Everyone knows that B2C eCommerce is huge. If you aren’t aware of Amazon, you literally just crawled out of the Amazon. But did you know B2B eCommerce is even larger? It’s expected to be double the size of B2C in 2020 and according to Forbes it will be the largest growth sector of eCommerce through 2025. While those are the two most widely known eCommerce models, they aren’t the only types of eCommerce business models
With so many eCommerce opportunities, every business should be doing some share of their sales online. No matter your business model, from eCommerce shipping to SaaS, there’s an eCommerce model for you. In addition to the B2B and B2C models, there are lesser known types of eCommerce business models such as B2B2B, D2C, B2G, and even B2E.
Different types of eCommerce business models
Determining the best eCommerce business model for your company requires careful consideration of many different factors. Every business is different. Examine the amount of time and the financial resources you are willing to commit as well as your risk for tolerance. Consider your profit margins, how your off-line business is structured and even what the competition is doing. You may find there’s an eCommerce model that emulates how you already do business off-line or other models than open new sales channels you haven’t explored.
B2B and B2C eCommerce business models rule
By sheer numbers, B2B and B2C trounce all other models. Retailers, manufacturers, wholesalers, and distributors use one or both of these eCommerce business models to reach their business and end consumer markets.
When most people think of buying online, the B2C eCommerce experience is what comes to mind. B2C sellers emulate the brick and mortar retail model. Nowadays, every brand from BestBuy to Nike offer eCommerce storefronts that generate the bulk of their revenue. B2C sellers have some common characteristics:
- Large customer base. When you sell directly to customers, you quickly discover there are vast quantities of them. You immediately have a tremendous target market. On the other hand, everyone else is fishing in your pond. Because the B2C market is highly competitive, you must be savvy about the niches you select to serve and deliver highly targeted marketing campaigns if you want to be effective—both organic and local SEO come into play here and you beter have a significant budget!
- Low volume transactions. B2C purchases are mostly for individual use. A B2C buyer will purchase enough wood flooring to finish a room or two. A B2B buyer will purchase enough wood flooring to finish every home in the new neighborhood they are building. Because of the nature of the purchase, B2C sellers don’t worry about negotiating prices, delivery, or payment terms. These customers just click to buy and click to pay.
- One-time purchases. Retail customers base their purchasing decisions on emotions and feelings. When marketing to these consumers, you convert when you can get them emotionally invested in the purchase. Many of these purchases are a one and done proposition and building a relationship with the customer isn’t that important.
In a B2B business model your customers are other businesses. More exactly, they are people that work for companies and make purchases on their behalf. An example would be bed linens sold to a hotel supply company or fasteners sold to other manufacturers. Business to business transactions are far more complex than ordering a pair of Nikes online. B2B sales differ from B2C sales in many different ways.
- Long purchase cycle. Business buyers tend to do extensive research before making a purchase. So, selling to other businesses takes an investment of time.
- Multiple transactions based on long-term relationships. A retail customer may make one purchase and disappear. Business buyers purchase the same item over and over, usually at regular intervals. They might only buy four times a year, but volume and ticket value will be higher. Because of this, B2B sellers concentrate on building and fostering long-term relationships.
- Multiple players. Most B2C buyers don’t consult with others or require the approval of another person before they can make a purchase. In business, in addition to the purchasing agent, there can be many others from various departments involved in the negotiation and purchase process. eCommerce can be a challenge unless your software solution can easily handle multiple roles, authorities, responsibilities, and workflows.
Alternative eCommerce models
B2B and B2C eCommerce models may rule, but they aren’t the only ones out there. Afterall, Amazon and Alibaba don’t fit neatly into either of those types of eCommerce business models, but they exert tremendous influence on internet purchasing. Here’s a sampling of alternative types of eCommerce business models.
The traditional B2B2B model is where a business sells to a business that sells to other businesses. In the eCommerce version, it’s the same dynamics with the same players. Except the process is digitized.
For example, you may be a manufacturer that makes chips or components that go into equipment like copiers or printers that are sold to other businesses. Got it? The benefit of digitizing this model is that you can gain valuable insights into your customer’s customer that you might not otherwise capture. Of course, you streamline the order process for all involved too.
In a B2B2C model the business sells to another business that sells to customers or it can be a business that sells to businesses and customers alike. You’ll often see this model with manufacturers that sell through distributors and direct. Or manufacturers that handle drop shipping and order fulfillment for other businesses.
When you apply eCommerce to this model, you give the manufacturer access to a larger customer base, distributors can sell without maintaining high inventory levels, and end customers end up with a smooth buying experience.
With 79% of Americans buying online, it’s no wonder the D2C model is gaining in popularity. In this model, a typically B2B business sells directly to the end customer with no distributor or retailer in-between. It was growing before the COVID-19 pandemic, but as governments shut down stores, D2C spread as fast as the virus itself.
This channel isn’t always smooth sailing. It’s important to carefully navigate to avoid damaging existing relationships with dealers and wholesalers. You also need an infrastructure in place that handles small orders and can support resource-intensive customer service. This type of eCommerce is close to B2C, so it’s important that you have a flexible eCommerce platform than can handle these sales as well as your B2B sales.
Brands such as PepsiCo and Harry’s are making businesses take another look at the DTC model.
B2B marketplaces provide access to customers that are already engaged in the buying process. Of course, there might be more competition as many marketplaces play host to competing companies. Instead of pulling out the trust old Thomas Directory, business buyers now turn to ThomasNet to source products.
B2B marketplaces like ThomasNet are geared for the needs of B2B buyers and sellers. For buyers, it provides a single source for purchase research, for sellers it is a cost effective way to broaden their reach.
The B2E model (business to employee) is often used to disseminate personalized information. Think employee productivity tools for 401(k) management tools.
Just as eCommerce improves the customer experience, digitizing B2E improves employee experience. This leads to a workforce that is more engaged and productive.
In the B2G model a business sells to governmental entities. This model may be used for the entire company or just a sector. Sales in this model tend to have a high-ticket value but a long sales cycle.
For example, McGraw Hill sells books, curriculum, and supplies to public K-12 schools. These schools are all operated by governmental entities. A hardware or software company may have a SLED (state and local government and education) team in addition to their B2B team. Using eCommerce with B2G requires a platform that is infinitely customizable. Each governmental entity will have their own requirements and needs, and your eCommerce platform must conform.
The G2G model used for transactions between governmental agencies. Instead of goods, the “product” trading hands is generally data.
This information is shared between governments that form consortiums for economies of scale or regional groups. Other G2G applications flow from the Open Government Directive that seeks to institutionalize an open government culture.
Different types of eCommerce models create different eCommerce platform needs
After reviewing all the different types of eCommerce business models, it’s easy to see that they all have very different needs. But that doesn’t mean that you need to invest in a different platform for each model.
Selecting the right eCommerce solution should enable you to move between business models as business conditions and markets change. In response to the COVID-19 health crisis, PepsiCo launched a new DTC channel in less than 30 days.
If you think you will sell to other businesses, beware of eCommerce platforms that were designed primarily for B2C. These platforms won’t give you the flexibility you need to meet the needs of business buyers.
Instead, look for a B2B eCommerce platform that will let your customers request quotes, negotiate prices, access personalized product listings and catalogs, reorder quickly, and pick from a variety of payment and shipping options.
Make sure you get the ability to support multiple websites using multiple eCommerce business models with just one instance. This will provide business buyers and individual consumers to get the personalized customer experience that’s right for them while providing you the ease of a single back-end for admin. It’s how SaltWorks simplified their complex business model by digitization.
SaltWorks moved to OroCommerce because of its ability to serve as a B2C, B2B, B2X and marketplace platform. Now as the types of eCommerce models the company uses changes, the platform will change along with them. That’s maximum value from a single solution investment.
Know that you know more about the different types of eCommerce business models, you may find a new niche with some of the lesser-known models. You may find you can grow your brand by entering new markets based on a new business model. With the right strategy and software solution, you’ll grow your slice of even more pies.
Explore one of these unconventional selling models and see if it will help you build a stronger brand with new channels filled with new opportunities.