Types of Ecommerce Business Models: Traditional and Innovate New Ones to Consider

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Think back to how you shopped ten years ago. 

Where did you go to buy clothes? How did you get your groceries? What did you do when it was time to buy a new mattress?

Innovative ecommerce businesses have transformed the way we shop today and redefined what is possible.

In 2013, ecommerce made up 6% of retail sales in the U.S. and by 2017, it was up to 9%. Experts predict that by 2021, ecommerces sales will make up 14% of the total purchases in the U.S. 

Today, it’s easier than ever for creative founders to make their ideas a reality. Each year, we see new businesses dethroning “the way we’ve always done it” monoliths.

While many of the tools are new and rapidly improving, the rules have stayed the same. If you want to innovate and defy expectations, you’ll need to know your business model and define how you’ll innovate.

In this article, we’ll talk about the central business models of ecommerce, some examples of innovators, and the principles of innovation in ecommerce.

Four Traditional Types of Ecommerce Business Models

If you’re starting an ecommerce business, odds are you’ll fall into at least one of these four general categories.

Each has its benefits and challenges, and many companies operate in several of these categories simultaneously.

Knowing what bucket your big idea fits in will help you think creatively about what your opportunities and threats might be.

1. B2C – Business to consumer.

B2C businesses sell to their end-user. The B2C model is the most common business model, so there are many unique approaches under this umbrella.

Anything you buy in an online store as a consumer — think wardrobe, household supplies, entertainment — is done as part of a B2C transaction.

The decision-making process for a B2C purchase is much shorter than a business-to- business (B2B) purchase, especially for items that have a lower value.

Think about it: it’s much easier for you to decide on a new pair of tennis shoes than for your company to vet and purchase a new email service provider or food caterer.

Because of this shorter sales cycle, B2C businesses typically spend less marketing dollars to make a sale, but also have a lower average order value and less recurring orders than their B2B counterparts.

And B2C doesn’t only include products, but services as well.

B2C innovators have leveraged technology like mobile apps, native advertising and remarketing to market directly to their customers and make their lives easier in the process.

For example, using an app like Lawn Guru allows consumers to easily connect with local lawn mowing services, garden and patio specialists, or snow removal experts.

Additionally, home service businesses can use Housecall Pro’s plumbing software app to track employee routes, text customers, and process credit card payments on the go, benefitting both the consumer and business alike.

2. B2B – Business to business.

In a B2B business model, a business sells its product or service to another business. Sometimes the buyer is the end user, but often the buyer resells to the consumer.

B2B transactions generally have a longer sales cycle, but higher order value and more recurring purchases.

Recent B2B innovators have made a place for themselves by replacing catalogues and order sheets with ecommerce storefronts and improved targeting in niche markets. 

In 2020, close to half of B2B buyers are millennials — nearly double the amount from 2012. As younger generations enter the age of making business transactions, B2B selling in the online space is becoming more important.

3. C2B – Consumer to business.

C2B businesses allow individuals to sell goods and services to companies.

In this ecommerce model, a site might allow customers to post the work they want to be completed and have businesses bid for the opportunity. Affiliate marketing services would also be considered C2B.

Elance (now Upwork) was an early innovator in this model by helping businesses hire freelancers.

The C2B ecommerce model’s competitive edge is in pricing for goods and services.

This approach gives consumers the power to name their price or have businesses directly compete to meet their needs.

Recent innovators have creatively used this model to connect companies to social media influencers to market their products.

4. C2C – Consumer to consumer.

A C2C business — also called an online marketplace — connects consumers to exchange goods and services and typically make their money by charging transaction or listing fees.

Online businesses like Craigslist and eBay pioneered this model in the early days of the internet.

C2C businesses benefit from self-propelled growth by motivated buyers and sellers, but face a key challenge in quality control and technology maintenance.

Five Value Delivery Methods for Ecommerce Innovation

If your business model is the car, then your value delivery method is the engine.

This is the fun part — where you find your edge. How will you compete and create an ecommerce business worth sharing?

Here are a few of the popular approaches taken by industry-leaders and market disruptors.

1. D2C – Direct to consumer.

By cutting out the middleman, a new generation of consumer brands have built loyal followings with rapid growth. 

Online retailers like Warby Parker and Casper set the standard for vertical disruption, but brands like Glossier are showing us how D2C can continue to be an area for innovation and growth.

2. White label and private label.

To “white label” is to apply your name and brand to a generic product purchased from a distributor.

In private labeling, a retailer hires a manufacturer to create a unique product for them to sell exclusively. With private labeling and white labeling, you can stay lean on your investments in design and production and look for an edge in technology and marketing.

3. Wholesaling.

In a wholesaling approach, a retailer offers its product in bulk at a discount.

Wholesaling is traditionally a B2B practice, but many retailers have offered it to budget-conscious consumers in a B2C context.

4. Dropshipping.

One of the fastest growing methods of ecommerce is dropshipping.

Typically, dropshippers market and sell items fulfilled by a third party supplier, like AliExpress or Printful. Dropshippers act as a middle man by connecting buyers to manufacturers. Easy-to-use tools allow BigCommerce users to integrate inventory from suppliers around the world for their storefronts.

5. Subscription service.

As early as the 1600s, publishing companies in England used a subscription model to deliver books monthly to their loyal customers. With ecommerce, businesses are going beyond periodicals and fruit of the month clubs. Today, virtually every industry has seen the arrival of subscription services to bring convenience and savings to customers.

5 Examples of Innovative Ecommerce Business Plans

Many companies have flourished with the freedom ecommerce gives them. These brands have combined classic business models with something new, making them innovative leaders in the field.

1. Larq – D2C.

Icp Test Page Ecommerce Types Article Larq

In 2018, LARQ launched the first self-cleaning water bottle. This reusable, rechargeable bottle uses UV-C technology to eliminate viruses and bacteria in water, whether it’s from a tap or a natural source. 

LARQ’s launch was the largest crowdfunded effort for a clean water initiative with $1.7 million raised. Today, LARQ donates 1% of its proceeds to efforts for clean drinking water around the world.

Buyers were attracted to this reusable bottle because of its eco-friendly factors, while they can also save money skipping on single-use water bottles, but still enjoy a clean water vessel (without scrubbing it) every time. These unique factors have led to LARQ’s increased revenue by 400% year-over-year.

2. Beer Cartel – Subscription service.

Icp Test Page Ecommerce Types Article Beer Cartel

Some ideas sell themselves.

Beer Cartel offers Australia’s longest running beer subscription service, with expert-selected craft beers from around the globe delivered to subscribers’ doorsteps each month.

They’ve attracted the curious and the connoisseurs by giving their customers a unique selection at a price better than what they could get in stores.

Beer Cartel has also done a great job of offering several different subscription options to serve customers of all appetites and budgets.

3. Berlin Packaging – B2B.

Icp Test Page Ecommerce Types Article Berlin Packaging

Fortune 500 companies and family-owned startups alike trust Berlin Packaging for sourcing, designing, and distributing their containers and closures. As a hybrid supplier, Berlin Packaging brings their expertise to every level of the supply chain to increase efficiency and lower cost for their customers.

Berlin Packaging is over 80 years old but has kept their advantage by innovating every step of the way. By adopting an ecommerce business model, they stayed competitive by making it easy for their customers to shop from their large selection of containers sourced from more than 200 different partner vendors. Berlin Packaging also prioritized a strong connection between their site and ERP, making it easier for customers to see their credit limits, balances, and past due balances.

4. Atlanta Light Bulbs – B2B.

Icp Test Page Ecommerce Types Article Atlanta Light Bulbs

Atlanta Light Bulbs is no stranger to innovative ecommerce. ALB launched their first ecommerce site in 1999, which gave them a huge head start on creating a unique site experience for their customers.

As their market has shifted to the millennial generation, Atlanta Light Bulbs has focused on adding more to their online platform that will set them apart from their competition, such as using apps for their BigCommerce storefront.

Their mobile shopping app has primarily helped grow Atlanta Light Bulbs’ B2C sales, but even their commercial clients have come to enjoy the convenience of ordering from their mobile devices.

Another creative tactic from ALB is their make an offer feature, which allows buyers to name a quantity and price and submit an offer. On the backend, pricing rules are used to auto-calculate the lowest price Atlanta Light Bulbs can give. Customers receive a message letting them know their proposal has been accepted and they can checkout, or, if the price is too low, a different deal is offered.

5. Mountain Crest Gardens – Wholesaling.

Icp Test Page Ecommerce Types Article Mountain Crest Gardens

Mountain Crest Gardens began as a family-owned and operated business in Northern California in the mid-90s. But when they relaunched their website in 2012, they saw 10x the revenue and a 400% increase in orders

Mountain Crest Gardens capitalized on what made them unique: their aesthetically beautiful succulents. User-generated content organically amplifies the plants and drives orders. Plus, Mountain Crest Gardens caters to different consumers as they offer individual succulents, wholesale options and even a subscription box.

Selecting Your Ecommerce Business Model

We’ve talked about your broader options for choosing an ecommerce business model, now let’s look at the specifics.

Here are a few questions that will help you create a plan that will set your company apart.

The key here is honesty and research.

Spend time learning about the market you’re targeting and be honest about what unique value you can bring to the space.

1. Who is your customer?

Who are you looking to serve?

Consider what their expectations are when purchasing the type of product you plan to sell.

You’re most likely to succeed if you can understand their behaviors and habits and find ways to improve them or save money.

To do this, you’ll need to look for pain points in the way things are currently done.

This is where you as an innovator can carve a space for yourself.

2. What are you capable of?

What do you know better than anyone else?

Build around your existing strengths and the pieces that are energizing to you.

Be realistic about what elements you can do yourself and what you will need to find help for.

It can be challenging to know your limitations but it will help you make better long-term decisions.

3. What is best for your product?

Depending on your product, different models will serve you better than others.

For example, if you are manufacturing your own products, you may want to consider wholesaling or subscriptions to help cover production costs and break even more quickly.

If you are a distributor of other people’s products, you’ll want to invest more heavily into direct marketing and strategies that will grow your customer base.

4. What is your positioning?

You understand what makes your product better, but will consumers?

Evaluate your competition and make sure it’s clear why your product is the best choice.

Are you competing on price? Selection? Convenience?

From your back end processes, to your warehousing, to your marketing, to your website’s shopping experience, your unique value should be clear.

Conclusion

We’ve covered the most common ecommerce business models, several tactics for ecommerce innovation, and examples of ecommerce businesses that have blazed their own path.

We’ve talked about the questions you’ll need to answer to find a niche where your new endeavor can thrive.

Planning is important, but innovation doesn’t happen in a vacuum. It’s time to get your solution out into the world and begin to refine your business based on the feedback you receive.

You’ve got this.

Ecommerce Frequently Asked Questions

Are there more than four ecommerce types?

There are four traditional types of ecommerce, including B2C (Business-to-Consumer), B2B (Business-to-Business), C2B (Consumer-to-Business) and C2C (Consumer-to-Consumer). There’s also B2G (Business-to-Government), but it is often lumped in with B2B. 

There are five value delivery methods in the ecommerce landscape: D2C (Direct-to-Consumer), white label and private label, wholesaling, dropshipping and subscription service.

Are there specific ecommerce platforms for each ecommerce type?

There are three main ways to classify the different types of ecommerce platforms:

  • Open-Source.
  • SaaS (Software as a Service).
  • Headless Commerce.

There are also two types of web hosting environments within ecommerce platforms:

  • Cloud: Hosted Elsewhere.
  • On-Premise: Self-hosted on your business premises.

A B2B ecommerce platform likely is easy to manage, reliable, integrates with current internal systems, and provides a unique shopping experience for buyers. On the other hand, a B2C ecommerce platform might offer a more straightforward buying process for customers.

Which ecommerce type is the most successful?

Being successful in ecommerce means different things to each business or consumer. Success could mean more sales, higher revenue, global reach, or the best customer experience. It’s important to define success first, and then create a plan to get there.

Can all business types create an ecommerce website?

Yes, all business types can create an ecommerce website made for online transactions. No matter the business type, the business owner will want to choose an ecommerce platform that fits their specific needs and wants for the site.

What is wholesale ecommerce?

Wholesale ecommerce means a retailer offers its product in bulk at a discount. Wholesaling is traditionally a B2B practice, but many retailers have offered it to budget-conscious consumers in a B2C context.

Is D2C ecommerce growing?

Yes, D2C ecommerce is growing. In 2019, D2C ecommerce U.S. sales reached $14.28 billion. Experts forecast that by the end of 2020, D2C ecommerce sales will grow by 24.3% to reach $17.75 billion.

Is B2B ecommerce growing?

Yes, the B2B model is one of the fastest-growing business models. Forrester Research predicts that B2B ecommerce will account for 17% of all B2B sales in the U.S. by 2023, reaching $1.8 trillion.

Is C2C ecommerce growing?

Yes, more C2C ecommerce businesses are launching every day. As of May 2018, the leading C2C retailer had approximately 143.1 million visitors.

How do I choose which ecommerce type to adopt?

To determine which ecommerce type to adopt, spend time learning about the market you’re targeting and be honest about what unique value you can bring to the space. Consider answering the following questions:

  • Who are you looking to serve?
  • What do you know better than anyone else?
  • What type of ecommerce business model would best serve your product?
  • What is your positioning vs. your competition’s?
Can you have a B2B and B2C ecommerce store?

Yes, a hybrid ecommerce platform has the capability to meet the needs of B2B and B2C markets from within the same platform, and the same website.

What is B2B2C ecommerce?

B2B2C translates to Business-to-Business-to-Consumer and it’s a business model that combines B2B and B2C to create a complete transaction from the very beginning of a product or service to the very end.

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