From B2B To D2C: Types Of ECommerce Business Models
The e-commerce world is evolving, and businesses are entering it from all sides. What a business needs to function and make profits on the e-commerce landscape is a good business model. The business model that a new e-commerce business chooses is what makes its workflow and brings in revenue. Before you pick out the e-commerce development solutions, you will have to choose your business model as a business owner. There are different business models in the e-commerce world, like the B2B, B2C, and D2C markets. Another model that is used in different types of e-commerce platforms is the C2C model. This write-up provides information about the types of e-commerce business models and which one is the best.
The Traditional Landscape: B2B and B2C
1. Business-to-Business (B2B)
The B2B model is the business-to-business model, and these types of e-commerce businesses operate with other businesses. A business that works on other business models could also be running on the B2B model. A lot of revenue can come in one go from different types of e-commerce platforms if you are running on a B2B model. Businesses need a constant stream of raw materials and products to cater to the consumerism mindset of their user base, so B2B is very popular as a model.
The advantages that you get from these types of e-commerce business models are that there will be higher order values and a high output of revenue from the network. This also leads to higher profits and a good turnover for B2B businesses. Another advantage of running a B2B business on e-commerce platforms is that the e-commerce platforms now streamline the entire buying-selling process and help the sellers out. The number of pitstops in the supply chain is reduced to a bare minimum, so the costs of selling are low, and the supply chain works efficiently.
However, there are some drawbacks to the B2B model of running a business. For example, B2B types of e-commerce businesses have complex sales cycles that are difficult to manage and interpret. While running B2B businesses on e-commerce platforms is easier than other models, setting it up initially and making the first investment is crucial and difficult. If you are starting out small and do not have enough investment money, maybe the B2B model can be put on the back burner. Another gray area is that the customization requests that you may get from businesses are somewhat cumbersome. You need an extensive team in place to handle the demands of client businesses.
Examples of platforms where companies can bulk sell and purchase products at lower prices are Alibaba, Meesho, etc. Every industry can have B2B models, like the fashion and clothing industry, the automobile parts industry, and the dairy industry.
2. Business-to-Consumer (B2C)
Another class of business model that can include different types of e-commerce business is the B2C model of e-commerce business. The B2C model means that the businesses sell to customers and create a customer base around their brand. The B2C model is where the customer directly buys from the brand in an e-commerce marketplace. Since consumers want to simplify the buying process as much as businesses, the B2C model is very successful nowadays.
B2C businesses are often called the best types of e-commerce businesses because they can target a large audience and get thousands of customers after one marketing initiative. In today’s world, when people are researching a lot before choosing a product, B2C businesses stand to gain from this model of operations. Because of the internet and the availability of the e-commerce marketplace, B2C businesses reach their target audience very quickly and sell their products steadily. The B2C model also connects businesses to direct consumers, which can improve the brand image and help with the collection of feedback from real users. The B2C model is convenient for both businesses and consumers.
However, there are some hurdles for B2C businesses on different types of e-commerce platforms. For example, there are a lot of brands present in the B2C sector of ecommerce and there is intense competition to tackle. Not every business that enters the B2C sector will survive. Some other challenges that your brand needs to tackle in the B2C business sector is that it has to build customer trust and make sure that the business maintains it through different mechanisms.
There are many B2C platforms and businesses that sell directly to customers and people. For example, Amazon, eBay, Flipkart, Snapdeal, and other brands sell directly to customers. Moreover, brands like Amazon are now releasing their own product lines that are competing with other brands.
Emerging Types of Business Models: D2C and Beyond
Direct-to-Consumer (D2C)
The direct to consumer model businesses directly sell to their customers through their dedicated websites and do not rely on third party marketplaces or wholesalers. The D2C model is like the B2C model, but it does not take support of e retail platforms like Amazon, Flipkart etc.
How D2C Differs From Traditional Models
The D2C model works and benefits both the customers and the business because there is an elimination of intermediaries. In the traditional business models, there are always intermediaries that interlink the supply chain for the business. In all other customer brand model, the customers do not have a direct relationship with the brand but D2C replaces that model. These are some of the differences that D2C businesses have from other business models.
Advantages of D2C For Businesses and Consumers
There are some clear advantages of D2C over other business models that you should know about. For example, cutting out intermediaries from the supply chain makes it very efficient and cost-effective. The brand saves a lot of money and hassle in the delivery process, and the customers get the products very quickly. The brand is able to create and control its own brand image and also build a strong brand-customer relationship. Other advantages that D2C businesses experience are the ease of adaptability and agility to market trends and changes so that they can survive and thrive.
Challenges Facing D2C Companies
The initial planning and investment costs are always higher for D2C companies. Since it is directly from the brand to the customers, setting up the logistics chain and maintaining its full efficiency for order fulfillment can be a huge challenge for the brand in the long run. D2C brands also face the challenge of limited reach and visibility because they tend to avoid large retail channels and platforms.
Successful D2C Brand Examples
Some of the well-known D2C brands are Wakefit, Lenskart, and Bombay Shaving Company.
3. Consumer-to-Consumer (C2C)
The C2C business model is a process where individuals pay for the services of other individuals, and individual sellers or providers reach out to other individuals on the same platform. This service could be any service like renting out an apartment, selling an old belonging, offering to cut someone’s hair, or tutoring services that are advertised on different social media platforms or dedicated utility platforms. In this case, online platforms only help connect individuals, but they do not play a larger role.
For example, OLX is a platform where people can put up ads for renting homes, old belongings or any service and then people will reach out to them. Quikr is also a similar marketplace. The Facebook or Instagram marketplace often facilitate C2C transactions through DMs and calls.
The C2C model has some good benefits, like peer-to-peer transactions that help micro sellers and service providers network. C2C platforms and sellers can also offer the benefit of convenience and hyperlocal availability. Products sold through the C2C funnel are affordable and wide in range. For example, there have been some product quality and authenticity concerns because C2C business platforms are prone to false profiles and fraud. Such platforms also come with limited buyer protection and transaction risks.
4. Business-to-Business-to-Consumer (B2B2C)
The B2B2C is a blend of the business-to-business model and the business-to-customer model of e-commerce. This might seem complex, but it works smoothly for a lot of small businesses. The B2B2C model is where businesses rely on intermediaries and source their products to the business, and then, from that business, the customers buy directly. The business that takes the products from the first business could be a marketplace or retailer.
In the FMCG sector, large companies like HUL sell their products to small town retailers and then the retailers sell the products directly to customers. Third party sellers can create seller accounts on ecommerce marketplaces and the larger brand procures the products and sends them to the customers through the B2B2C model.
The B2B2C model offers a wide audience to small businesses as they connect with a national audience through e-commerce marketplaces. Thus, small businesses have the advantage of expanding their business to a national base from one control center. The B2B2C model also reduces marketing costs because the marketplace will already have an active audience. With simple marketing investment, the company can amplify its products. This allows small businesses to save money and diversify revenue streams in return.
Key Considerations For Choosing Types of E-Commerce Models
- Understanding Your Target Audience
Now that we know what are the different types of ecommerce, we can start creating businesses on the basis of the model. However, before creating any model for your business, you need to understand the nature of your product and the target audience it will cater to. Understand the presence of your target audience and what they want to see and feel. Then start entering the ecommerce platforms with a modelled business.
- Evaluating Your Product or Service Offering
To understand the nature and features of the product and the relation it will have with your target audience, you need to discuss with your product development team and evaluate your product on the basis of different parameters. Also involve your user research and market research team in this process to get a complete outlook on your ideal, marketable product.
- Infrastructure and Technology Requirements
Before investing in any business model for the long run, you should first understand the infrastructure of the model in reality and the technological and human resources requirements that you will have to make for the business model to be fully successful.
- Legal and Logistical Consideration
Once all other parts of your business model are in place, you should also take up the legal framework needed for the business model and understand the logistics requirement before your supply chain hits the marketplace. Once all these considerations are made and implemented, you can create a functional business model for your brand.
The Future of Best Types Of ECommerce Business Models
- Trends Shaping the Future of ECommerce (e.g., AI, VR)
There are many upcoming trends, like the use of AI in chatbots, product recommendations, and search algorithms, as well as the use of VR in visualization and product tryouts on e-commerce platforms. These new e-commerce trends are shaping new businesses and forcing the old ones to adapt.
- The Role of Data and Personalization
Big Data, data analysis, and personalization of the e-commerce platforms are going to improve marketing and targeting of the audience, bringing more people into the user base of e-commerce businesses.
- Predictions For Emerging Business Models
All major types of e-commerce business models have their definite advantages. The B2C brands and D2C brands are very successful in the current e-commerce market because of the simplified supply chain and the direct services that the customers get. However, subscription-based e-commerce models are also becoming very successful at the present time.
Ready to Sell Online? Pick Your Perfect E-commerce Platform Now!
Different types of e-commerce models work in different ways. After you have studied all the types of e-commerce models and chosen the right model for your new business, you have to approach an b2b e-commerce development company to create an e-commerce portal for its products and services. The e-commerce development company can also help develop an app at later stages once you have created initial traction for your brand. E-commerce business development can take a lot of time, but with a bit of investment, you can get great returns on investment.
