6 Ecommerce Business Models Explained

Want to beat the top brand ranking for your product but not sure what they are doing that you aren’t? Well, for starters, let’s just understand that it isn’t about great products or a fancy website. The key is choosing the right ecommerce business model.

E-commerce is revolutionizing and changing at a rapid pace to meet the growing needs of customers, and everyone is offering services online. From simple side hustles to global conglomerates, everyone is using the power of the internet to make sure their business is visible to their potential customers.

Why do some people do well selling online while others don’t? The answer lies in the details. Who are you selling to? How will you deliver value? What is the monetization strategy? How is your business going to work? And whatnot!

To answer all these questions and many others that define the foundation of your business, you need to define your business model.

At Wytlabs, we have the experience and expertise to work with various ecommerce entrepreneurs, be it subscription box startups, print-on-demand services, B2B sellers, etc. Each of these businesses has its own unique business model and unique objective. No matter the model, we implement the best tools and solutions to help these businesses run smarter, faster, and more efficiently.

If you are a budding entrepreneur looking to define your business model and further plan your business strategy, this guide is for you. Our experts have shared the major eCommerce business models to help you define the one that fits your vision.

What is an Ecommerce Business Model?

Your eCommerce business model serves as the cornerstone of your enterprise. They’re the blueprint for everything that follows. Pick the right one, and you’re setting yourself up for smoother operations and scalable growth. You could be selling handmade artifacts, offering software solutions, dealing with real estate, or anything else. Your business model is the guide to your business, influencing your inventory, marketing, pricing, and fulfilling your business needs.

Why is understanding your business model so important?

Without understanding your business model, your ecommerce marketing services can’t execute their plans. Probability is they may misidentify your customers, mismanage your costs, create systems that break, or not scale as you thought.

Once you have a clear idea of how your business model works, your business becomes intuitive. You can easily predict the revenue, nurture customer relationships, and define daily workflow. At Wytlabs, we understand there is no one-size-fits-all model and curate marketing plans that suit your business needs.

The key models we work on are direct-to-consumer brands, subscription-based services, dropshipping general goods, or creating custom print-on-demand goods.

We have built a system that fits your business vision and helps you operate your business exactly as you want. Before we discuss any further, let’s explore six of the most common ecommerce models and how they play out in practice.

6 Main Types of Ecommerce Models

E-commerce models can be categorized into several types depending on who serves whom. Based on the customer and provider segments, we can categorize e-commerce into several models. Let’s discuss each one of them in detail:

Business to Consumer (B2C)

As the name suggests, we have a business serving a large count of customers. These clients are individuals, not organizations or companies. One example of this model is Home Depot or L’Oréal, where a manufacturer or a business sells their products to individual customers.

The biggest advantage of this model is recurring purchases, as a satisfied customer prefers buying again and again from the same business. In other words, the customer retention rate is high, and the customer acquisition cost is lower. This is the reason why most businesses prefer this e-commerce model.

Business to Business (B2B)

The second model is called B2B, where a business sells its products or services to another business. Alibaba, for instance, is a global leader in the market. Businesses from all over the globe purchase their products and resell them on their portals or through the B2C model at a higher price, thereby generating significant profits for both Alibaba and other businesses.

This model may work in two ways. First, a wholesale manufacturer could sell his products in bulk to other businesses, while smaller businesses could sell the same products to their customers. This includes an aggregated portal like Alibaba, where businesses from all across the world sell their products to other businesses, leaving some profit margin for the aggregator.

The biggest advantage of this model is its capacity for generating bulk sales and revenue. Since there is a minimum order quantity, buyers have to buy in bulk. Furthermore, since buyers have their business model running around the larger suppliers, this model generates recurring purchases.

Business to Government (B2G)

B2G, or the business-to-government model, is one where a business sells its services or products directly to the government. And since the inclusion of the word “government,” the large order quantity and the recurring nature of the business make this model highly successful. This is what makes this model a highly successful one.

Some of the examples of this model are companies selling manufacturing, electric, or eLearning products to the government or government agencies. The list goes on to infrastructure products, auctioned products, and online payment portals.

Since the transactions are made with the government agencies, compliance, securities, and reporting tools are very crucial. Being a leading player in this model, we have enabled ourselves to serve the B2G model.

Consumer to Consumer (C2C)

As the name suggests, this model is where a person sells their products to other people; simply put, a consumer serving another consumer. eBay and Etsy are examples of this model. Despite these platforms being well-renowned businesses, the buyers and sellers on these platforms are individuals.

Though this model looks very appealing from a distance, there are certain obstacles that one must take care of. Trust-building is the most important among these and a seasoned ecommerce seo services company can help you do that well. Since this model contains two individuals, gaining the trust of each other is very important.

We have mastered the art of C2C ecommerce marketing and help brands bridge the gap between two consumers. From the easy selling interface for the seller to the easy buying experience for the buyer, we cover everything in between.

Consumer to Business (C2B)

And next on our list is a very little talked-about model, the consumer-to-business (C2B) model. For a novice, it could be difficult to imagine how a consumer or a person can serve a business. However, there are certain services and products that a consumer can actually use to serve a business.

Take freelancing or influencer marketing, for example. A freelance graphic designer may serve a large organization. A graphic designer can serve a large organization by creating a perfect example of the C2B ecommerce model. The same goes for an independent product creator or an artist who can serve an organization with his products.

Consumer to Government (C2G)

Last but certainly not least, which most would not even consider an e-commerce model, is consumer to government (C2G). A consumer does get involved in e-commerce with the government in many ways. If you go with the real definition of e-commerce, where one entity provides some products or services and the other entity pays for it, you’ll see this model in a lot of day-to-day activities.

Right from paying taxes to applying for online licenses, donations, voting, and much more, a citizen, or a consumer, does perform these transactions with the government very frequently. This sums up this e-commerce model.

How to Determine the Right Ecommerce Model for Your Business?

With the many different ecommerce models available—B2B, B2C, subscription, dropshipping, etc.—it’s easy to be overwhelmed. However, the process of selecting an ecommerce model doesn’t need to be complicated; it just requires some contemplation about your goals, resources, and who you want to serve. Your choice will shape your operations, marketing, and growth. That’s why making the right choice from the outset is critical for setting you up for success in the long run.

The following are the key points to consider when defining your business model:

Target Audience: The journey starts with who you are selling your product to. Is it business-to-business, business-to-customers, or the government? Is your audience local or international? Once you have identified your audience, everything else falls in line. It becomes easier for the marketing agency to define your SEO process, content strategy, link-building process, and other aspects.

Type of Product: Are you selling a physical product, software, a digital product, or a custom solution? Each business model is designed and apt for a different kind of product. Reach out to us with your business idea, and we’ll help you with the right strategy to create a profitable business.

Scalability Aspirations: Another important point is your growth rate. What are your plans, and how are you planning to scale your business idea? You can choose the subscription or dropshipping model to grow your business faster. With the right conversion strategy, we help you build a digital environment that helps you scale.

Returns and Investment: You cannot ignore your finances when working on your business. You have to plan your business idea and define your model based on the resources that you may outsource or pick from others.

Fulfillment Options: And the last is your order fulfillment restrictions. You need to identify Your business model should lay the groundwork for how and where you will fulfill an order.

A Basic 3-Step Process to Assist You in Your Selection

Sometimes, knowing everything still might not be enough to help you make the right decision. Our team of digital marketers has shared here a simple three-step guide to identify how you can make the right choice.

Step 1: Define Your Vision 

Decide your business goals and objectives before you pick any of the above-discussed models. Do you think running a digital store can help, or do you want to use a website? Your business model must align with your business goal to ensure you make the most of your investment.

Discuss your objectives with us, and we will assist you in selecting the model that will best support your growth.

Step 2: Align Your Product with the Model

The right business model is most dependent on the product you are planning to sell. Let’s assume you are. If you are planning to sell handcrafted solutions with customizations, you need to establish a direct connection with your customers, thereby adopting a direct-to-customer model. Alternatively, if you are offering solutions such as ERP, payroll software, etc., your target audience would likely be businesses, necessitating a business-to-business (B2B) model.

For some businesses, defining the model can be a little difficult, and in that case, you need to experiment with different models.

Step 3: Experiment and Validate

You can experiment with a few business models, making it easier for you to identify the right solution. We suggest getting a landing page up, creating a free demo, or creating a mock or gift store to help validate customer demand.

Popular Ecommerce Business Strategies

Subscription-Based Model

The subscription-based e-commerce model offers amazing solutions for customers as well as brands. Customers get convenience and consistency, and brands get a source for predictable revenue and improved customer loyalty.

This model works amazingly for businesses that offer meal kits, skincare products, supplements, or pet food. When partnering with a web development agency, ensure the integration of advanced software to help you manage your transactions and develop relationships with your subscribers.

You would need recurring billing solutions, customer feedback management solutions, invoice generation, etc. Invest in a CRM tool that helps you track subscriber preferences, purchase history, and engagement so you know what offers to make and when to work on improving your subscriber’s loyalty.

If you’re bundling features, this also helps you increase order value by allowing you to bundle related products for a rate.

Dropshipping

For new business owners who want to minimize risk when starting an online business, dropshipping is usually a beginner-friendly model because there is no need to have products in stock to begin. However, dropshipping does come with unique challenges that differ from traditional retail operations, including order processing, managing suppliers, and operating an online store. Without a robust system in place, dropshipping can often feel overwhelming.

Designers at our ecommerce marketing agency can create a solution that is meant to meet the needs of everyone involved in the dropshipping process. With reputable supplier networks, you can connect to thousands of worldwide vendors and import products with a few clicks. Check for real-time inventory syncing, order tracking, and automated notifications so that both you and your customers are informed.

Wholesaling

If you are seeking to sell products in bulk, the wholesale model is exactly your choice. Wholesaling needs a great focus on volume, ongoing relationships with clients, and pricing practices that are set up in a way that encourages repeat purchases.

You can turn your business into a success only when you provide an efficient B2B experience—with flexible pricing methods, reordering in a snap, and terms that are specifically assigned to a specific customer. Including interesting B2B pricing tiers allows you to deliver discounts based on order volume or customer groups. You can get the flexibility to create custom pricing lists for each of your partners, so the end buyer is always given a price that expresses their value and order volume.

With advanced customer management options and customer segmentation tools, you can reflect on repeat customer purchase histories and structure future communication, offers, and terms based on the price tier of each customer.

White Labelling

Are you simply selling products to other businesses to let them customize them to suit their brands and reach the end customer? Then, whitelabeling is your go-to solution.

The model stands best for businesses that are focused on marketing, branding, and customer experience without getting into the intricacies of manufacturing. The key point to remember here is that branding and presentation need to be on point to earn your customers the trust they deserve.

It is here where you need to partner with the right digital marketing team to generate a consistent branded experience that builds credibility and keeps customers returning. Our eCommerce experts choose private product listings to manage your white-labeled inventory securely and provide different product variations to different customer groups. Plus, our marketing integrations benefit you by allowing you to run targeted campaigns in email, social media, or paid ads to ensure your brand message gets out.

Print on Demand

If you are a creative entrepreneur looking and interested in creating custom products that line without worrying about the costs of inventory before launching, then this is your business model. Be it t-shirts, mugs, phone cases, or wall art, the ability to design custom products that are printed when purchased gives you both creative freedom and business flexibility. Your POD business can be successful, however, if you have an efficient design, production, and shipping process.

You can upload custom designs, have mockups created dynamically, and receive full connection and automatic fulfillment from trusted print providers. After a customer submits an order, it is automatically received by the printer, printed, and shipped, all without requiring a step on your behalf. Automation makes it easier for you to minimize hands-on work, helping you run your business and grow your creativity. Our marketing team can assist you in establishing a robust brand presence, thereby accelerating your business growth.

Conclusion

It may seem a little difficult to choose a business model that matches your goals, audience, and resources. Do you like the predictable, recurring revenue of subscriptions? Or maybe you love the seamless operation. Perhaps you’re drawn to the seamless operation of dropshipping, but you’re seeking a larger scale, similar to what wholesalers offer. Perhaps you want a more brand-building approach to white labeling or a creative flair for print on demand.

Each of these models comes with its unique opportunities—and challenges. The good news is that you don’t have to navigate them alone. We are here to guide you through these challenges. No matter which model you choose, our software will continue to evolve with your business. The success of ecommerce does not solely depend on the ecommerce model; it also depends on your adoption of relevant tools and strategies that can consistently deliver an exceptional experience to your customers. We can help you do just that!

Ready to lift your ecommerce strategy off the ground? Explore our solutions or book a consultation to see how Wytlabs can help your eCommerce business at every step!