The term eCommerce is not new anymore. eCommerce can be simply defined as any website that enables transactions. Any website that is commercial, with transactions of money and goods, is an eCommerce website. This could be a subscription website selling digital content or a multi-vendor store selling products from different categories through multiple vendors. Over the years, eCommerce has evolved from selling 10–20 products on a website to millions of products on a website (amazon.com). While there still exist websites which sell 10–20 products that do well, there are others which fall into other categories like B2B, B2C, D2C and more. Choosing the right model or type of eCommerce website determines the success and failure of an eCommerce website.
Every business, startup, small business owner, digital marketer and eCommerce strategist should know the type of eCommerce business they plan to launch, scale or market. This ensures that the website is moving in the right direction, reduces corrections and loses time fixing problems in the future.
This article discusses the types of eCommerce models and their pros and cons to benefit small business owners, startups and eCommerce strategists understand each model, their pros and cons, revenue potential while analysing use cases and case studies.
B2C eCommerce Websites – The Most Popular Online Retail Model
When we name the most popular eCommerce websites that come to our mind immediately, we think of B2C websites. B2C stands for Business to Customer. These websites are created to cater to the customers directly from the business. Think about Big Basket, Amazon, Nykaa, Myntra, Flipkart or Zara. All of these websites cater to clients directly. They are known for their user-friendly shopping experience, product catalogues, customer reviews, secure payment gateways and delivery options.
The fact is that 90% of all eCommerce websites fall into this category. While there may be 100 known eCommerce websites today which you can name off the head, there are millions of B2C websites in India in various niches. Every niche, big or small, has at least 1 or 2 eCommerce websites. Take for instance booking a doctor’s appointment. Practo is one website which enables this and is a fully functional large-scale eCommerce website for this niche. There are eCommerce websites for everything from customised products to kitchen accessories and even products that cost over ₹100,000 today which can be purchased online.
Pros of B2C eCommerce websites
B2C websites are known to have a large audience. They appeal to a broad and diverse customer base, allowing rapid growth for your business. They give you a brand-building opportunity, perfect for direct-to-consumer platforms that want to own and control their own customers. This offers a good opportunity for building relationships, remarketing and more. B2C websites are scalable from local to global easily and are usually easy to track. Rich data and insights help track customer behaviour, preferences and trends in real time, making it possible to adjust your marketing campaigns, sales and promotions accordingly.
Cons of B2C websites
With better business models and easy integration of payment gateways and eCommerce platforms, the number of B2C websites has increased tremendously. While many websites still focus local, others have slowly moved national and a few even have scaled globally. The ease of access to technology has also increased competition in the retail eCommerce sector. Most of the popular niches are already saturated. High-value industries and industries where bulk sales are possible are often highly competitive nationally. With increase in competition, many businesses are required to advertise their products. This increases the marketing investment for your business and a strong digital marketing strategy for visibility and conversion. Also, businesses today need to think beyond a website and create a brand. All the extra money invested in brand building and marketing also reduces the profit of a business, cutting into your margin. Thin margins are often the result of discounts, free shipping and deals to compete in the already saturated B2C eCommerce business.
Who is the B2C eCommerce model right for?
D2C brands that are looking to control the end-to-end customer journey should take advantage of the B2C eCommerce model. With the heavy investment which goes into a D2C brand creation, creating and growing an eCommerce brand only makes it more sensible. With an established business already in place, all you need is to scale it online to an eCommerce store. Apart from D2C brands, retailers with an offline business which is near saturation in its local retail business should take advantage of B2C eCommerce to increase their customer range. The other most common popular B2C model is the drop shipping websites. While this requires a deep understanding of drop shipping, sourcing and more, creating a B2C business with the drop shipping model is proven to be successful to some degree, provided you get all the parts right.
B2B eCommerce Websites – Selling to Other Businesses Online
B2B eCommerce websites are different from B2C websites in its core functionality. Instead of focusing on sales of individual products to customers, the platforms focus on serving businesses and dealing with products in bulk. Catering to manufacturers, distributors, wholesalers and suppliers, B2B websites sell goods and services directly to businesses, often in bulk. Products may vary from fully finished products that are ready to sell or raw products which can be assembled to create a finished product. When it comes to functionality, B2B platforms focus on negotiated pricing, bulk ordering and tiered pricing systems. Payment gateways are often integrated to allow credit-based payments. The buying cycle of a B2B website is often longer and more strategic, which needs a different approach to marketing and sales, focusing on operational needs rather than impulse buying.
Some of the well-known B2B commerce sites include IndiaMART, Alibaba, Udaan and Amazon Business.
Pros of B2B eCommerce websites
B2B eCommerce websites usually have a high order volume, usually in 100,000s or more, while some of the B2B websites range from ₹20,000 per transaction. The average transaction of a B2B website is often not less than ₹10,000. This ensures higher profits. In terms of relationships with customers/businesses, they are almost always long-term contracts with ongoing supplier relations, creating recurring revenue for the eCommerce websites. With efficient B2B order management systems and streamlined workflow, systems are able to handle quotations, custom pricing and logistics through the website.
Cons of B2B eCommerce websites
B2B eCommerce websites are more complex and this is reflected in the complex navigation systems that require custom proposals, multiple decision-makers and flexible pricing. The target market is also small since it’s focused on businesses and manufacturers only, and not the wide pool of consumers. The sales usually take months since decision-making in business takes time. The journey from enquiry to sale is often longer than any B2C business website.
B2B websites are best for manufacturers, usually with multiple products or raw products, distributors and wholesalers managing and moving bulk products and industrial suppliers providing equipment or raw material to other businesses.
C2C eCommerce Platforms – Connecting Consumers Directly
C2C websites are not as common as B2C and B2B websites. C2C websites are designed for consumers to sell goods to consumers. They connect consumers to each other, sometimes offering a payment method to smooth the transactions. You can buy or sell goods or services directly from one another. These platforms in most cases act as an intermediary providing digital services or products, with infrastructure for listing, communications and sometimes payment processing, while the actual transaction may take place between users.
Most of the C2C platforms are community-driven with informal ways of making deals, making them an ideal platform for resale of second-hand goods, vintage items, collectibles and DIY products. Some of the best-known C2C platforms include OLX, eBay and Facebook Marketplace.
Pros and cons of C2C eCommerce platforms
C2C platforms are expensive to create but offer a low overhead cost with no inventory maintenance, warehousing or supply chain needs. The users usually take care of their own listings and logistics. They are also open to a large community, making them a lucrative place to sell products, increasing the chances of successful sales. Ideal for unique products like collectibles and antiques, C2C websites are also great for second-hand products and handcrafted products and hobbyists.
On the downside, there is limited control over transactions with problems such as guaranteed product quality, delivery and trust issues. Sellers may put in a product for sale, but buyers find it difficult to trust these customers with only reviews to guide them through. Customer service for C2C websites is almost non-existent unlike B2B and B2C websites, and C2C offers very minimal dispute resolutions.
C2B eCommerce Websites – When Consumers Offer Services to Businesses
C2B eCommerce websites, or customer-to-business eCommerce models, flip the traditional B2C relationship. The business focuses on individuals who offer products and services to businesses for a project or on a contract basis. More common in the service industry, this model is often referred to as reverse eCommerce and has seen an explosive growth in recent years. Freelancer marketplaces are the most prominent examples of this model where individuals monetise their skills by pitching to businesses who need their services.
Some of the popular platforms include Fiverr, Upwork and DesignCrowd – all services in the IT industry.
Pros and Cons of C2B Ecommerce Platforms
High Competition and Price: C2B platforms can be highly competitive, with multiple service providers bidding from all over the world to provide one particular service. This can cause a race to drive the price to the bottom, often creating problems. The quality of the service provided too is not consistent, as various players come with various experiences, bidding on jobs that may require precision and expertise. Users are also subject to platform policies and rules which affect earnings and visibility. On the bright side, the platform grows through user contribution and is marketed automatically. For businesses, C2B models are often cost-efficient, and they can tap into the global pool of talent. This empowers freelancers, consultants, and creatives to earn on their own terms, building a personal brand.
The C2B model is best for websites related to freelancers, consultants, coaches, and digital service providers. Some services like Elancer (freelancers.com), Upwork, and Fiverr are multi-million dollar companies and have helped build a marketplace that thrives on user-generated services.
D2C eCommerce Stores – Brands Going Direct
Direct-to-consumer eCommerce websites are a disruptive model of the B2C model, catering to the consumer directly from a brand or a manufacturer. Brands sell their products directly to consumers, bypassing traditional middlemen, retailers, and wholesalers. This allows more control over the brand experience and establishes the product the way the brand owners think fit. Cutting out intermediaries allows full control over the customer experience, pricing, and data apart from branding itself, helping brands understand customers’ needs and adjust the products and marketing according to the needs. The D2C model is growing rapidly and becoming a popular eCommerce model across private label brands, niche product creators, and startups.
Some of the notable direct-to-consumer eCommerce websites include Mamaearth, Warby Parker, and Glossier, each with their own branding, selling directly to consumers.
Benefits of D2C Ecommerce Stores
D2C businesses have complete control over brand experience. From packaging to post-sale engagement, everything reflects on their brand identity. The margins are better with no cuts to distributors, retailers, and wholesalers, and the customer data is completely owned by the brand, helping understand customer behaviour, preferences, and feedback. D2C businesses also create a tailored marketing strategy with hyper-targeted campaigns on social media, emails, and retargeting to achieve better reach and brand identity.
Drawbacks of D2C Ecommerce Stores
Direct-to-consumer eCommerce websites require heavy marketing investment on ads, SEO, influencers, and content. Creating a brand online requires significant time and resources. They are also required to manage their own logistics and fulfilment, which includes warehousing, shipping, customer service, and more. This could become resource-intensive fast. They are also slow during the early stages, and growth could take anywhere between 6 months to one year.
Who is the D2C Model Ecommerce Website Best For?
D2C eCommerce is best for people who have a unique story to tell and are willing to invest in their product in terms of time and money. Brands need to understand that this is not an overnight model where you invest money and get the required sales and recognition. Growth is slow. They are also great for companies that have a niche product like handicrafts, eco-friendly or vegan products, catering to a specific customer segment. If you are a private label brand selling to a niche audience, the D2C model is often the best path to take.
Multi-Vendor Marketplaces – Hosting Multiple Sellers
Multi-vendor stores are like a mall or a hypermarket online which sells a wide range of products from various brands and various vendors. These brands rely on other companies, manufacturers, and businesses to stock their product, with mostly no inventory stocking. Unlike D2C, which is very similar, multi-vendor marketplaces allow other sellers to sell on their platforms. Examples include Myntra, Amazon, Flipkart, Etsy, and a lot more.