Business models define the way the shopping experience takes place. This concerns both the sellers and the buyers. If you’re running an eCommerce business then what lies at the center of is basically your goal to make money. In order to do this, you first must answer some questions. This is about things like what kind of products are you selling and to whom. It’s also about the quantity and price of said products and how will they be delivered.
If you get into answering all of these questions and more, you will delve into the subject of business models. There a few general categories of business models, with some of them being:
What follows is a more detailed look at all of these, and plus some more. Once you know more about the different types of business models that are out there, the better you can plan out your own eCommerce business.
As the name suggests, B2B is a model where one business is offering products or services to another business. What usually happens in this scenario is that the business that purchases ends up reselling to a consumer. This type of business model often takes place over a longer time. In other words, the two businesses continue the dynamic repeatedly. These business sales usually happen on a larger scale as well.
The B2B model could bring with itself a couple of challenges if you’re the business that is selling. Namely, it could be hard to define the audience that you need to target. This is because, with other businesses, it’s not always clear who is making the decision to buy. On the other hand, a B2B model could work great because the orders are often huge. They also tend to happen repeatedly so if you maintain quality then that could be very beneficial to you.
The business to consumer model is when a business is selling products or services to individuals. This is the typical buyer-seller dynamic that takes place so you’re probably quite familiar with it. People who make purchases in this model usually have a much easier time when making a decision. This is because these types of sales happen on a smaller scale and don’t have a tendency to be recurring. A person may buy a jacket from some seller and be done with it.
Due to its simplicity, the B2C model would be the easiest way to start if you’re new into eCommerce. It also tends to be the most successful model and it’s what big marketplaces like Amazon & eBay use. The same goes for people who have their own eCommerce business and are using the likes of Shopify and Magento. The basis of the process is that a consumer orders a product from a website and then the business provides it to them.
When you first hear of the consumer to consumer business model, you may find it a bit confusing. However, successful sites like eBay have made it quite convenient for consumers to sell items to each other. A person could place an item for sale and people could bid on it through an auction. The way eBay would profit from this is through a commission that the consumers would pay. These are the general guidelines if you want to run a C2C model.
As with any other business model, there are some challenges that come with it. When it comes to C2C, what’s hard to maintain is quality control. But if you manage to do so, you will provide stability and ensure that your business will last longer. Other than eBay, typical C2C websites allow users to sell properties and vehicles. And it doesn’t always have to be selling, but renting is a cool option as well.
The consumer to the business model is when a person is selling products or services to a larger business. A great example of this model is freelancing and websites like Upwork. These kinds of websites allow consumers to do a certain task that a business may need. What works great for the consumer is that he gets to name his price. From there, multiple businesses could compete to get that consumer to do some work for them.
It’s also a win for the businesses because they could find skilled people capable of doing a great job. They could even hire freelancers for a lower price in case they’re living in a country with lower standards. As for the consumers, what’s also great is the opportunity to get a lot of diverse work experience. And not only that, but they would get it rather quickly and earn some quality money while doing it.
As mentioned earlier, there are multiple business models that you may take into consideration. We have covered a few so far, but those aren’t the only ones. Here are some other business models that you might want to pay attention to:
This one is also known as Business to Administration. The B2G model is about selling products and services to governments or some kind of a public administration. An example for this model would be a public school ordering some items such as desks and chairs. In this case, the school would take the role of a consumer. If a business is to sell to the government chances are that it would have to meet some defined criteria.
With this business model, the government is likely to provide a website where buying and selling could take place. What’s also likely is that the business will sell only to the government which is good for making long-term calculations. Meaning, the business could plan things out better and have steady profits. Of course, if a new government happens to take over, the business wouldn’t be ensured that the collaboration will continue. Another possible downside would be the requirement of a bigger initial investment.
The opposite of B2G is the government to the business model, which is more about paying taxes and bills. In such scenarios, the businesses are in a way the target group of the government and again, websites are used so that buying and selling could take place. This business model is also about the exchange of information which would happen online. Businesses could obtain services such as e-learning, auctions, tenders, various data, application forms, insurances, etc.
The government to consumer model is about the government providing products or services to regular consumers rather than businesses. For example, the government could set up a website where individuals would get documents such as death or birth certificates. If the government provides such services online this could save people a lot of time. This model could also come in handy in the education system where parents need to pay various fees.
What we have discussed so far are the typical business models that you would consider when it comes to your eCommerce business. However, there are some other things that require your attention in regards to this subject. This refers to things other than the relations between businesses, consumers, and governments. A simple way to get at this is to ask some questions. One of them is what are you planning to sell?
The first answer that may come up is products and services. In regards to products, these could be either physical or digital. Physical products are items that will require from you to provide storage. You would also need to come up with ways to ship the products to the consumers. As for digital products and services, you won’t have to deal with concerns such as storage and shipping. If you’re selling a software package for example, you could just send it out online.
If you’re planning to sell physical products you’ll have to take plenty of things into consideration. One of them is how are you going to make the products? Another one is where you are going to store the products, and also how are you going to dispatch them? There are several methods and ways of doing these things, and we’re going to pay attention to some of them.
But before we do so, here’s a quick look:
White-label products are items that are made by one company but could be rebranded by another one. Let’s take, for example, a company that makes perfumes and similar products. With a white-labeling option, you could order a bigger quantity of their perfumes. Then, you could design your own package and sell their perfumes as your own.
However, keep in mind that the bigger quantity aspect of it could pose a problem. When it comes to white-label products, the companies which make them require that you order a minimum number of items. With the perfumes example, perhaps you would have to order 4 000 of them. Therefore, it’s important that there is a demand for the product so that you’re able to sell more of what you bought.
Wholesaling is about selling items in huge quantities with the provided advantage of decreased prices. Now when you have so many products to sell, it’s important that you do so. Otherwise, you’d be left stuck with the products loafing around which will definitely not come cheap. That’s why it’d be a great idea to sell through as many avenues as possible.
In regards to where you would store the products, this is when warehouses come into play. These are huge buildings where your products could be kept and dispatched from when needed. Managing all this would require a lot of money. You will also need to take care of tracking items and orders, which overall could prove to be quite challenging.
In contrast to wholesaling & warehousing, drop shipping is much easier to set up and manage. It also costs less. With this method, all the troubles and challenges of storing and keeping track of items are left to someone else. Your job would be to find a supplier who will take care of all of that. From there, once people order from you, it’s up to your supplier to dispatch the items. This makes it easy for you to run an online store and only worry about its forefront.
Some potential disadvantages with drop shipping would be unexpected failings on the part of the supplier. When the warehouse, inventory, and orders aren’t in your control, you’re dependant on the supplier to come through. But this may not always be the case, as they could be slow with the orders or the products may arrive with questionable quality. And considering your customers would think this came from you, it’d be you who receives the backlash.
In this article, we have covered a lot of aspects in regards to eCommerce and the general business models. This should give you enough information and plenty of ideas when it comes to your own online business and how you may approach it. Make sure that you pay proper attention to what you are selling and to whom. Also keep in mind how are you going to move your products and come through for your customers. If you have the right answers to all these questions, your online business will be more likely to be successful.
In relation, we have mentioned a lot about products and keeping track of inventories. This is obviously a very important aspect of any eCommerce business. Therefore, it’d be crucial that you have an efficient way of managing information about your products. Remember that SyncSpider is an amazing tool that allows you to update all of your products at the same time. And this goes for across all platforms.