Last updated on June 7th, 2021
The eCommerce Business Model can be described as a collection of principles that enable online business owners to manage and sell their goods or services globally without incurring additional costs.
The eCommerce Business Model can have a number of advantages and disadvantages. The key benefit of the eCommerce Business Model is that it will allow online business owners to access international markets without incurring any additional operating costs.
As eCommerce is a highly trending industry, one of the best decisions you’ll ever make is to start an eCommerce business.
An eCommerce company not only expands your product market, but it also helps you to customize your customer experience. And moreover, the eCommerce business will usually have low start-up costs.
Most business people will find it difficult to select the best business model for them. Finding the right model is critical because it is one of the most important factors which will affect the company’s long-term performance.
This article compares the two most common eCommerce business models (i.e B2C model and B2B model) as well as their benefits and drawbacks. As a result, you’ll be able to determine which model best suits according to your budget, level of experience and time constraints.
B2C Ecommerce Business Model
The B2C eCommerce model is a form of a retail model wherein goods and services are sold to the end customers. This model is recommended for new eCommerce business owners.
Despite the fact that it is a conventional model, B2C eCommerce has recently gained a lot of traction. The rise in popularity is due to the fact that more people are opting to shop online rather than visiting physical stores because of the convenience it brings in.
And moreover, Covid19 has made it compulsory for business owners and customers to sell and purchase goods online.
Benefits of B2C Ecommerce Business
There are three major benefits of the Business-to-Consumer model:
It has low startup costs
B2C eCommerce companies are highly cost-effective. In reality, if you use dropshipping, you can start this eCommerce business without any cost.
Increases sales volume
With B2C eCommerce you can have regular sales and as a result, revenue will keep on flowing, ensuring that the company owners have a constant stream of income.
Although the B2C eCommerce model is not that passive, a business owner can still make a lot of money even while sleeping. This is made possible by the fact that business will be available all the time i.e 24/7.
Some Disadvantages of B2C Ecommerce Business
Two drawbacks of the B2C eCommerce business model are as follows:
It needs better customer service
As more people buy online, their expectations for better eCommerce service will rise. As a result, you have to deal with more questions, order inquiries, concerns, and even product purchase returns and exchanges if you use a B2C eCommerce business model.
Without a second thought, it’s a highly crowded marketplace because you’re not the only business with a well-established B2C eCommerce model.
Some online retailers have more robust and stable B2C website designs. As this is a competitive market, making it a very difficult niche to break into, especially for new business owners.
B2B Ecommerce Business Model
The B2B model includes selling goods and services to other companies and you wont be dealing directly with end consumers.
This form of eCommerce is now growing faster and stronger than the B2C model. Selling office equipment, electronics, and software to other companies is an excellent example B2B eCommerce.
A business owner may choose to sell existing goods or their expertise to other proven businesses using this Business-to-Business model. Alternatively, an individual may produce their own goods and then sell them as a wholesale to other businesses.
Benefits of B2B eCommerce Business Model
The following are the most important advantages of B2B eCommerce web design:
It enables bulk orders
Companies, without a doubt, make more bulk transactions than end consumers. As a result, the Business-to-Business model is more likely to generate greater orders than the Business-to-Consumer model. Bulk orders will usually result in higher sales and earnings.
It promotes faster market growth
B2B eCommerce is rising at a faster rate than B2C eCommerce. This means that companies that use this eCommerce business model have a better chance in terms of developing and growing their business.
It promotes a high level of consumer intent
Consumers in the B2C eCommerce model are more likely to search a lot before making any purchase. Businesses, on the other hand, are more likely to make transactions while looking for goods or services.
Disadvantages of B2B eCommerce Business Model
The following are some of the drawbacks of the B2B eCommerce model:
There is no doubt that it generates more money because of the bulky orders made with the B2B eCommerce business. But the time it takes to process is usually longer resulting in less sales over time.
It is characterized by increased market competitiveness
Because companies buy in bulk and resell at a profit, they are still searching for a better offer. Furthermore, when they buy in bulk, they have more bargaining power. As a consequence, all of this leads to increased retail price competitiveness, ultimately resulting in lower income for you.
To run a B2B business, you’ll need a thorough understanding of how this business operates. This is why B2B business can be difficult for beginners in the field of e-commerce.
Which eCommerce Business Model to Choose?
Other classifications exist in addition to the B2C and B2B eCommerce business models, such as the Consumer-to-Consumer (C2C) and Consumer-to-Businesses (C2B) models. A business that sells household items on sites like eBay is an example of the C2C model. A C2B model, on the other hand, is for example when an Instagram influencer sells his or her popularity/influence to other businesses.
Both of these business models are successful to some extent, but they cannot compete with B2C and B2B eCommerce. In 2021, these two models will definitely continue to be the most effective and recommended eCommerce business models.
But how do you know which of these two business models is right for you?
The first thing that you can do is figure out whom you’re going to hit i.e your target audience.
Will your company concentrate on one-on-one relationships with customers? Or will you market your goods and services to other businesses that are already established? Ask these 2 questions to yourself and get the answers for them.