. Since this style of business model is the most common, there are many unique approaches that apply to it.
Consumers who buy clothing, household supplies, or entertainment from an online store are doing so as part of a B2C transaction.
Businesses-to-consumers (B2C) purchases are typically much shorter than business-to-business (B2B) purchases, especially if the item is inexpensive.
Consider this: shopping for tennis shoes is much easier than choosing an email service provider or food caterer for your company.
A shorter sales cycle means that B2C companies spend less on marketing, but also have a lower average order value and fewer repeat orders than their B2B counterparts.
In addition to products, B2C includes services as well.
Innovations in B2C marketing have leveraged technology such as mobile apps, native advertising, and remarketing to reach their customers directly.
Users of an app like Lawn Guru can find local lawn mowing services, garden and patio specialists, or snow removal specialists easily.
As well as tracking employee routes, sending texts, and taking credit card payments on the go, Housecall Pro’s plumbing software app provides both consumer and business benefits.
2. Business-to-business is known as B2B.
B2B refers to selling products and services to other businesses. Buyers may be end users, or they may resell their products to consumers.
The sales cycle for B2B transactions is typically longer, but the order value and number of recurring purchases are higher.
Ecommerce storefronts and better targeting in niche markets have replaced catalogs and order sheets in recent B2B innovations.
It is estimated that nearly half of B2B buyers in 2020 will be millennials – nearly double what they were in 2012. As younger generations enter the age of making business transactions, B2B selling in the online sector becomes increasingly important.
3. Consumer-to-business – C2B.
Individuals and companies can sell goods and services through C2B businesses.
Affiliate marketing services would also be considered C2B services under this ecommerce model. Customers can post jobs they need done and businesses can bid on them.
In order to help businesses hire freelancers, Elance (now Upwork) pioneered this model.
Prices for goods and services are what give C2B ecommerce its competitive edge.
Using this approach, consumers can set their own price or businesses can directly compete to meet their needs.
Innovative companies are using this model to market their products using social media influencers.
4. Consumers to consumers, or C2C.
Online marketplaces, also known as C2C businesses, connect consumers and exchange goods and services.
This model was pioneered by companies like Craigslist and eBay during the early days of the internet.
Motivated buyers and sellers propel C2C businesses, but quality control and technology maintenance pose key challenges.
Ecommerce Innovation: Five Value Delivery Methods
Business models are like cars, and value delivery methods are like engines.
Your edge is here. How will you create a business worth sharing and compete with others?
Market disruptors and industry leaders take a variety of approaches.
1. Direct-to-consumer marketing.
With no middleman, a new generation of consumer brands has grown rapidly and built loyal followings.
Brands like Glossier are showing us that D2C can continue to be an area of innovation and growth despite vertical disruption from Warby Parker and Casper.
2. Private labeling and white labeling.
When you “white label” a generic product purchased from a distributor, you add your name and brand to it.
Using private labeling or white labeling, retailers are able to stay lean on design and production expenses while gaining an advantage in technology and marketing.
3. The wholesale business.
Retailers who wholesale offer their products at a discount in bulk.
The practice of wholesaling has traditionally been a B2B practice, but some retailers have adopted it as a B2C practice to appeal to budget-conscious consumers.
4. Shipping by dropshipper.
In the world of e-commerce, dropshipping is one of the fastest-growing methods.
The dropshipping industry usually markets and sells products that are fulfilled by third party suppliers, such as AliExpress or Printful. A dropshipper connects buyers with manufacturers as a middle man. It is easy for BigCommerce users to add inventory to their storefronts from suppliers around the world using easy-to-use tools.
5. Service that requires a subscription.
Ecommerce is becoming more than just subscribing to a magazine and joining a fruit of the month club. As early as the 1600s, publishing companies used subscriptions to deliver books to their loyal customers monthly. Subscription services have emerged in virtually every industry today to offer convenience and savings.
Business Models for Ecommerce
Let’s take a look at the specifics of choosing an ecommerce business model.
You will be able to create a unique business plan by answering a few questions.
Honesty and research are key here.
Make sure you learn everything you can about the niche you intend to target as well as the unique value you can add to it.
1. What kind of customers do you have?
Can you tell me who you are looking to serve?
When you plan to sell a product, consider what their expectations are.
Finding ways to improve their behavior or save money is most likely to lead to success.
It will require you to identify problems with the way things are currently done in order to do this.
You can carve your own niche as an innovator here.
2. How capable are you?
Who knows it better than you?
You can focus on the pieces that you enjoy and those that are energizing to you.
Understand what elements can be accomplished by yourself and what will require professional assistance.
Knowing your limitations can be challenging, but it will help you make better decisions in the long run.
3. How can you make your product more effective?
It depends on your product which model is best for you.
Consider wholesaling or subscriptions if you manufacture your own products to help cover production costs and break even faster.
Invest more heavily in direct marketing and strategies that will increase your customer base if you are a distributor of other people’s products.
4. How would you describe your position?
How will consumers perceive your product as better? You know what makes it superior, but will consumers?
Make sure you evaluate your competitors and explain why your product is superior.
Can you compete on price? Can you compete on selection? Can you compete on convenience?
Your unique value should be clearly evident from your back end processes, to your warehousing, to your marketing, and to your website’s shopping experience.
Conclusion
As we discussed in the previous section, we have discussed the most common ecommerce business models, several innovations for ecommerce, and some example ecommerce businesses that have set themselves apart from their competitors.
To find a niche in which your new endeavor can succeed, you’ll need to answer a few questions.
Getting your solution out into the world and working with feedback will help you refine your business. Innovation does not occur in a vacuum, but it depends on planning.
