Now more than ever, in this surreal experience of self-isolation across the globe caused by the ongoing Covid-19 pandemic, people are spending considerably more time online and e-commerce is on the rise.
In the following article, you will get familiar with the types of e-commerce business models that exist.
Generally, there are six main models of e-commerce that businesses can be categorized into: Business-to-Consumer (B2C), Business-to-Business (B2B), Consumer-to-Consumer (C2C), Consumer-to-Business (C2B), Business-to-Administration (B2A) and Consumer-to-Administration (C2A).
B2C e-commerce encompasses transactions made between a business and a consumer. This is one of the most widely used sales models in the e-commerce context and examples of B2C are everywhere. In the product-based B2C model, businesses sell products to consumers through the use of online marketplaces and stores. There are two models: direct sellers, when consumers purchase goods directly from the manufacturers via their online retailers; and online intermediaries, the online e-commerce platforms such as Etsy, that help bring together the buyers and sellers. The platform themselves do not make the products or services listed on the site.
A company with a service-based B2C model functions exactly as its namesake – it helps provide services to its consumers. A service-based B2C company earns revenue by providing services instead of selling physical products. Netflix and Spotify are great examples of a “service-focussed” software-based B2C companies. Both help provide video and music services to consumers via the use of the software.
Unlike B2C, Business-to-Business e-commerce relates to sales made between businesses, such as a manufacturer and a wholesaler or retailer. This type of e-commerce is not consumer-facing and happens only between business entities. Most often, business-to-business sales focus on raw materials or products that are repackaged or combined before being sold to customers.
There are B2B companies in every industry, from manufacturing to retail. Wherever business is done, you can be sure a host of B2B suppliers and advisory firms are active. Every B2C company requires certain products, services and professional counsel, so every B2C company generates B2B activity. Examples of real-world B2B activity are plentiful and more visible than you might guess. For example, the cloud-based document storage company Dropbox serves businesses as well as individuals. General Electric makes plenty of consumer goods, but it also provides parts to other enterprises. Xerox is a household name but makes billions providing paper and print services to businesses.
Consumer-to-consumer (C2C) markets provide an innovative way to allow customers to interact with each other. Traditional markets require business to customer relationships, in which a customer goes to the business in order to purchase a product or service. In customer to customer markets, the business facilitates an environment where customers can sell goods or services to each other. Created by the rise of the e-commerce sector and growing consumer confidence in online business, these sites allow customers to trade, buy, and sell items in exchange for a small commission paid to the site. Opening a C2C site takes careful planning.
Consumer-to-Business (C2B) reverses the traditional e-commerce model and it is a lesser-known form of e-commerce. C2B is similar to C2C in that an intermediary is often required. This online commerce business is when the consumer sells goods or services to businesses, and is roughly equivalent to a sole proprietorship serving a larger business. An example of this would be a business model like iStockPhoto, in which stock photos are available online for purchase directly from different photographers. The business then pays for the right to use the stock photo and the intermediary site hosts the transaction, transferring the money and information online.
Business-to-Administration (B2A) is when a business provides an online service for the government, generally through a website. One way to understand B2A e-commerce is through taxes. Taxes, which go to the government, can be filed online through third-party businesses, such as TurboTax or H&R Block.
Consumer-to-Administration (C2A) occurs when a consumer is providing something for the government. A C2A transaction can be as simple as paying for parking tickets or ordering a new government ID. However, to be considered a C2A e-commerce transaction, this must be done online. While C2A and B2A aren’t the most important e-commerce types today, both are an important part of the future of online transactions.