Types of E-Business Models
E-commerce, or electronic commerce, is the process of selling and buying products and services on the internet. In the modern economy, e-commerce, which accounted for 14.3 percent of all retail sales in 2018, is much more than a luxury for businesses; it has become essential for success.
E-commerce offers both companies and customers convenience and cost savings.
With the rise in popularity of e-commerce, people are increasingly finding themselves thinking about opening an online business. Four different e-business models to consider are business to consumer (B2C), business to business (B2B), consumer to consumer (C2C) and consumer to business (C2C).
The largest e-business model based on generated revenue is business to business, or B2B. With the B2B model, both the seller and buyer are business entities.
B2B transactions may be from manufacturer to wholesaler, wholesaler to retailer, or retailer to retailer. The number of B2B transactions that take place is far greater in number than the other transaction types because many B2B transactions happen along the supply chain.
In such a case, the only transaction involving the customer is the final sale.
In comparison to other e-business models, the B2B model has more market stability because of the static nature of most companies' business models.
Consumer preferences and shopping habits may be fluid, but businesses rarely change their core business models. This allows for a stable relationship to form between two companies doing business with each other.
The largest B2B e-commerce company in the world is China-based Alibaba.
Another common e-commerce business model is business to consumer, or B2C. This business model involves a business that sells products directly to consumers online. The B2C e-business model is more in line with traditional retail businesses, except there is no brick-and-mortar store.
One of the main advantages of the B2C model is that retailers can focus on a niche group of consumers and a specific market and cater to them exclusively. Examples of companies who use the B2C e-commerce model include Amazon, Walmart and Target.
While B2B and B2C business models are conventional and straightforward, the consumer to consumer, or C2C, model is less prevalent. Also referred to as citizen to citizen, the C2C business model involves transactions between two consumers. The consumers are the buyers and sellers.
They use a third-party online marketplace that facilitates the trade.
One of the main advantages of the C2C model is that it does not require any intermediaries such as wholesalers, distributors or retailers. It only needs a platform, which allows for low transaction costs between the consumers.
A couple of popular examples are websites such as eBay and Craigslist.
The consumer to business, or C2B, e-commerce model is not as common as the other types, but it is becoming more prevalent. With the C2B model, consumers create all the demand and bring value to products that businesses sell.
For example, a blogger may choose to sell advertisement space on a website to a retail company.
This C2B e-business model is common among freelancers – whether writers, designers, marketers or any other such position. They offer their services to companies who essentially purchase them when they agree to the freelancer's terms.
With the rise of platforms such as Instagram, the C2B e-business has grown to include influencers, who use their large followings to market a company's products and act as a part of the sales pipeline.