You want to make money in e-commerce, but you don’t know where to begin. You have no problem finding people with online get-rich-quick schemes, but you want to build a serious business. What e-commerce business model should you follow?
There are four main types of E-Commerce: B2B, B2C, C2B, and C2C. By knowing your target audience, you can discover unfulfilled niches and find profitable ways to fill them. And while competition can be stiff, you can start your e-commerce business with a minimal financial investment in many cases.
Everybody wants to sell, but few take the time to ask what their market wants. And so I start this essay with a question: who are your buyers?
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What Are the Four Types of E-Commerce Business Models?
Business analysts and academics generally divide business transactions into four categories. These distinctions have become increasingly blurred with the rise of e-commerce and online marketplaces. But they will help you to narrow down your business options or decide where you want to aim your efforts.
For example, it doesn’t make sense to market B2B services to to new entrepreneurs who have consumer mindsets or vice versa. There are 4 main types of e-commerce
- Business to business: Buying and selling supplies or services between businesses.
- Business to consumer: Selling directly to consumers, often via your own website or an online platform like Amazon.
- Consumer to business: Selling products at cost that you buy for resale on a marketplace like eBay or Etsy.
- Consumer to consumer: Classifieds sites and online product swap communities
How you approach these types of markets will determine the type of marketing plan and business model you need to follow. Each type of business model has advantages, and disadvantages:
B2B – Business to Business
In B2B e-commerce, your target market is businesses. Wholesalers, manufacturers, and distributors are examples of B2B operations. So are software packages aimed at accounting departments and computer security auditing companies.
B2B customers have tight deadlines and expect you to meet them. They are less interested in your image than in your customer support. But if you can meet the needs of a small or a large business, you will have a loyal customer whose orders will grow as fast as their company.
Market Your Business to Small Businesses
If you want to make money in the booming e-commerce sector, remember that Levi Strauss never prospected for gold. He got rich by supplying prospectors with sturdy mining pants. The same is largely true today, no matter the industry.
Check forums for Shopify, Etsy, eBay, Facebook Marketplace, and other e-commerce platforms. See what small sellers want and figure out how you can meet their needs. And once you get a track record of sales success, don’t underestimate the extra income you can earn from offering classes to aspiring sellers.
Market Your Business to Big Businesses
Big corporations hire independent contractors and small businesses. If you have corporate experience or specialized skills, you can tap your industry contacts for continuing work in the field. Big firms will often pay top dollar for items and professionals they need for their work. If you can fill a difficult niche, you may land yourself clients with very deep pockets.
B2C – Business to Consumer
To understand the difference between B2B and B2C, consider paper towels. Your workplace handles its paper towel needs through a B2B account with a supplier. When you run low at home, you go to a B2C store like Walmart, Target, or your local bodega.
Most online businesses are built on the B2C model. You sell merchandise, apps, or services to consumers, often at a significant markup. Consumer spending accounts for 68.2% of America’s total economy, and much of that spending happens online. Platforms like Shopify have enabled many to start business empires from their bedrooms.
E-Commerce Takes Local Businesses National
Your corner bakery could be selling brownies or your local cabinet maker shipping furniture nationwide with a small ad campaign.
Getting rich online takes just as much hard work as running a brick-and-mortar business. But an online presence can provide an additional income stream and social media brand building.
You don’t need to hire a Kardashian to promote your image. Micro-Influencers—people with between 10,000 and 50,000 social media followers—have a more trusting and loyal audience than influencers with millions of followers.
Working with smaller but respected micro-influencers can be an inexpensive way to build brand recognition and win new customers.
Dropshipping Can Be Profitable – But Risky!
There are many pages promoting dropshipping as an easy way to quick riches. While it can be a good starting place for beginning entrepreneurs, it is not without risks.
Dropshipping lets you sell products you have neither seen, touched, nor bought. But if there are problems with those products from the manufacturer or they fail to arrive at all, you are responsible.
Many beginning e-commerce operations dropship from a Spotify storefront through various wholesalers using Oberlo. Shopify has an excellent dropshipping guide that will help you better understand the time and financial investment required to set up a dropshipping storefront and the steps you can take as your business expands.
C2B – Consumer to Business
C2B e-commerce is essentially when regular people offer their products or services to businesses. Perhaps the best example of C2B e-commerce is the growing “influencer” market.
Influencers make money by wearing or promoting services or products on Instagram, YouTube, and other social media, while talented or charismatic gamers can earn millions from sponsorships. Even if your social media following measures in the dozens rather than the millions, you can profit from other C2B-based e-commerce models.
During the gold rush between 2008-2014, and even to this day, special circumstances enabled consumers to sell their precious metals to businesses and other ventures offering to pay cash for these items. While this is less prevalent today, the most common types of e-commerce consumer to business models tend to revolve around lead generation.
Affiliate Marketing Lets You Earn Commissions
Amazon affiliates earn commissions on sales they drive to the Amazon website. If you know something about home repair and run a how-to-fix-it blog or video podcast, you could earn extra income simply by providing affiliate links to the products you discuss.
Many other affiliate programs will provide you a commission on sales made from your site. These programs range from excellent to spammy. All have terms and conditions you must follow, and many have traffic, financial or other requirements. So, do your research and decide which programs work best for you.
Lead Generation Earns You Money for Meeting Client Needs
Ever visited a website that offered to put you in touch with local lawyers, veterinarians, plumbers, or real estate agents? Those sites are selling leads. Professionals pay good money for information about prospective customers.
If you give those customers an informative, SEO-optimized site, you can make a good living by putting them in touch with businesses that can fulfill their needs.
If one of your fix-it viewers finds the project too complicated, they will be looking for a local handyperson. And that handyman will happily pay for a referral to the guy who needs a remodeling project repaired.
C2C – Consumer to Consumer.
eBay, Craigslist, and Facebook Marketplace are examples of consumer-to-consumer e-commerce sites. They are open forums where you can get rid of your grandfather’s old stereo or buy a couch from a departing neighbor. Many people have turned C2C site sales into a lucrative full-time career.
Taking Your Business to C2C Sites
If you are in e-commerce and aren’t selling on C2C sites, you may be leaving money on the table. Over 183 million active buyers use eBay, and over 39 million use Etsy. Facebook Marketplace and local FB buy/sell groups can also expand your business presence.
Consumer C2C sites have rules and can sometimes favor the buyer in disputes. Complaining about eBay, Etsy, and similar smaller sites has become e-commerce’s official sport.
There is certainly a learning curve in establishing a C2C business and many headaches. But these sites can provide a lucrative, if sometimes confusing and arbitrary, shop filled with interested customers.
Using Social Media To Build Your E-Commerce Business
Word of mouth and community building are hugely important for building an online brand. You can create an online presence on your Instagram, Facebook, TikTok, or other accounts.
A community where members talk passionately about your products is a great place to answer questions, solve issues and complaints, and learn more about your market. However, as you may already know, online communities are prone to drama. When you’re speaking on behalf of your business, try to stay professional even when dealing with idiots.
There are very few online ways—and even fewer legal ones—to get rich quickly. But there are practically countless opportunities for resourceful, smart, and hard-working people to make money in e-commerce. Now you know more about the different types of e-commerce business models, and you are in a better position to stake your e-commerce claim or sell blue jeans!
Also, if you’re looking to get into the world of e-commerce, be prepared by knowing the types of e-commerce fraud that are on the rise.