Let’s face it: e-commerce is the holy grail of convenience for both customers and sellers.
Now, customers don’t need to visit physical stores to purchase their favourite apparel, furniture, or gardening equipment.
A quick browse of online stores on Amazon, Walmart, or Shopify and you’ll find and order what you want.
The seller, on the other hand, hardly needs to set up a physical store, saving on rent, maintenance, and other fixed costs.
That’s why the e-commerce business will grow exponentially in the next few years.
According to Statista, e-commerce sales will grow to $8.1 trillion by 2027, and this trajectory is less likely to wane.
If you plan to set up an online store on one of the e-commerce platforms, it’s important to acquaint yourself with the available types. Here’s a detailed overview:
What is e-commerce?
In the simplest terms, e-commerce is the process of trading goods and services online.
Businesses showcase their products online, which are then shipped from a warehouse once a customer makes a purchase.
This form of trade relies on digital platforms like mobile apps, websites, and social media to make buying and selling possible.
Why E-commerce
Besides the convenience that this business model offers, there are many other benefits of e-commerce:
Fast Buying Process
An e-commerce platform makes it easy for a customer to order, buy, and receive a product. You don’t need to visit several physical stores to compare prices.
You can look for an item on several e-commerce platforms and compare the features, prices, and similar products from the comfort of your home.
If you are sceptical about its function, the review section helps you understand its quality and effectiveness.
Low Operating Costs
Setting up a brick-and-mortar store is quite costly. In Kenya, for example, you’d need approximately $500-$1000 to set up one.
With an e-commerce store, you don’t need that much capital to start a business.
You only need to develop an e-commerce website and advertise your products or services online to get your business going. This model saves you a whole lot in operating costs in the long run.
Access to a Global Market
A physical store confines you to your geographical area, which can be your town or city. It would take time to traverse national or global boundaries.
Showcasing products on an e-commerce platform is the best way to reach a global audience. Customers can place orders from anywhere in the world, and you can ship them to their location.
Affordable Advertising
Advertising takes up a huge chunk of any company’s budget, but with the e-commerce model, you don’t have to spend as much.
The platforms are equipped with advertising tools that allow you to add images, videos, and infographics, which could double up as advertising tools.
What’s more, they have customer analysis tools that can help you understand customer behaviour so you know where to focus your advertising efforts.
Types of E-commerce Models
E-commerce takes on different forms, and understanding them can help you choose the best model for your business.
Business to Consumer (B2C)
This is the most common e-commerce model that most online businesses use.
Also referred to as a direct-to-consumer e-commerce model, it involves the direct sale of products or services to the customer or end-user.
Amazon, Walmart, and Alibaba are excellent examples of platforms that use B2C e-commerce models.
The most striking features of B2C models are:
- High volumes of transactions because you’re dealing with the end user
- Access to a suite of marketing and sales tools to reach your target customers
- User-friendly product management to help you add product images, specific descriptions, and product categories
- Mobile-optimized platforms to encourage customer engagement
- A variety of shipping and fulfilment options to streamline delivery
Business to Business (B2B)
This model involves trade between two or more businesses, i.e., a business sells a product or service to another business.
For example, a company buying accounting software from an online business takes on a B2B e-commerce model.
Features of B2B models
- More recurring purchases
- Long sale cycles
- High-value transactions
- Orders are in bulk
- Fast re-ordering process
- Portals are customized to the user
- The contract determines the pricing, payment terms, and who pays for the shipping costs
Business to Government (B2G)
Here, a business sells products or services to a government or public administration like a county or state.
For example, when a company sells accounting software to a local government agency, it takes on a B2G model.
Unlike other models where the buyer approaches the seller directly, a B2G model begins with a request for a proposal from the government.
Businesses are invited to pitch their product or service to the government, bidding for the contract.
The best bidder is awarded a contract to supply the product or service to the government.
Features of B2G E-commerce Models
- Involves high-value transactions
- Requires compliance with federal and business laws
- The sales cycles are long
Consumer to Business (C2B)
This model involves the exchange of goods or services between individuals and companies. The company is the end-user and purchases the goods or services for resale.
For example, a company may purchase an image from an individual to add it to its blog, logo, or video.
Other examples
- Social media users who promote products or services on behalf of the company
- A travel blogger who shares an affiliate link to a hotel on their blog
- A large e-commerce website that pays consumers who review their products
Consumer-to-Consumer (C2C)
This is a business transaction involving consumers. For example, a homeowner may sell their home to another homeowner without engaging an intermediary.
eBay, Facebook Marketplace, and Craigslist are excellent examples of online platforms that use C2C e-commerce models.
Consumer to Government (C2G)
In this model, a government transacts directly with a consumer. The premise is to facilitate communication between the government and the consumer.
As such, consumers can share their feedback with the government.
Examples of C2G Transactions
- Citizens paying taxes
- The government provides public services like education and healthcare
Conclusion
Understanding the different types of e-commerce models helps entrepreneurs identify the most suitable business to venture into. Be sure to familiarize yourself with their requirements as they vary by model. A B2B e-commerce business, for example, relies on the contract to determine the pricing and shipping details. Businesses in a B2C model, on the other hand, are price takers. The market forces set the product prices, hence is no room for negotiation.
