In 2020, online sales surpassed $4.2 trillion worldwide, marking a 44% increase year over year. The rise of eCommerce has influenced consumer behaviors, industry trends, and how organizations and individuals make money. But for those who are new to selling products or services online, the term “eCommerce” can be a bit vague. After all, the internet is home to a diverse range of revenue-generating websites, mobile applications, online stores, marketplaces, social media platforms, and so on.
So what are the different types of eCommerce? What are the different revenue models? And which approach is right for your business?
The eCommerce landscape is always changing—with new technologies, user expectations, and sales and marketing practices popping up constantly. So if you’re new to selling products or services online, or just looking for a refresher, use this article as a guide to help cut through the noise and determine the best options for your business.
To get started, here are the 5 major types of eCommerce:
Business to consumer (B2C)
B2C eCommerce companies manufacture and sell products to targeted consumers, often with a retailer, wholesaler, or other middleman assisting in distribution. This is the most common eCommerce business model.
Any purchase you make from an online store as a consumer—such as clothing, furniture, food items, concert tickets, and so on—is considered a B2C transaction. Well-known examples of B2C eCommerce companies include Walmart, Amazon, Starbucks, and Netflix, as they each sell products to customers who are also the end-user of those products. Also included in this category are direct-to-consumer (D2C) companies, like Apple and Microsoft, which exclusively sell in-house products to customers without the involvement of a third-party middleman.
Business to business (B2B)
Rather than selling directly to consumers, B2B eCommerce companies sell products and services to other companies. This usually comes in the form of raw materials, equipment, consultations, and other offerings that help the client operate their business. Since they don’t create products for individual consumers, B2B brands are often less visible to the public.
For example, we’ve all heard of the Ford Motor Company, as it’s been selling automobiles to consumers for more than a century. But Ford itself doesn’t create every piece of every car they build. Instead, the tires, batteries, hoses, electronics, and other essential elements that make up the final product are provided by dozens of other suppliers. So when you purchase a Ford car via a regular B2C transaction, you’re also purchasing products from a variety of B2B companies you may not be aware of—such as Asahi Glass, which supplies the windows for Ford cars.
Over the past few years, a rapidly increasing number of B2B companies have embraced eCommerce by digitally transforming their sales process via online sales portals. This puts more freedom and control in the client’s hands, as they can purchase supplies for their business, learn about new products, set up recurring orders, make payments, and so on—all from a single dashboard, without the help of a sales or customer service representative.
Adopting online sales portals helps B2B companies cut costs, improve operational efficiency, and optimize revenue. As a result, B2B eCommerce sales in the US have increased from $889 billion to $1.2 trillion in the past 4 years.
Consumer to consumer (C2C)
C2C eCommerce websites like eBay, Craigslist, and Etsy allow private consumers to sell, purchase, and trade their own products and services—in exchange for a small commission. While not as common as B2C and B2B, C2C eCommerce is becoming an increasingly popular model for entrepreneurs, artists, and other solo businesses. In fact, in 2020 alone, the leading C2C online marketplaces attracted more than 100 million site visitors.
Consumer to business (C2B)
There are also online channels where individuals can market and sell their products directly to businesses. This is known as C2B eCommerce—and like C2C, it’s becoming more popular every year. C2B sites like Fiverr and Upwork connect businesses with copywriters, designers, photographers, videographers, software engineers, and other freelancers looking for work.
From a business perspective, C2B eCommerce makes it easier to tackle one-off projects and also offers a cheaper alternative to hiring full-time employees. And for freelancers, it provides the opportunity to consistently find new work and be their own boss.
Government/ Public administration (B2G and C2G)
This type of eCommerce involves government or public administration entities—such as the IRS, local law enforcement, or institutions of higher education—doing business with private companies or individuals. An example of business-to-government (B2G) eCommerce could be a weapons manufacturing company selling supplies to the military. And perhaps the most common consumer-to-government (C2G) eCommerce transaction is a citizen paying their taxes online.
Types of eCommerce revenue models
Whether your business is a B2C, B2B, B2G, or hybrid operation, you’ll need a revenue model that works for your customers, employees, and associates. How will you manage your business’ inventory? Which systems should be outsourced to third-party providers? What kind of payment options will your customers have? All of this will have an impact on how much revenue your company earns. And there are many different approaches here, so take a close look at each option, and determine which makes the most sense for your business.
Dropshipping—the most common method among B2C and B2B eCommerce brands—involves purchased products being sent directly from the supplier to the customer, without ever being handled by the actual business. The online store simply shepherds the customer through the shopping and checkout process, and the rest is up to the supplier. This method will help your company save time and resources, as you won’t have to worry about warehousing, packaging, shipping, and so on—leaving more room to focus on sales and marketing strategies.
However, some businesses don’t like dropshipping because—with little control over quality assurance and shipping—customers may be unsatisfied with purchased products when they arrive, leading to negative online reviews and a lack of trust among consumers.
Wholesale eCommerce businesses order their products from suppliers in bulk and for a discount, then store those products in a warehouse. Customers purchase these products online for a marked-up price, at which point the items are sent from that warehouse to the location of the buyer. This allows your business to make a profit on each unit, while also lowering operational costs.
Private labeling/ manufacturing
Private labeling—also referred to as on-demand manufacturing—involves designing a product from scratch, then hiring a manufacturer to build the product for you. Once the item has been purchased online, it is shipped from the manufacturer’s warehouse to the customer. Since your business doesn’t have to pay the immense upfront costs of setting up its own production facility, you can get your products built, modified, tested, and updated more efficiently.
Rather than creating your own products from scratch, you can simply put your company’s branding on an already existing product. This is known as white labeling, and it’s a common practice among beauty, wellness, and food companies in the eCommerce space. It involves purchasing products in bulk from a supplier, then having those products relabeled with your brand’s name, logo, and custom design before being shipped to customers.
Ecommerce subscription services—like Dollar Shave Club, Stitch Fix, and Blue Apron—are becoming more and more popular among consumers. By setting up regularly scheduled product deliveries and automatic payments, subscribers get what they need, when they need it, with little to no hassle. And for businesses, this model provides predictably recurring revenue and a more active customer base, which always makes stakeholders happy. Although, as one of the more niche eCommerce revenue models, it’s important to note that subscription services rarely succeed outside of fashion, food, health, and beauty.
The rise of headless commerce
As you contemplate your business’ new online sales and marketing strategy, you’ll want to consider one of the major trends in eCommerce today—headless architecture. This involves decoupling your online store’s front-end presentation layer from its back-end eCommerce functionality.
With a traditional monolithic architecture, any updates to the front-end—such as adding new features and content to the user experience—comes with additional changes to the back-end code as well, and vice-versa. This means more work for developers and slower deployment times for new products, sales channels, site redesigns, and so on.
With a headless architecture, front- and back-end developers can work independently of each other, resulting in faster deployment times, lower development costs, and greater operational efficiency overall. If your business is planning on launching a multi-channel eCommerce strategy—with various online storefronts that will require heavy customization—going headless may be the right move.
Getting started with eCommerce
Bringing your business online and remaining competitive in the eCommerce landscape can be challenging, as it requires advanced knowledge of digital technologies, consumer expectations, and market trends. But with the right team of eCommerce experts, your business can elevate its digital presence, provide engaging customer experiences, leverage data, and optimize revenue.
That’s where Codal comes in. We’re an award-winning web development agency with over a decade of experience empowering eCommerce businesses—helping them sell more products and services, expand their customer base, and make more data-driven decisions. We do this by designing and developing online storefronts, marketing websites, mobile applications, B2B portals, and other cutting-edge digital products.
As we’ve done countless times in the past, we’ll digitally transform your company’s processes, from sales and marketing to order fulfillment and inventory management. We’ll help choose the best eCommerce solutions for your business and its customers, integrate those tools into your current technological infrastructure, conduct usability tests, and provide proactive maintenance and support—so you can focus on running your business.