Types of e-commerce business models
Basic e-commerce models are business to business (B2B) or business to consumer (B2C), although other models exist.
The internet can open up new e-commerce opportunities for your business to buy, sell or exchange goods or services online. It is important to understand the different types of e-commerce models that exist and find the one that best suits your business.
Seven types of e-business retail structures
The primary e-commerce models broadly cover two main categories:
- business to consumer (B2C) - selling products/services directly to consumers
- business to business (B2B) - selling goods/services to other businesses
Other models cover different types of business relationships, including:
- consumer to consumer (C2C) - where consumers pay a commission to buy and sell items
- consumer to business (C2B) - where a sole proprietor may be serving a larger business
- business to government (B2G) - for businesses whose sole clients are government
- government to business (G2B) - for government sales to private businesses
- government to citizen (G2C) - for government sales to the general public
B2C e-commerce model
A B2C model focuses on selling goods and products directly to individual customers. It typically requires one of two things:
- a website with an online shop front
- using an online marketplace
Consumers can browse your products online, decide to make a purchase and proceed to an electronic checkout where some form of payment processing will take place. This will typically be via a merchant account set up through an acquiring bank, which is capable of processing credit and debit cards, or a payment processing provider.
See more on accepting online payments.
B2B e-commerce model
A B2B model operates by providing products from one business to another, through either online auctions or e-marketplaces.
Online auctions are computerised versions of traditional auctions where buyers set the prices and bid against each other. For example, an online auction might specialise in services for buyers and sellers of chemical feedstocks, chemicals, plastics, and related products. There are two main types of online auctions:
- forward auctions - lots are sold to the highest bidder
- reverse auctions - suppliers compete on price and the lowest bid wins the business
E-marketplaces specifically for B2B usually offer discounts for large quantities of goods. These are websites where buyers and sellers trade goods and services online. Online marketplaces vary according to the size and number of companies using them and the type of commodity traded. For more information, see e-marketplaces, online auctions and exchanges.
5 most common e-commerce business models
There are many ways you can run an e-commerce business. Some are easier to set up than others. They generally fall under five categories:
- dropshipping - where you sell items on your website that someone else manufactures and ships to your customer
- wholesaling and warehousing - where you buy products in bulk and store them in a warehouse (usually for B2B market)
- white-labelling - where you have a contract that allows you to put your brand on the product as if you are the manufacturer
- manufacturing - where you're paying to have the products created for you and you fulfil the order yourself
- subscription-based - where you rely on a subscription model that delivers your products to customers at regular, scheduled intervals
Read more about planning for e-commerce.