eCommerce business model: The initial stage for business growth

 Choosing the ideal eCommerce business model type may be more complicated than you thought, and it may depend on numerous things. Explore this article for more.

eCommerce is booming. However, many business owners aren't sure if it's a good fit for their model. Maybe what it takes to make the switch. There are numerous concerns in nowadays eCommerce business such as intense competition, cybersecurity issues, and questions about whether your client experience will still be up to pace. Therefore, it's critical to be sure eCommerce will work for you before jumping in.

One of the first issues you should address before starting a new business is which eCommerce business model is best suited to your business concept, capabilities, and resources. Online businesses come in many sizes and shapes, with unique requirements based on their industry. eCommerce software development companies follow up from the start to help business owners choose the best eCommerce business model. 

An overview of eCommerce business model: Basic concept and classifications

What is eCommerce business model?

An eCommerce business model is a company's fundamental framework or strategy for operating financially and providing value to customers. An eCommerce business model will assist you in determining what product or service your company provides, its target market, and any anticipated costs. As a result, an eCommerce business model can be defined as a company's high-level plan for profit in the online market.

6 fundamental types of eCommerce business models

Both traditional and eCommerce enterprises commonly use six types of eCommerce business models: business-to-administration (B2A), business-to-business (B2B), business-to-consumer (B2C), consumer-to-administration (C2A), consumer-to-business (C2B), and customer-to-customer (C2C).

1. Business-to-administration (B2A) 

Business-to-administration (B2A) e-commerce involves companies working with government bodies. B2A businesses are relatively new eCommerce business models.

The B2A model allows businesses or manufacturers to sell their services or goods to government agencies by negotiating a long-term contract. The government can hire a SaaS (Software as a Service) provider to maintain the state's military-grade web communications gateway.

B2A strategies are viable business models for eCommerce SaaS firms and other startups that provide government services.

2. Business-to-business (B2B)

B2B eCommerce involves selling and servicing other businesses. This strategy targets businesses that utilize or sell directly to end users. Due to mass sales, B2B requires mass investments and resources. This strategy is widely used by software eCommerce giants such as HubSpot, Salesforce, Survey Monkey, etc.

B2B eCommerce business model is an excellent option if your company sells to other businesses and can afford bulk supplies.

3. Business-to-consumer (B2C)

B2C eCommerce is great for selling directly to consumers. It is the most common model and is used by companies such as Alibaba, Amazon, and Walmart. You may ask an eCommerce software development company to construct an internet store and display the products you sell on it. The buyers will then explore your site to submit purchases, which you will accept, package, and deliver.

The B2C eCommerce business model allows you to sell to individuals all over the world while requiring less capital than B2B. 

4. Consumer-to-administration (C2A)

Customer-to-administration, also known as customer-to-government, is another eCommerce business model that is very similar to B2A.

In C2A, a client transacts directly with government agencies online by providing something of value. This strategy includes paying taxes, water, and power bills, or even something as basic as offering comments on a government website.

5. Consumer-to-business (C2B)

The C2B eCommerce business model is ideal for freelancers and work-from-home individuals wishing to provide their skills to businesses.

C2B helps companies find solution-oriented professionals. For example, Upwork is a marketplace that connects freelancers with businesses. Content writing, copywriting, graphic design, web development, UI/UX design, consultancy, and more services are available. This concept lets users set prices and work with global companies from home.

6. Consumer-to-consumer (C2C)

The C2C model is a new eCommerce business model. It involves people using third-party platforms to buy and sell.

You might want to sell a new or used product on a third-party network like OLX, Craigslist, or eBay. Potential purchasers will investigate and contact you if they wish to purchase. This is how the C2C eCommerce business model operates. For using their website, third-party platforms will only charge a little commission.

Top 6 prominent eCommerce revenue models

Once you select your eCommerce business model, the next step is deciding which revenue model for eCommerce best suits your brand. Although this seems a straightforward decision, it can also be quite challenging.

Here are the top 6 outstanding eCommerce revenue models:

1. Direct to the customer (DTC) - Create your own brand

Selling your items directly to customers allows you to save money by cutting out the middlemen.

The direct-to-customer approach is an excellent way for online companies to develop a loyal customer base, and you can quickly customize your customer experience.

Online merchants such as Warby Parker, Glossier, and Casper use this model of the eCommerce software solution.

2. White label  - Lower barriers to entry

White labeling is an eCommerce revenue model and approach that involves branding and selling a third-party product as your own.

Some companies aim to create a unique product without producing it. The eCommerce company employs a supplier to make a product that meets their requirements. Before they are marketed to consumers, these white label products are differentiated. This includes utilizing multiple brand names, different packaging, and even different prices.

3. Wholesaling - Approach for the financially well-off

Wholesaling is an eCommerce concept and approach that involves selling things in large numbers to businesses at a reduced price. Both manufacturers and online retailers prefer this model.

Wholesaling involves a considerable amount of capital and inventory. However, the eCommerce model involves high risks and low-profit margins. Several B2B businesses and a few B2C companies utilized this eCommerce model.

4. Dropshipping - Effective solution for starters

Want to sell things without keeping stock? Dropshipping is the solution.

Dropshipping is an eCommerce revenue model in which you operate as a middleman between a buyer and a supplier to market and sell things. You avoid the costs of inventory, warehousing, and shipping.

You can ask an eCommerce software development company to create a website and sell things from many brands at your price. When a buyer makes a purchase, you notify the supplier, who handles product tracking and delivery, and you profit from the price.

You are the only one responsible for running advertisements and driving traffic to your eCommerce site.

5. Subscription DTC - Improve customer loyalty

A subscription DTC revenue model allows users to purchase and subscribe to a service or product for a month or year.

Most eCommerce software development companies - website builders, payroll software, accounting systems, etc. - use the subscription DTC model. Tech giants aren't the only ones who use this concept. eCommerce giants like Netflix, Blue Apron, Amazon Prime, and ButcherBox also use it.

However, this eCommerce model does not apply to every industry; it works best in the fashion, food, pet goods, movie, or cosmetics industries.

6. Freemium model - Built-in upsell opportunity

Freemium is an eCommerce business marketing approach that involves providing some product or service elements for free while charging a premium for further capabilities.

This approach is mostly adopted by social media firms such as Hootsuite, music services such as Spotify, and software companies that create games and mobile applications.

Spotify, for example, offers services with minimal features and many restrictions. On the other hand, the premium membership allows users to access all services and stream indefinitely.

Features unique to each type of eCommerce website

So far, we have explored various eCommerce business models and revenue sources. By now, you should have an e-business and a revenue model in mind.

There's one last important thing to think about before embarking on your eCommerce adventure. To sell your products and services, you must have a website. Here are thoroughly curated types of eCommerce websites and their functions.

1. Single brand website - An optimal choice for beginner

A single-brand website is a dedicated website that only advertises the products and services of a single brand.

A single-brand eCommerce store is best for beginners. Your website simply displays your products and services, and you can sell straight to buyers without the interference of a third party.

With a single-brand website, you have more control over your pricing and branding. If you do not know how to create a website, you can engage an eCommerce software development company to build your single-brand website. This firm would combine the best aspects of your in-store and online buying experiences into one place, assisting you in optimizing your eCommerce business.

2. Online retail website - A powerful market research tool

An online retail website is effective for businesses that provide products from multiple producers in enormous amounts. It is the most widely used eCommerce website.

A huge corporation - Amazon or Etsy - frequently owns the website. Multiple online vendors promote their businesses through online retail websites, but they have little control over branding and pricing.

An online retail website is an excellent option for small firms or vendors that wish to evaluate client demand for their items before expanding.

3. Affiliate websites - Excellent marketing initiatives for your business

An affiliate website is a website that advertises products or services in exchange for commissions on sales - this is an effective strategy that brands employ to improve sales. The amount of remuneration is determined by the affiliate program. Some utilize a percentage of the sale, while others pay a predetermined rate.

Aside from revenue, affiliate marketers can get paid for bringing in new traffic and converting users to take specified actions. These actions may include signing up for an account, subscribing to a newsletter, or installing an app.

There are several affiliate marketing websites, with product review and comparison sites being the most popular. Moreover, independent blogs, online periodicals, and coupon websites are examples of other forms. Because of its popularity, numerous eCommerce software solutions referring to affiliate websites have been developed to assist business owners in building their retail stores.

4. Marketplaces - Where people gather for both purchases and sale

A marketplace for eCommerce connects merchants and customers on a single platform. To attract buyers, sellers list their products on eCommerce marketplaces. The marketplace owners are in charge of consumer transactions, while the sellers handle the shipment.

Marketplaces have regulations and restrictions on what can and cannot be sold on their platform, and they take small commissions on each good sold. However, some business owners desire a rapid launch of their initiatives instead of making unique features for the eCommerce marketplace. As a result, eCommerce software development companies view the buyer-centric eCommerce platform as a type of e-commerce marketplace to construct.

Ecommerce business plan: Secrets to select your proper business model

If you want to start your own eCommerce business, you might feel like there are too many eCommerce business models to choose from. But there are only a few simple questions you need to ask to select the appropriate model.

What does your target audience desire?

Great businesses start by thinking about their customers and what they want or are frustrated by, and then let that drive what they sell. If you want to help new mothers stay healthy by giving them organic meals, for example, find a group of them and ask them questions like:

• Do they like shopping, or only want to get it done?

• Do they like their food to be different or the same every time?

• Do they like to buy in large amounts?

• Do they always buy the same kinds of things, or does it change?

• Will they pay more for a higher-quality product?

These questions will determine whether you need one product or many, whether you can handle a subscription model, and whether you can afford a lower-margin option like a marketplace or drop shipping.

What resources do you possess?

The first thing a new business owner might do is think positively. But it helps to be very practical and even skeptical when figuring out your eCommerce business model.

Some ways to run a business, like direct-to-consumer (DTC) and private labels, need more money upfront and time. Other options, like a marketplace or dropshipping, also benefit from having good supplier contacts. By taking an honest look at your relationships with your suppliers and the money you have to invest, you can choose the best eCommerce business model for you.

What are your unique capabilities?

This may be the most crucial thing in the end. Great businesses need an edge over their competitors, and that starts with the owner. Your best skills can give you a competitive edge, which can help you build a eCommerce model:

• If you know product development in your country, DTC may be the best fit.

• If you are well-versed in branding or social media, a white label or private label might be best for you.

• If you’re good at the customer experience, dropshipping or marketplace may be best for you.

• If you have a sustainable cost advantage, B2C wholesale may be best for you.

Furthermore, you should consult an eCommerce software development company to determine the best eCommerce model for your online store. Besides, this software company develops appropriate eCommerce software solutions to create the greatest option for your business.

Let’s take the first step of your journey to grow eCommerce business!

Online businesses are rapidly expanding and flourishing in today's digital environment. Therefore, to be able to raise the competitiveness of your firm, you must start on the proper path and be diligent from the very beginning. And, as this article has mentioned, the first step is to select your eCommerce business model.

Adamo Software, a leading software development company, is always willing to support your business and offer you with the most effective eCommerce software solution.