10 Types of Ecommerce Business Models That Work Right Now

Ecommerce business models of all types are thriving. Sales from online stores are expected to increase 385% this decade.

It’s easy to get caught up and excited in the latest ecommerce trends, but unless you know the fundamentals, you’ll hit a profitability wall without knowing it.

A booming ecommerce business takes intuition, knowledge of your market, a solid business plan, and careful research into products and business models. But one of the biggest hurdles most newcomers to the space face is easy to solve. Many would-be ecommerce business owners just don’t know how ecommerce businesses are set up and what different types of ecommerce are available to them.

If you want to ease into an ecommerce juggernaut, I’d suggest you start a hybrid ecommerce, affiliate store. More on that later.

Types Of Ecommerce Business Models

You’ll need to familiarize yourself with each type of business model before you start your ecommerce business:

You’ll also need to identify an ecommerce platform that suits your preferred business model’s needs. In this post, I’ll walk you through the jargon.

Major Ecommerce Business Classifications

Electronic commerce encompasses all online marketplaces that connect buyers and sellers. The internet is used to process all electronic transactions.

The first thing to think about is the type of business transaction you’re going for. When you think about the business you want to run, who do you see yourself selling to? Is your business B2B, B2C, C2C, or C2B?

Do you have an idea for a type of ecommerce business that you’ve been thinking about for a while? Do those acronyms make your head spin? Let’s take a look at the most common ways online transactions occur.

B2B: Business to Business Ecommerce

A B2B model focuses on providing products from one business to another. While many businesses in this niche are service providers, you’ll find software companies, office furniture and supply companies, document hosting companies, and numerous other ecommerce business models under this heading.

B2B: Business to Business Ecommerce

B2B ecommerce examples you may be familiar with include the ExxonMobil Corporation and the Chevron Corporation, Boeing, and Archer Daniel Midlands. These businesses have custom, enterprise ecommerce platforms that work directly with other businesses in a closed environment. A B2B ecommerce business typically requires more startup cash.

B2c: Business to Consumer Ecommerce

The B2C sector is what most people think of when they imagine an ecommerce business. This is the deepest market, and many of the names you’ll see here are known quantities offline, too. B2c ecommerce sales are the traditional retail model, where a business sells to individuals, but business is conducted online as opposed to in a physical store.

B2c: Business to Consumer Ecommerce

Examples of B2C businesses are everywhere. Exclusively online retailers include Newegg.com, Overstock.com, Wish, and ModCloth, but other major B2C model brick-and-mortar businesses like Staples, Wal-Mart, Target, REI, and Gap.

C2C Ecommerce

B2B and B2C are fairly intuitive concepts for most of us, but the idea of C2C is different. What does a consumer-to-consumer ecommerce business look like?

Consumer To Consumer Ecommerce

Created by the rise of the ecommerce sector and growing consumer confidence in online business, these ecommerce websites allow customers to trade, buy, and sell items in exchange for a small commission paid to the site. Opening a C2C site takes careful planning.

Despite the obvious success of platforms like eBay and Craigslist, numerous other auction and classified sites (the main arenas for C2C) have opened and quickly closed due to unsustainable models.

C2B: Consumer to Business Ecommerce

C2B is another model most people don’t immediately think of, but that is growing in prevalence. This online commerce business is when the consumer sells goods or services to businesses, and is roughly equivalent to a sole proprietorship serving a larger business.

C2B: Consumer to Business Ecommerce

Reverse auctions, service provision sites like UpWork, and several common blog monetization strategies like affiliate marketing or Google AdSense also fall under this heading.

Government / Public Administration Ecommerce

The models listed above are the primary ecommerce retail structures, but they aren’t the only ones. Other types involve government/public administration conducting transactions with businesses or consumers.

  • B2G (also called B2A), for businesses whose sole clients are governments or type of public administration. One example is Synergetics Inc. in Ft. Collins, Colorado, which provides contractors and services for government agencies.
  • C2G (also called C2A): typically individuals paying the government for taxes or tuition to universities.

Two sectors that are closed for entrepreneur owners but are growing include G2B for government sales to private businesses, and G2C, for government sales to the general public.

Types Of Ecommerce Business Revenue Models

The next most important thing to think about is how you want to handle inventory management and sourcing products. Some people like the idea of making their own products and others hate the idea of their garage full of boxes.

1. Drop Shipping

The simplest form of ecommerce, drop shipping lets you set up a storefront and take the customers’ money through credit cards or PayPal. The rest is up to your supplier. This frees you from managing inventory, warehousing stock, or dealing with packaging, but there’s a major caveat.

How Dropshipping Works

If your sellers are slow, product quality is lower than expected, or there are problems with the order, it’s on your head (and in your reviews).

Many dropshippers use Shopify and Oberlo. Its quick and inexpensive to set up. A popular model is to set up a quick store and drive traffic with Facebook Ads. Margins are thin and if you can squeeze out some profit here, more power to you. I’m holding off on drop shipping for now, but you can make money with it.

2. Wholesaling and Warehousing

Wholesaling and warehousing ecommerce businesses require a lot of investment at the start – you need to manage inventory and stock, keep track of customer orders and shipping information, and invest in the warehouse space itself.

How Retail Works

DollarDays is an online wholesaler with a massive product catalog that includes more than 260,000 products. They employ a key strategy for retailers in this space – by offering case prices AND piece prices, they can sell to the general public and to retailers. This gives them a higher profit margin than a strictly wholesale model.

Solutions For Wholesalers

Wholesale businesses are all about volume. You’ll need to push products out to Ebay, Amazon, Google, etc. BigCommerce includes all this in their Basic plan for $29 month. No tinkering needed. If you have dev skills, you can use X-Cart

3. Private Labeling and Manufacturing

If you’ve got an idea for the perfect product, but don’t have the cash or desire to build your own factory, this might be the right business model for you. Companies that manufacture products offsite for sale send the plans or prototypes to a contracted manufacturer who produces the product to meet customer specifications and can either ship directly to the consumer, to a third party such as Amazon, or to the company selling the final product.

How private labeling works

On-demand manufacturing allows you to quickly change suppliers if you encounter problems with product quality. The startup costs are minimal, and if you’re interested in potentially opening your own production facilities later, this is a good way to test a new product or concept.

4. White Labeling

White labeling is similar. You choose a product that is already successfully sold by another company, but offers white label options, design your package and label, and sell the product. This is common in the beauty and wellness industries, but more difficult to encounter in other niches.

How White Labeling Works

One problem with white labeling is demand. You’re stuck with whatever you order, and most of these companies set a minimum production quantity. If you can’t sell it, you’ll have to live with it. Consider this option when you’re willing to work full time on your business and know your product is in demand.

A common type of white labeling is Print On Demand.

5. Subscription

One of the most popular and successful pure ecommerce brands is the Dollar Shave Club. Other examples of subscription services include Stitch Fix, Blue Apron, and Nature Box. On the local level, community-supported agriculture boxes are popular.

These companies rely on a subscription model that delivers customers a box of products at regular, scheduled intervals. Subscription companies have relatively reliable income streams and can easily incentivize customers to purchase additional subscriptions or encourage their contacts to subscribe.

Picking the right products and niches can be difficult. Successful subscription boxes tend to fall into a small handful of product categories: health and grooming, beauty, fashion, and food.  Outside of these areas, few subscription companies thrive.

Recurring Online Billing Software

I love the idea of a subscription based e-commerce model. Both Shopify and BigCommerce need additional, paid apps for subscription based ecommerce. So you’ll need something like WooCommerce Subscriptions (WordPress) or X-Cart to handle this.

Must Read:

What Model Fits Your Idea Best?

Now that you know what ecommerce businesses, product options, platforms, and business classifications exist, you’re ready to get started. Take a look at your business plan.

No matter what eCommerce business model you choose, chances are you are going to need outside funding at some point in order to scale your business. Funding solutions like Payability specialize in eCommerce businesses and offer both accelerated daily payouts when marketplaces pay on terms and capital advances based on future eCommerce sales.

If you found this article useful, please give it a share.  Keep reading the Ecommerce CEO blog for tips to help you succeed in ecommerce, from choosing your online platform to marketing your products and site. Maybe you want to know how to find your niche.

If there’s a topic you would like to see covered that you don’t see in our archives, leave a comment below.

Types Of Ecommerce Business Models

About the author

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Darren DeMatas
Darren has an MBA in Internet Marketing and 10+ years of experience marketing retail, manufacturing and Internet marketing corporations, 7-figure brands and startups online. Follow him on TwitterLinkedIn. Or take his course to learn ecommerce.

34 thoughts on “10 Types of Ecommerce Business Models That Work Right Now”

  1. BTW I was unable to leave the above comment unless I turned on my VPN and based m IP in USA (instead of Australia). Not sure why. Thanks again Adam

    Reply
  2. Thanks Darren, that is a very well written and concise explanation.
    Our current models include B2B and B2C, and as such I find myself lost in ecommerce platforms that could facilitate both models whilst syncing with social media platforms, FB marketplace, Ebay, Amazon, Amazon FBA etc; AND shipping & tracking from our two bases of white labelling and customisation engraving (Vietnam & Portugal).

    We currently have a wix site which ranks highly in our niche; however it is time to take it to the next level as we have been predominantly wholesalers and B2B (Hotels and Resorts).

    Any suggestions? Would be willing to engage you as a consultant if that is a service you provide. Thanks Adam

    Reply
    • Hey Adam – thanks for writing. I was in the middle of changing web hosts so maybe that had something to do with it?

      Sounds like a lot of requirements. B2B platforms can get complicated quickly. Especially if you need to tie directly to your customers internal business reporting systems. What are you trying to do with that?

      Also you might want to check out: https://www.ecommerceceo.com/ecommerce-platforms/

      Reply
  3. Darren, you are a great teacher and I just want to say thank you for putting together all of your experience and knowledge to help people like me learn the industry from someone who has done it over and over and knows what they are talking about.

    Reply
  4. Wow Darren, This is of a very great Help and Guiding platform for all the Newbies, further i would like to Under stand the eCommerce business in Home Services Sector, Such as Electrical, Plumbing, cleaning Etc, for both B2B and B2C. if you could give me some idea’s of how to go about this .

    Reply
  5. I am looking at an online market place for organic food lovers, using the private label route, I need advice if I want to go beyond my country.

    Reply
    • This is not something I have done. International food online might be tough.

      Reply
  6. Great explanation on these concepts. I understood immediately I read just once. thanks Darren.

    Reply
    • Thanks for reading!

      Reply
  7. Hello Darren – We are specifically looking for a mentor in setting up an online marketplace. Our group are looking at the Drop Shipping model, starting with a ‘hot’ single product, then once we gain success, branching out to other products and/or categories.

    In areas I’ve seen Drop Shipping explained, you are marking up another online store’s low, low prices (like Ali Express). However, we would rather have the online marketplace, setup orders directly to a supplier/wholesaler, then take a markup off the top (direct ship from supplier).

    Do you have a guide for pursuing this? We can figure it out, but would be much less painful to have someone who’s been through the pitfalls of this pathway.

    Reply
    • Hey Richard, Im working on a dropshipping guide, but it won’t be for a while. Honestly, i prefer the private label route – and/or affiliate marketing. As you have more control over branding and pricing.

      Reply
  8. Awesome write up. Glad i came across this at this time. i will be following you closely henceforth. Thanks for putting this valuable piece out here.

    Reply
  9. This is such a great article! Thanks Darren for doing a thorough job and also presenting it in such a clear way.

    Reply
  10. Thanks for this! We are just applying for an accelerator programme and its really help me with my business model slide 🙂

    Reply
  11. My friend suggested me to put money 6 to 12 lakes( in terms of dd) in e-commerce business, afterwards her boss will explain how to work, that money for online enterprenership, not explained in detail. But I am confused, should I spend such money or not. Darren can you suggest me?

    Reply
    • I dont understand your question. Can you be more specific?

      Reply
  12. Wow Darren, your blog is one of the best I have come across. I’ve paid for ecomm webinars that don’t even cover 1/8th of what you share in all your posts. True value and you are my new go-to for all things ecomm. Thank you sincerely for your time and efforts.

    Reply
    • Thanks, Amy! My goal is to make the best FREE ecommerce resources on the planet.:)

      Reply
  13. Great e-ccomerce guideline specially for those who wants to start a business online and have no any ideas..

    Reply
    • My goal is to include a ton of ideas so you can start implementing them. So I am glad you found this useful.

      Reply
  14. Sir what way i will start ecommerce business how many cost manpower etc pleas inform me thank

    Reply
    • I have included all this information in my free course. Sign up on the home page.

      Reply
  15. Can you discuss with me regarding E-Commerce business

    Reply
    • What questions do you have?

      Reply
  16. Excellent eCommerce guide. We are also planning to kick start from single categories and then expend to further level. Thanks for wonderful information keep guiding the world.

    Reply
  17. This is the most comprehensive guide I have read to explain ecommerce business models. We just started planning on building an ecommerce website but we have still yet to decide the categories of products we will sell and the business model that we will have. Really great writing. Thanks!

    Reply
    • Thanks for reading, Jamie!

      Reply
      • I am a startup in B2B Agro commodity market in wholesale. My website will function on Dropship pattern.
        I need guidance to launch this business.

        Thank you
        Regards
        NIlesh Teli

        Reply
        • drop shipping is not my thing.

          Reply
  18. Thanks Darren for this very informative post.
    I’ve shared it with my groups. This will help us understand what to look for in planning our eCommerce businesses.

    Reply

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