Are you curious about the different types of ecommerce that exist?
Ecommerce doesn’t just describe business transactions and transactions between businesses and consumers.
In this post, we discuss what each ecommerce type means and how it differs from models it’s similar to.
The different types of ecommerce
These are the ecommerce business models we’re going to cover in this post:
- Business to consumer
- Business to business
- Direct to consumer
- Consumer to consumer
- Business to business to consumer
- Consumer to business
- Business to government
- Consumer to government
1. Business to consumer (B2C)
This is the most popular ecommerce business model.
A business-to-consumer ecommerce website sells to consumers. While businesses sometimes shop at a B2C store for supplies, general consumers are the target market in this ecommerce model.
There are a lot of advantages to focusing on general consumers when you start an online store.
The first depends on your niche. If your niche is filled with general consumers, you’re better off launching a B2C store.
The second has to do with market demand.
Some niches need specific solutions, solutions that may be provided by products you sell. If you discover that only general consumers are looking for those solutions, you have a pretty good idea of what type of ecommerce website you need to start.
The third reason why business-to-consumer stores are so popular is because they’re easier to operate.
Business-to-business (B2B) stores typically have larger average order values, but because consumers spend less and order far fewer products than businesses do, you won’t need to purchase a lot of inventory upfront nor will you need to process large orders on a regular basis.
On the flip side, this can be a disadvantage of B2C commerce.
You’ll need far more customers because your customers don’t order as much as businesses do when they shop. This also means your average order value will be lower.
It also doesn’t help that B2C products tend to be much cheaper than B2B products.
B2C ecommerce businesses also face a larger amount of competition as more and more B2C stores launch per niche.
2. Business to business (B2B)
The business to business (B2B) ecommerce model is just as popular as the B2C model.
In this model, an ecommerce business only sells to other businesses.
This type of ecommerce model has a few different subtypes, including product-based ecommerce, service-based ecommerce and software-based ecommerce, including software as a service (SaaS).
The B2B ecommerce model has a few advantages over the B2C model.
The first few have to do with the customer base this model attracts.
B2C commerce is based more on wants rather than needs. Therefore, if consumers need to budget, they’re more likely to stop shopping for things they want but don’t necessarily need.
B2B products are typically necessary in order for businesses to operate as successful businesses don’t waste money on products they don’t need.
This means you can always expect business customers to become repeat customers. You can even make deals and contracts with businesses.
The second has to do with average order value. Businesses tend to purchase products in bulk so they can reduce the number of shipments they need to track and because most B2B stores offer bulk discounts.
This means you can always expect high average order values as a B2B store.
B2B also lets you get to know your customer better. Businesses need specific solutions, which means they’re more likely to get in touch with your sales representatives or customer success managers to find those solutions.
These conversions can spark long-term business relationships.
Let’s talk about a few disadvantages of B2B ecommerce. The first has to do with target market.
While you may have a higher average order value than B2C stores, your target market may be much smaller in comparison. There are far fewer businesses looking products than there are general consumers.
And while there isn’t as much competition in B2B models, you may wind up losing a long-term business relationship at some point if a competitor offers a discount you weren’t willing to give.
Finally, a lot of B2C commerce relies on impulse purchasing decisions, but this almost doesn’t exist in the business world.
Startups need to be meticulous about what they spend their shrinking startup funds on, and successful businesses have decision makers who look at budgets, charts and forecasts before they make final purchasing decisions.
This can make the sales process a lot longer.
3. Direct to consumer (D2C)
The direct to consumer (D2C) ecommerce model is a subtype of the B2C ecommerce model in which a business cuts out the middleman and sells directly to the consumer in their target market.
A typical B2C ecommerce store bases ecommerce sales on products sourced from different brands and manufacturers.
A D2C ecommerce business cuts out that B2C store and launches their own, giving them opportunities to interact with the consumers who purchase their products.
This is one of the advantages the D2C model has. It allows brands and manufacturers to connect with consumers one on one, or it makes it easier for them to do so at the very least.
Not only does this foster better relationships with consumers, it also gives brands access to better customer data.
The D2C model also gives brands and manufacturers more control over how their products are marketed.
D2C businesses are also able to offer better prices for their products in this model.
When businesses sell their products to retail businesses, they understand the need for these businesses to make profits, so they sell for lower than what products are going for on the market but still high enough to earn profits themselves.
However, D2C businesses can sell their products at market value by cutting out that middle man.
So, why use a middle man in the first place?
Well, marketing is hard. If you can find a store who’s willing to sell your products, you have at least one customer who’s willing to buy your products in bulk.
That middle man will also handle order fulfillment, which can be hard for ecommerce businesses to learn and perfect.
4. Consumer to consumer (C2C)
The consumer to consumer model is becoming more and more popular thanks to online marketplaces like eBay and Facebook Marketplace.
An online marketplace gives consumers the ability to list items they no longer want for sale.
It’s a popular way for general consumers to get rid of old electronics and furniture. Some consumers use it as a way to sell valuable collectibles they’ve saved for a while.
The C2C model is great for consumers because it allows them to get full price for items they longer want.
It also allows them to market the item to a broader range of potential buyers.
Without the online marketplaces the C2C model has, general consumers have less-than-stellar options for getting rid of things they don’t want, including donating them, selling them to pawn shops for far less than they’re worth, holding garage sales, putting ads in their local newspaper, or simply asking friends, family and peers if they’d be willing to buy them.
5. Business to business to consumer (B2B2C)
The business to business to consumer model is an ecommerce model in which a B2C business relies on a third-party supplier in order to fulfill orders.
A good example of the B2B2C model is when restaurants and retail stores use a service like DoorDash to fulfill delivery orders when they don’t offer delivery themselves. They accept delivery orders from DoorDash, but a DoorDash driver who does not work for the restaurant is the one who actually delivers the order to the customer.
The same is true for online stores who use third-party delivery drivers, such as Walmart and Amazon who sometimes outsource order fulfillment to third parties.
The B2B2C model is an attractive ecommerce model for businesses of all sizes who want to offer more convenience and services to their customers but don’t want to hire additional staff to do so.
6. Consumer to business (C2B)
The consumer to business model describes a special ecommerce relationship in which the consumer offers products and services to a business.
The C2B model is sometimes used to describe freelancers and independent contractors who sometimes offer their services to businesses or hobby bloggers who engage in affiliate marketing and sponsorships, but this can also be seen as the B2B model.
In reality, any transaction in which a general consumer offers a product or service to a business falls under the C2B model.
This includes surveys and special tasks consumers perform for businesses in exchange for money, gift cards, rewards and discounts as well as one-time sales consumers make with stores, such as GameStop or pawn shops.
7. Business to government (B2G)
The business to government model is a subset of the B2B model in which the “business” in question is a government entity. In the B2G model, federal, state and local governments purchase products and services from businesses.
The most common use of the B2G model is in marketing when governments purchase printing services for brochures, pamphlets and fliers. Governments also enlist the help of advertising services to create political and public service announcement ads.
In reality, governments have a lot of operational costs that can’t all be handled by government employees.
A government’s yearly budget report will often include what are known as requests for proposals (RFPs). These are problems the government has and services they need performed that local businesses can offer proposals for.
Whichever businesses get chosen by the government will be able to enter into government contracts for the goods and services they provide.
Third-party services government agencies rely on include IT infrastructure, janitorial and construction.
8. Consumer to government (C2G)
The consumer to government ecommerce model is a lot simpler than the B2G model.
The C2G model is mostly seen when citizens pay for things like government-issued bills, fines and tickets.
It can even include manual payments you need to make to tax entities like the IRS.
The biggest benefit of the C2G model is the way it offers more power and transparency to consumers by allowing them to initiate transactions rather than having the money taken out of taxes or automatic bank payments or risk having to send checks through the mail.
A disadvantage to this model is how it opens the risk for citizens to fall victim to fraud.
When citizens are used to paying for government bills online, they’re more likely to fall for phishing scams in which scammers pretend to be government entities citizens owe money to.
How to choose the right ecommerce model for your business
We’re going to tackle this section by only addressing the top three business models as they’re the most popular in ecommerce.
Choosing the right ecommerce model for your business is pretty simple.
If you already have a product or service you want to sell, determine who’s in your target market. Are they consumers? Are they businesses? Can you offer the product or service to both?
If you don’t yet know what you want to sell, choose a niche, and then choose a target market.
If you research this target market well enough, including having conversations with them, you’ll have a better understanding of what they do in your niche, what problems they have, and which products and services they’ve been disappointed by in the past.
Not only will this give you plenty of ideas for products and services you can sell, it’ll also help you determine which business models you have to choose from.
You should also consider the budget you’re working with or whether or not you think you’re able to secure funding.
If you have a small budget, you’re better off going with a B2C model since you won’t need to purchase a lot of inventory upfront or process large orders from the start.
If you’re offering digital goods and services, consider selling to businesses. The projects will be much larger, but the payments will be as well. Plus, you’ll have more revenue with fewer customers to manage.