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Ecommerce
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May 16, 2024
HatLaunch generates 75% of revenue from digital advertising spend across Google and Facebook, which Clearco funds
The ecommerce business model you choose for your company will depend on what you’re selling and who you’re selling it to. Marketing, sourcing inventory, customer service, and even the structure or setup of an office can change depending on the type of ecommerce business involved. There are different ecommerce types and different target markets for ecommerce businesses, each one with its own requirements for setting up shop, keeping the shop running, and reaching customers to buy. For businesses, these include:
This guide will go into detail on the most commonly used ecommerce business models, when they are best used, and some examples of the ecommerce businesses that use them.
Business-to-consumer, or B2C, is sometimes referred to as direct-to-consumer (DTC), as well. Direct to consumer is probably the most familiar type of ecommerce business model, as we interact with it on a regular basis. In B2C, a business sells a product directly to the end user. This sale can be made on marketplaces like Amazon, Walmart, or Etsy (which bring in a steady stream of customers, the American shoppers who spent a whopping $3.065 billion online every day in 2023) or via a direct sale on a platform like Shopify (where sellers bring home more profits, but will need to bring in customers).
B2C is a popular option for ecommerce businesses: the number of users in the US B2C ecommerce market is 61.4 billion, This number is continuing to grow, with ecommerce retail sales topping 285 billion in 2023. This gives new sellers plenty of room to capture market segments and share their products, services, and goods.
One of the downsides of B2C is increased competition. To offer some idea of scale, there are 2.18 million live storefronts on Shopify and over 1.9 million Amazon selling partners competing for $300M in global sales - and in each search, the customer doesn’t usually click past the first page. With so much activity in the market, there are often alternate suppliers offering similar goods. This is true whether your product comes from wholesalers, overseas suppliers, or is manufactured in house.
This means clever marketing is essential in B2C. Consumers are more likely to make quick decisions, be swayed by feelings like excitement or envy, or change their mind based on price. The brand, approach, and strategy behind a B2C business all need to be well defined (or at least adapted as the business grows) to meet the needs of the target customer.
Examples of B2C businesses include direct sellers like Amazon, Walmart, Best-Buy, or Etsy. They also include companies like Facebook, services like Spotify or Audible, apps, software, or subscription memberships like Netflix or Disney+.
Business-to-business, or B2B, is another major option in the ecommerce world: businesses selling to other businesses, not the end user. B2B ecommerce revenues in the United States topped 4.2 billion in 2021. Buyers are usually other businesses, who either use the purchases as part of their own operations or resell them as private label or wholesale goods.
Business customers often have more specialized needs, which lowers the pool of competition considerably. B2B customers make decisions based on supplier relationships, have a more thorough vetting process for vendors, and spend more money each time they buy.
Examples of B2B vendors are wholesalers like the ones found on Alibaba, sellers of bulk office supplies like Uline, or business software like QuickBooks.
Ecommerce businesses can also be B2G or B2A (the terms are often used interchangeably). This is when an ecommerce business sells primarily to administrative or government bodies. For example, payroll solutions for State governments or filing software for the IRS.
B2G/A business models have a higher barrier to entry and less competition. Those qualified as vendors by government agencies or administrative bodies enjoy the longer-term contracts, and high spend, of these agencies. The US Federal Government, for example, spends as much as $18-42 billion per day.
Each of these business models have pros and cons. The best option will be the one that fits the business as a whole and where product offerings best fit the needs of the market. One ecommerce business can sometimes have multiple product lines, and these can cross the boundaries between markets as well.
Imagine a company that makes keychains and lanyards: pretend they call themselves the “Stanley of keychains” for their indestructible build. The company has an Amazon storefront geared towards US buyers and lanyard enthusiasts (B2C). The company also has a wholesale portal for retailers, which leads to a bulk purchase from a big box store (B2B). Since the company’s lanyards are so popular with shoppers, the “Stanley of keychains” makes a second online portal for custom orders. It approaches US colleges and offers to co-brand the lanyards with the college names - just in time for March Madness (B2A).
The example above is one example of just how varied – and how specific – your ecommerce business can be. Notice the company in this example has thought carefully about who its market segments are, and how it can change the product, service, or even timing of its marketing efforts to cater to each one.
Understanding these ecommerce business models can reveal the most lucrative opportunities for your business. Finding product market fit in another market, or adding a new customer segment, might be all that’s needed to unlock the next level of business growth!
Kristen is the co-founder and Director of Content at Skeleton Krew, a B2B marketing agency focused on growth in tech, software, and statups. She has written for a wide variety of companies in the fields of healthcare, banking, and technology. In her spare time, she enjoys writing stories, reading stories, and going on long walks (to think about her stories).
