There are many different types of eCommerce businesses, each with its own pros and cons.
Once you've come up with some eCommerce business ideas or subscription box ideas and committed to starting an eCommerce business, you need to decide on your business model. This task can seem daunting, but it doesn't have to be.
We've broken down the various types of eCommerce businesses, how they work, and why you may want to choose one over the others.
Different Types of eCommerce Businesses
There are four traditional types of eCommerce businesses. Some sell products and some sell services, but they all operate online.
Here they are:
- Direct to consumer business model (D2C). What is D2C? It's the most common form of eCommerce business. This model features businesses selling their products or services directly to the end consumer. Order values are low and recurring orders are less common, but the market is large and sales cycles are short. Many of the most profitable eCommerce businesses are DTC.
- Business to business model (B2B). The B2B business (see what is a B2B company) eCommerce model features businesses selling to one another. It is known for having order values and quantities that are high, but the market for selling wholesale is much smaller than D2C. If you choose this route, make sure to pick up a wholesale dealer license to avoid any trouble.
- Consumer to business model (C2B). This model may sound odd at first, but it is a growing and profitable field. C2B eCommerce has individuals selling their products or services to businesses. Affiliate marketing and freelancer websites are common forms of this model. This model is known for competitive pricing among sellers and businesses can make money off of fees from transactions.
- Consumer to consumer (C2C). The C2C model is also called an online marketplace and allows individuals to sell their products and services to one another. The business itself hosts the marketplace and takes a small fee for each transaction between consumers. This model is unique, but you'll still need an eCommerce business license if you want to operate one.
Picking an eCommerce Business Model
Now that you know the different types of eCommerce businesses you can choose from, you need to pick the one that works for you.
Here are four steps you should take:
- Choose your customers. Do you want to sell to businesses or to individual consumers? This decision will steer your entire eCommerce business plan. Businesses order more slowly, but in higher quantities. Individuals order quickly, but each sale comes with less revenue.
- Define your capabilities. Reflect on your starting capital, pre-existing knowledge of the product or service you want to sell, and your technical limitations. Biting off more than you can chew at this point will make things harder down the road.
- Pick your offerings. You may be offering a service that can be performed remotely or in person. Or you may want to produce your own products or resell or distribute another business's products. Whatever you choose, make sure you understand your costs so you can set proper prices and ensure a profit. If you're looking to start a trendy business, look into some of the best eCommerce books or read an eCommerce blog to learn what the markets are into.
- Position your business. Establish how you'll get your products or services in front of customers and what makes you stand out from the crowd. This step will be key when it comes time to work on your B2B marketing or DTC marketing plan.
Best Types of eCommerce Businesses
There are many options for your new eCommerce business that can lead to success. However, trends show that some models are likely to be more lucrative than others over the next few years.
Here they are:
- Dropshipping. It's easier than ever to start a business, but warehouse space is expensive and cost-prohibitive for many. To avoid warehousing costs, many entrepreneurs are turning to dropshipping. This model passes along all fulfillment duties to a third party while the sales are still conducted by the eCommerce business. You should still pick up some eCommerce business insurance so you don't lose out if product gets damaged or causes trouble upon receipt.
- Kitting. This model involves combining SKUs to be sold in bundles for a single price. By creating a kit that combines low performing items with popular ones, you can sell off inventory at risk of becoming dead stock (see dead stock meaning). You can even participate in private label kitting and sell a manufacturer's products under your own brand name.
- Online marketplaces. Whether a B2C or B2B online marketplace, these sites are continuing to grow year-over-year. They take away the effort of having to build your own eCommerce site from scratch. They also give you access to a large pool of buyers for little cost. You still receive the eCommerce payment, then just pay a small fee to the site. They look a lot like an online line sheet.
- Wholesale product sourcing. In this model, you'll sign a contract with a supplier and resell their products through your own online store. You need to have more startup capital to secure the products, but profits are high as you set the markup price. Using a B2B eCommerce platform is a great way to adopt this model, buy wholesale products, and connect you with prospective customers.
- Subscription services. This model has seen rapid growth in the past few years and more consumers are turning to subscription services to automate their purchasing. From disposable razors to international snacks to a coffee of the month club, these services can be as broad or specific as you want. If you’re a food business, you can even use the BlueCart Food Subscription Platform to grow your sales quickly and easily.
Give ‘Em the Business
You can build an eCommerce business in many ways and still make a profit. What you choose to do depends on the products or services you want to offer and what capabilities you have. If you lack storage space you can participate in models where fulfillment is handled elsewhere. If you have deep pockets you can become a reseller with a high markup. For more information, read our full guide on how to start an eCommerce business and learn how to calculate important metrics like your fill rate.
Regardless of the model you choose, make sure you start with a solid eCommerce business plan and pick the right platform. For wholesale food vendors, the BlueCart Digital Storefront is the ideal choice and allows businesses to make wholesale sales, sell direct to consumers, or both. It's even got great SEO for eCommerce product pages, so each item can be found easily.
Once you've settled on a business, make sure to open an account with one of the best banks for eCommerce business and invest in eCommerce accounting software. Your budget will be lean in the early days so protecting your money is imperative. You probably shouldn't hire an order management specialist early on.