Types of E-Commerce Business Models

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With e-commerce revenue increasing year-over-year globally, it’s no secret that the future is, in fact, in e-commerce. Heck, it might just be the present… With that said, while having a great idea is a start, much more is required to succeed in the e-commerce arena.

Some of the most basic include defining your audience, devising a business plan, executing market research, and of course, understanding which type of e-commerce business model your operations fall under and/or which you’d prefer to operate in. 

That’s why, in what follows, we’ll be outlining several types of e-commerce business models, defining each and their roles in detail. Further, we’ll touch on e-commerce relationship models and how they differ from business models. 

Eager to become more informed of the e-commerce world of business?! Then this article is for you. Let’s get right into it!

What is an E-Commerce Business Model

Simply put, an e-commerce business model is a defining decision that determines how your business will operate, whom it will target for its customer base, and how said customers will receive your business offering. 

While the model you choose isn’t as rigid as you might think (in fact, it’s quite fluid), and although you as the owner have the flexibility to adjust and tailor said model to your liking, it’s still a necessity to place your business in a category so as to act as a roadmap of sorts. 

With that said, although there are several types of models that can be implemented and followed, there are four primary business models that we’ll be discussing in this article.

Types of E-Commerce Business Models

E-commerce business models are not to be confused with e-commerce relationship models which are models that define who you’ll be selling to; while business models do broadly define whom you’re selling to, it’s done so in such a way complementary to the structural concept at large.

Instead, e-commerce business models focus more heavily on how you’ll capture the attention of your target consumer, how you’ll sell to your target consumer, and how you’ll position your product/service in such a way as to optimize revenue.

There are, however, several types of e-commerce relationship models including but not limited to B2B (Business to Consumer), B2C (Business to Consumer), B2G (Business to Government), and C2B (Consumer to Business). 

Before proceeding to choose what type of e-commerce business model you’ll be operating under, it’s important to first choose who you’ll be selling to; what type of e-commerce relationship model your business falls under. Once chosen, it’s time to choose your lane! 

Below are some of the most common types of e-commerce business models:

Dropshipping

Dropshipping is an e-commerce business model whereby the seller (you) will complete and proceed to fulfill buyer transactions without keeping any inventory or overhead. 

Instead, based on what’s needed, you, the seller, will purchase inventory as necessary and as defined by the orders that have been made in real-time. This is typically accomplished through wholesale or third-party manufacturers. 

While dropshipping carries some level of controversy, often viewed as somewhat of a “get rich quick scheme”, it’s undeniably successful should you operate it correctly… It’s no wonder millions of dollars are made from using this business model alone each year.

Wholesaling

More popular amongst those with sizable amounts of upfront capital at their disposal, wholesaling is another e-commerce business model whereby e-commerce businesses are responsible for both inventory management, customer fulfillment, shipping and receiving, and, of course, any payroll involved in the operation of the business at large. 

Wholesaling e-commerce businesses are those that supply products to other relevant buyers, typically in bulk so that they can then proceed to sell on their own boutique online stores.

What traditionally used to only be exclusive in a business-to-business relationship has since expanded to consumer-to-business relationships, as well…

Subscription

Yet another popular e-commerce business model, subscription services have opened the door to new ways of achieving passive/residual income via recurring revenue while continuing to maintain satisfactory relationships with customers. 

In fact, most subscription-based e-commerce businesses experience higher retention rates and boast longer customer relations than most other online businesses today. 

Whether you’re selling toiletries or premium software services, subscriptions have proven their worth in the e-commerce world and might just be the business model for you!

White-Labeling

Often compared to private labelling due to its many similarities, white labelling is an e-commerce model whereby e-commerce businesses purchase already proven products and simply place their own branding on them to sell D2C. 

While it’s seen across industries, the most common tend to include health and wellness products like supplements, or even clothing like t-shirts and hats.

If this is the path you want to go down, be cognizant of how much inventory you initially purchase, for whatever you buy and can’t sell, you keep… A lucrative but potentially detrimental business model if not operated intelligently.

In Summary

With several e-commerce business models to choose from, it can be difficult to decipher which one suits your goals and objectives best. If you’re having trouble determining it, consider revisiting your initial business plan to gain any past insights that might lend themselves to suggestions. 

Whichever model you opt to choose, be confident in your choice and proceed onward with intent and determination because, at the end of the day, the success of the business doesn’t lay in the model that you choose but in the way in which you operate it as an entrepreneur.

Good luck!

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