The eCommerce Business Model can be defined as a set of principles that enable owners and operators of online businesses to manage and sell their products or services worldwide without incurring additional expenditure for such activities. There are various benefits of the eCommerce Business Model. The eCommerce Business Model’s main advantage is that it helps online businesses enter global markets without incurring additional operational costs.
Starting an eCommerce business is one of the best decisions you could ever make. An eCommerce business not only increases the market for your products but also allows you to personalize the business experience. What’s even better, eCommerce businesses usually have meager startup costs.
However, the digital market offers a wide range of business models. Most business-oriented people usually find it daunting to choose the business model, which would be ideal for them. Finding a suitable model is crucial since it is one of the top factors influencing your business’s long-term success.
This article discusses the two best eCommerce business models and their respective pros and cons. Therefore, you will be able to make a wise decision on which model will be best for your budget, level of experience, time, and risk tolerance. Read on!
Business-to-Consumer (B2C) Model
The B2C eCommerce model is a traditional retail model that involves selling products and services to individual customers. It is mostly recommended for business owners who are new to eCommerce.
Despite being a traditional model, B2C eCommerce has been gaining a lot of popularity recently. The increasing popularity is because more people are now choosing to shop online instead of visiting physical retail shops.
Advantages of B2C Ecommerce
The Business-to-Consumer model has three main advantages:
- It has minimal set-up costs – B2C eCommerce businesses are the most affordable to start. In fact, you can begin this eCommerce web design business with almost nothing, especially if using dropshipping.
- Maximizes sales volumes – The web designs for B2C businesses encourage regular sales. Therefore, cash is kept flowing, such that the business owners are guaranteed a steady flow of income.
- You can make passive income – While the B2C eCommerce model is not very passive, a business owner can still make much money while sleeping. This is made possible by the fact that the business web designs are kept running 24/7.
Disadvantages of B2C Ecommerce
The following are two demerits of the B2C eCommerce model:
- It demands more customer service – As more consumers shop online, their expectations for eCommerce increase day by day. Therefore, with a B2C eCommerce web design, you can expect to deal with more questions, orders, complaints, and even product returns at times.
- It is highly competitive – You are not the only business person who has an established B2C eCommerce model. There are other online sellers with even more stable B2C web designs. This is a crowded marketplace, making it a highly competitive field, especially for new business owners.
Business-to-Business (B2B) Model
As the name suggests, the B2B model involves selling products and services to other businesses, such as traditional retail stores. This type of eCommerce now experiences stronger and faster growth than the B2C model. An excellent example of such a business is selling office supplies, electronics, and software to other businesses.
With the Business-to-Business model, a business owner can choose to sell existing products or their skills to other established businesses. Alternatively, a person can create their own unique products, then sell these to other businesses on a wholesale basis.
Advantages of B2B Ecommerce
The following are the main pros of the B2B eCommerce web design:
- It allows for bulk orders – Undoubtedly, businesses make more bulk purchases than consumers. Therefore, you can expect to get larger orders with the Business-to-Business model than with the Business-to-Consumer model. And larger/bulky orders usually translate to more sales and profits.
- It encourages stronger business growth – The B2B eCommerce model is growing faster than the B2C model. This means that businesses that tap into this web design have higher chances for growth and development.
- It encourages a high buyer intent – With the B2C eCommerce model, customers tend to browse first before making any purchase. On the contrary, businesses have a higher likelihood of making purchases when searching for products or services.
Disadvantages of B2B Ecommerce
Some of the demerits of B2B eCommerce model areas outlined below:
- It has fewer sales – The bulky orders made with B2B eCommerce web designs generate more profits. However, the timeline between each sale is usually longer, resulting in fewer sales overtime.
- A higher price competition characterizes it – Since businesses buy their products in bulk and resell them at a profit, they are always looking for a better deal. Also, the fact that they buy in bulk means that they have the leverage to bargain. Therefore, all this contributes to higher price competition in the market, resulting in lesser profits for you.
- It has a steep learning curve – To run a B2B web design, you need to have deep knowledge and understanding of how businesses work. This is why B2B businesses tend to be challenging for newbies and beginners in E-commerce.
Which Ecommerce Business Model Should You Choose?
In addition to the B2C and B2B eCommerce business models, there are other classifications, such as the Consumer-to-Consumer (C2C) and Consumer-to-Businesses (C2B) models. An excellent example of the C2C model is a business that involves selling household items on auction sites, such as eBay. On the other hand, an example of the C2C model is where an Instagram influencer sells its popularity/influence to other businesses.
While both of these business models are effective to some degree, they cannot surpass the B2C and B2B eCommerce models. These two latter models remain the most effective and most recommended eCommerce business models in 2021. But how can you know which of these two models is best for your business?
Well, the first thing you should identify is which customers you will be targeting. Will your business focus on individual customers? Or will you promote your products and services to other established businesses?
For individual consumers, the most suitable model would be the Business-to-Consumer (B2C) model. In contrast, the most suitable model for other established businesses would be the Business-to-Business (B2B) model.