You’ve developed an amazing product, and you’re certain there’s a market for it. So why is no one buying? The culprit might be a mismatch between the products you’re selling and your e-commerce business model.
In this guide for entrepreneurs and digital strategists, you’ll learn about the most common types of e-commerce, with examples to cement your understanding so you can hone in on the best fit.
What’s an E-Commerce Business Model?
A business model in general is the framework that governs how your business creates value, delivers it to your customers, and monetizes it. An e-commerce business model is just a framework for running an e-commerce business specifically.
E-commerce business models are composed of many moving parts. First, there are the higher-level elements that set the tone for your overall strategy. This includes your pricing plan and the value proposition that sets your business apart. It’s also where you outline who you’re selling to and how you’re selling it to them.
Then, there are the lower-level details that shape how your day-to-day operations work. These are factors like which online marketplaces you use, how you manage inventory, and how you collect payments.
Your e-commerce business model is the key to maximizing conversions and achieving stable growth. When you choose a model that’s incompatible with the product your business sells, you end up not only missing your revenue targets but also wasting time and money on tactics that don’t work—at least not optimally. In other words, you’re leaving money on the table and flushing it down the drain at the same time.
So, this is the big-picture view. But what are some examples of e-commerce business models? Keep reading to find out.
What Are the Types of E-Commerce Business Models? 5 Options With Examples
There’s a broad range of e-commerce models, but most businesses fall into one of the following five categories.
Business-to-consumer (B2C)
The B2C business model is probably the most familiar. Brands using this framework sell items to shoppers rather than other companies. B2C models span a wide range of businesses, consisting of everything from brick-and-mortar stores to online marketplaces like TikTok Shop and eBay.
In e-commerce, you’re running a B2C business if you’re a creator selling products online, whether they’re physical like handmade knitwear on Etsy or digital like an e-book explaining your custom fitness program.
Direct-to-consumer (DTC)
DTC is a subset of the B2C framework. It sidesteps the middleman by selling directly to consumers instead of going through retailers or marketplaces. For example, if you create custom jewelry and sell it from your own online store rather than listing it on Amazon or Etsy, your business is built on the DTC model.
Consumer-to-business (C2B)
The C2B model turns the tables on B2C. Consumers become the sellers, businesses the customers. Freelance writers and affiliate marketers are everyday examples of the C2B business model in action.
Business-to-business (B2B)
The business-to-business model focuses on selling products to other companies instead of consumers. One example of a B2B business model is selling customizable branded clothing to other organizations. Another is an online wholesaler that sources products to sell in bulk to individual retailers. This arrangement is sometimes called business-to-business-to-consumer, or B2B2C.
Consumer-to-consumer (C2C)
Online peer-to-peer marketplaces like eBay and Poshmark power C2C interactions. Here, consumers buy and sell directly with other consumers, whether it’s unread books gathering dust on the bookshelf or secondhand high fashion. Brands running these marketplaces often make money by charging a fee for listing products on the site or taking a percentage of the sale.
Getting Paid: E-Commerce Revenue Models
Online business models give structure to the way you do business. E-commerce revenue models define how you use that structure to make money. Here are some of the most common examples.
One-Time Purchase Revenue Model
This revenue model is simple: Create a product, sell it, and make money (hopefully). If you’re a business that sells products directly to customers at a fixed price, you’re in the one-time purchase game. Anything from art supply stores to grocery outlets fits the bill.
Subscription Revenue Model
Subscription models are familiar to anyone who’s used a streaming service. Instead of a one-time fee, customers pay on a periodic basis, often monthly or yearly. This gives business owners a steady, recurring source of income.
Most people associate this model with brands like Netflix and Hulu. But subscription-based businesses that sell physical products—like monthly home cooking kits and book-of-the-month clubs—have grown significantly in recent years.
Wholesaling Revenue Model
The traditional image of wholesaling is a business that buys products in bulk from manufacturers. They sell these goods at a premium to retailers, who then flip the merchandise at a markup. However, this B2B revenue model isn’t limited to big firms or corporations. Anyone who sells products in bulk counts as a wholesaler.
For example, an artist who mass produces prints to sell to museum gift shops is just as much a wholesaler as an Alibaba seller who deals in electronics parts at scale.
Dropshipping Revenue Model
Dropshipping businesses sell products without managing inventory or even developing a product themselves. Dropshippers market other people’s products and let the supplier handle picking, packing, and shipping. They keep the difference between what they pay the manufacturer or wholesaler and how much they’re able to sell the products for.
Lightweight products that are easy to produce and don’t cost a lot to ship, such as phone cases and office supplies, tend to do better with this model.
How To Choose the Right E-Commerce Business Model
Wondering what innovative online business models match your niche? Here’s how to choose.
Pinpoint your target market
Understand the problem your product solves, and think about who needs it. Zoom in on demographic details like age, income level, and location, then find out where those future customers shop and what makes them tick.
Find the right platform
Choose a platform that meshes well with the type of e-commerce model you’re working with. Make sure it has all the features you need, like robust automation and integrations with your existing toolkit.
Define your business goals and KPIs
Work out your business objectives. Are you hoping for a fast takeoff and rapid growth, or are you focused on slow but steady recurring income? Use the answer to decide which key performance indicators (KPIs) to focus on, such as conversion rate, profit margins, and customer acquisition costs.
Optimize
Use your analytics to find out what’s working and what isn’t. Test different layouts, product pages, and other marketing elements to find the perfect formula.
Pros and Cons of Running an E-Commerce Business
No matter the business model, running a successful e-commerce business has its advantages and drawbacks. Here are a few of the biggest.
Pros
- Lower startup costs: You don’t need a lot of resources to open an e-commerce business. A product, a laptop, and some free time is enough to get started.
- Easier to scale: Because everything’s online, you can grow your operations without expanding your physical space.
- International reach: Two-thirds of people spend time online. While brick-and-mortar establishments limit you to a neighborhood, city, or (at best) region, e-commerce expands your audience globally.
Cons
- Fierce competition: Because of the relative ease of opening an e-commerce store, you have to fight to stand out and convert. Finding your goldilocks niche—not too saturated, but not too small—is the key to success.
- Security and compliance: You’re responsible for protecting your customers’ data. Modern tools take care of a lot of the overhead, but you still need to remain vigilant.
- Tech obstacles: Hooking up payment services, analytics tools, and inventory systems can be a headache. The best e-commerce platforms automate and simplify as much as possible.
Put Your E-Commerce Business Model To Work With Genstore AI
You’ve worked out the perfect e-commerce business model to match your vision. Where do you go from here? You could spend weeks grappling with finicky old-school e-commerce platforms, tweaking product descriptions, and fine-tuning buggy themes and plugins—or you could get up, running, and selling in minutes with Genstore AI.
All it takes is uploading your inventory, then describing in plain language how you want your shop to look and function. Your online storefront will be live in seconds, complete with AI-powered inventory management, marketing, and 24/7 customer support. No coding skills required.
Ready for launch? Try Genstore AI today.