Different types of e-commerce models

23 Jan, 2015

When you hear the word ‘E-Commerce’, you tend to think of companies like Flipkart, Snapdeal, Alibaba and Amazon. These companies are generally considered to have a homogeneous business model which is broadly similar in nature across all of them. But the fact of the matter is, different e-commerce companies operate on different models.

An Ecommerce business can have a completely unique model on the basis of following:

  • Who is selling to whom?
  • What they are selling?
  • Where they got it from?
  • How are they completing the transaction?

And a unique combination of these criterias is what gives a business its special leverage within a given market. The type of business model chosen also has lots of implications on operations, cash flows and in determining how sales and marketing are being positioned by the company.

Here are the most common models which are prevalent these days:

1) Business-to-Consumer (B2C)

Common notion about e-commerce is that it is a business selling something through an online interface to a consumer. And this is the Business-to-Consumer (B2C) model. The most widely known ecommerce businesses, such as Flipkart, Amazon, etc. are ones where a retailer sells directly to a consumer.

2) Business-to-Business (B2B)

Business-to-business (B2B) refers to a business (the e-commerce retailer) selling directly to another business. The seller can sell goods or services that are used by the recipient to run their business. It may be as fundamental to their business as selling iron to a construction company, or as supplemental as selling coffee to be consumed by employees. Wholesalers like subsidiaries of Alibaba and IndiaMART typically sell B2B.

Simply speaking whenever the end user is itself a business that’s using the products the retailer is selling to augment its business operations, the relationship is termed as B2B.

3) Consumer-to-Business (C2B)

In a consumer-to-business (C2B) model, consumers sell products and services to businesses, instead of it being the other way around.  Example - Freelancer websites, where the end-user lists jobs that businesses (either individual or larger businesses) can buy from them. In a way, job portals are also C2B as here, the ‘end-user’ (the prospective employee) lists their ‘product’ (resume) to attract businesses to hire them.

4) Consumer-to-Consumer (C2C)

In a consumer-to-consumer (C2C) model, the ecommerce website serves to facilitate the transaction between two consumers. Auction sites such as eBay (specifically when items are sold by individuals, rather than businesses listing products for auction) is a classic example of C2C e-commerce model.

Apart from these 4 major models, there are 2 more models where one of the entities is Government. These models are:

5) Government - to - Business (G2B)

Government uses B2G model to approach business organizations. These models support auctions, tenders and application submission functionalities.

6) Government - to - Citizen (G2C)

Government uses G2C model to approach citizens directly. Examples for such models can be websites providing services like registration for birth, marriage, etc. A main objective of G2C websites is to reduce average time for servicing people’s requests for various government linked services.

It should be noted here, that it’s not necessary that a business will use just one of the models. In fact, many of the most successful ecommerce businesses use a combination of these methods in different permutations. So if you are looking to start your own e-commerce venture, do make it a point to critically evaluate all these models before taking the dip.

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