What is an E-commerce Business?
E-commerce, also known as electronic commerce, refers to buying and selling items online. It is an online store that contains all types of items, big or small. You can view it as a shopping complex on your devices. The e-commerce platform has been divided into lifestyle, fashion, beauty, electronics, food items, groceries, DIY, toys, grooming, and so on.
Because of such big business worldwide, it has made a good revenue in this new world of e-commerce. Going by the stats for 2021, global e-commerce stands at US$4.9 billion and is expected to reach US$7.3 billion by 2025.
In this article, we’ll go through the types of e-commerce businesses that operate worldwide and their two sides.
Popular e-commerce business models
There are six to seven types of business models operating across the world. The list includes B2B, B2C, C2C, C2B, and others. Each of these is adopted by companies depending on the business they wish to pursue. Scroll down to learn more about these popular e-commerce business models.
The Most Common Types of E-commerce Business Models
The seven types of business models that come under the umbrella of e-commerce are as follows.
The business-to-customer or B2C model is when a company markets its products or services directly to the customers. It is the most standard and widely popular model among companies. Some common examples you witness in your day-to-day lives are nearby grocery stores, movie theaters, salons, stationery shops, and many more. If we zoom specifically into e-commerce, then it is further restricted into five models:
- Direct sellers are when the customers buy online products directly from retailers.
- Online intermediaries can be seen as intermediaries between retailers and customers and take some cuts from each transaction.
- Advertising-based is where information is provided for free, and the money is made from advertising that product on the site.
- Community-based is a demography-based model where customers are targeted based on their location or demographic by showing ads based on their locality. Facebook is a typical example of a community-based model.
- Fee-based is becoming more popular nowadays. In this model, companies charge fees to sell information or entertainment on their platform, such as Netflix, Hulu, Disney+, etc.
The B2C model is a new wave covering even offline retailers to convert to online business or add a digital channel sideways. As more people prefer to shop online because of the variety of products, small and big entrepreneurs are putting their hands on digital platforms.
In the business-to-business or B2B model, a company markets its products and services to another business. This model can be divided into two methodologies.
- Vertical businesses sell products to their customers within a specific sector or domain.
- Horizontal businesses sell products to their customers across various sectors or domains.
Each has its benefits and drawbacks, so it is important to understand your customers and products before considering any of the methodologies.
Back in the day, the B2B model had always been behind direct-to-customers (D2C) as there were some problems with negotiating and collaborating with other businesses. But nowadays, the B2B model has evolved with time. The entire model has become tech-savvy, and the demands from the company are almost the same as its customers.
A recent report by Statista, global B2B market values $14.9 trillion in 2020. It is 5 times more than the B2C market.
In this model, the company sells products to another ‘business’, then sells to customers. One of the most common examples would be a wholesale distributor who sells its products to retail stores that sell it to their end-users.
Business-to-business-to-customers have three segments
- the first business or the originator
- an intermediate
- the customers
In e-commerce, this model is frequently used. For instance, a company partnering with other businesses to sell products that can be commission based for each transaction or sale. One of the main advantages of this model is the low or no cost of customer acquisition. Customers open their e-commerce portal and buy the item without checking the retailer. This way, many retailers can grow their business by only producing good quality products.
In this model, businesses sell their products directly to government agencies. These agencies are either local, county, state, or federal.
One example of a B2G model would be when a manufacturer sells any legal weapon (say ammunition) to the government or army.
This business model is different from any other model as it doesn’t involve customer dealing. While dealing with different government agencies, companies have to deal with various bureaucracies. Government agencies don’t go to an e-commerce site or online to place an order. Each step is followed legally and thus takes a lot of time.
But here’s an exception. If a local government agency has to repair any part of the equipment, they can place their order online from an e-commerce company. However, this depends on the requirements and size of the agency.
This model allows customers to sell their products to customers through a business. In this, the individual sells their product directly to the company, which can put up a bid on that product. Many freelancers can share their work or product by adopting this customer-to-business or C2B model.
Some businesses connect with freelancers and buy their artwork at a significant cost. It is generally done on social media platforms where customer engagement is high.
Direct-to-customer or D2C is just another form of B2C where the products are directly sold to their end customers without the involvement of a middleman. It is a streamlined distribution process that offers products at lower prices. Since it doesn’t have traditional retailers, it requires marketing and advertising to increase the customer base. This can be costly for companies.
Furthermore, by eliminating any middleman, they can make their website and channel or even do partnerships on social media platforms to increase their reach.
This model has become super beneficial for customers as both the seller and buyer are customers. Platforms such as Shopify and many others allow customers to sell their old items online to other customers at a very reasonable price.
In the C2C business model, the transaction is done on the platform, and customers can sell their products at their rate without having any online storefront.
What Is an Ecommerce Website?
An e-commerce website is a new way of selling your products to customers. Through a website retailers can sell different kinds of products through the same website. Through an e-commerce website, customers can place their orders at any time. Thereafter, it is handled by businesses to ship and deliver the product to the customer’s doorstep.
Common Types of E-commerce Websites
Here are some common types of e-commerce websites that sellers can look out for–
- Single brand website
It refers to any brand’s website that sells the products of only one company or firm. It is more common among start-ups as they build their own website to sell their products. For example, Zara’s website only showcases Zara’s products and nothing else.
- Affiliated website
In this type of website, retailers sell other brands’ products on their websites. For example, Zalora is an affiliated online platform that sells fashion products. There you’ll be able to find different brands under one roof.
It is equivalent to an online shopping complex where you’ll find a bunch of different categories. Here the categories range from fashion to electronics. Some common examples are– Lazada, Tokopedia, etc.
Advantages of E-commerce
Faster buying for customers
One of the most significant advantages of e-commerce is that customers get anything they want at their preference. Since e-commerce offers too much on its platter, it becomes easier for customers to browse through just one platform and get their desired product.
Because of this, the delivery options are also optimized. Now, companies offer 1-2 days or even same-day delivery facilities that increase both business and customer satisfaction.
Lower operational costs
Retailers used to have brick-and-mortar stores, which required a lot of money to construct, maintain and design. E-commerce saves that portion of your money which you can invest in your products rather than offline stores.
Setting up your e-commerce business is affordable and demands little investment. Moreover, if you get associated with one of the biggest e-commerce firms, you don’t have to worry about customer acquisition costs.
A report revealed that personalized experience increases sales by 20% and 80%. Customers are more likely to buy products from those companies that offer a personalized experience.
Offering customers individualized offers and services by using their personal data is what we refer to as a personalized experience. Scrutinize their demographics, purchasing habits, history, etc., to know what your customers like and dislike. As an online business owner, you must know how your customers react to your products and what services they would like to see in your business.
Companies can easily reach new customers
It is tough for sellers to reach a maximum number of customers. They only have a certain set of buyers, which is not likely to increase. E-commerce gives you plenty of room to increase your customer base. It allows customers to join in from any country corner and shop from any store they want. Worldwide shipping has supported e-commerce businesses, ensuring that the products reach customers at the right time under the conditions.
Access to new technologies
Entrepreneurs can experiment with their websites by implementing new technologies. For example, headless commerce is one of the best ways to offer personalized experience, where you can separate the front end from the back end to create an open architecture. This will help you build a customized interface and expand your choices. You can be free from templatized content that makes everything monotonous. Choose appropriate tools which are perfect for your business.
Disadvantages of E-commerce
- Site crash- Technical difficulty is unpredictable. Customers can’t buy anything when the site crashes, affecting customer satisfaction. Moreover, there could be some instances where you might lose customer data. This is why it becomes essential to build your website from an authentic source such as– Shopify, BigCommerce, etc.
- No trial- The one thing that goes opposite to the customer’s need is the no-trial option. Unlike offline stores, customers can buy whatever they like without trying them. This sometimes results in customer turnover as they don’t get to try what the product is like.
- High competition- There are so many big players in e-commerce that it creates very tough competition, making little or no space for small e-commerce entrepreneurs.
- Lengthy shipping- Shipping can be long sometimes. It can stretch from two days to weeks, making loyal customers furious and leading to canceling an order that costs more money.
What Makes an E-commerce Store Successful?
Every business in the e-commerce industry has plenty of things to try out. There are a multitude of sectors present all across the world under the e-commerce umbrella. However, since every other business does something similar, it becomes vital to present yourself differently.
Marketing has the power to make an ordinary product extraordinary, which makes it the hero of your business. It requires brainstorming and a back team to make your business successful. Here are a few tips which you can implement in your industry.
Moreover, one of the most basic and essential aspects of making an e-commerce store successful is focusing on customers. While shopping online, customers are left devoid of feeling to touch, smell and see products firsthand. While there is no solution to this, you can provide customer-focused service to your consumers. The best features you can offer include the best pricing, free shipping, an easy checkout process, and a simple website.
How To Start A Successful E-commerce Business
1. Finding e-commerce products
There is a possibility that the kind of product you’re selling may coincide with your competitors. It is also possible that the product has already achieved its saturation point. In this situation, thoroughly research the area and niche you will establish your e-commerce business. Target those segments and then find the product that could be a perfect fit for your business and customers.
2. How to source your products
Find out different methods of delivering or sourcing products to customers. One popular method is dropshipping. Here, retailers don’t have to set up their inventory. Instead, retailers take customers’ orders and forward them to the supplier.
3. Building your online store
The next important step is to build your online store on a reputed e-commerce website, like Shopify, or set up your website. Whatever option you go for, always remember that customers buy what customers see. Present your product to the customers with all the necessary information required, make it attractive, and regularly work on your online store.
4. Promoting your e-commerce business
The last is to promote your business. There are many ways to market your business, such as email marketing, content marketing, social media, influencer marketing, and ads. Choose the option which would give you excellent results on the marketing front without investing too much.
Top 5 Delivery Frameworks for your eCommerce Business
As mentioned above, drop shipping is becoming very prominent among retailers. The retailers don’t have to stock the items in their stores. Instead, they outsource the order to the third-party supplier, and then the suppliers deliver the order directly to the customers. Retailers don’t have to worry about inventory stock, management, shipping, etc. You can see the retailers as a mediator between the suppliers and the customers.
2. Subscriptions services
This means charging your customers yearly or monthly for your services. That charge deducts the shipping costs from the products and offers customers some premium services. There are different kinds of subscription models, such as unlimited services, account management, pricing, billing, and many more. You can choose any one of these based on your business.
Under this framework, the wholesaler manages everything from head to toe, from warehousing to shipping. This framework is one of the most common in the e-commerce business and exists both in a B2B and B2C model.
4. Private labeling
The entrepreneur hires a third-party manufacturer in private labeling to manufacture or customize their products. You can decide the product’s manufacturing, but a third party is responsible for making it. The business doesn’t have to worry about manufacturing its goods in this framework. But at the same time, all rights are reserved under that firm. You can either ship the product directly from the manufacturer or have it come back to you.
5. White labeling
White labeling can be confused with private labeling, but both terms differ. In this framework, you sell or market the products under your name, but a third party manufactures the product. In this case, the manufacturer is already a master at making the product, and you have no contribution to the making. You just sell the product to the customers under your brand name.
Examples of E-commerce businesses
Some significant examples of e-commerce have established themselves in the e-commerce business.
It allows both online and in-person selling and buying of products. This application serves fulfillment offers and shipping rates that are comparable with other shipping carriers. Besides that, it also offers email marketing services, abandoned cart recovery, native tools, and so many other things for its retailers.
One of the best e-commerce platforms in APAC is based on a hybrid model. It facilitates Customer-2-customer (C2C) and Business-to-customers (B2C). The website has 16.15 million monthly visits and 300 million users. It is best known for special festival offers and attractive campaigns.
Create a digital strategy to make your business succeed. However, any marketing strategy you choose should coincide with the type and objective of your business.
Make the experience seamless and smooth. Always put yourself in the customer’s shoes and see what you would demand if you were a customer. A comprehensible (or easy-to-use) website, multiple payment options, and on-time delivery would be the three pillars that any entrepreneur could go for.