Classification of Business Models in EC
Electronic commerce, or e-Commerce, is a business model that lets businesses and consumers make purchases or sell things online. There are six major e-Commerce business models:
- Business to Consumer (B2C)
- Business to Business (B2B)
- Business to Government (B2G)
- Business to Business to Consumer (B2B2C)
- Consumer to Consumer (C2C)
- Consumer to Business (C2B)
We’ll review each of these six business classifications in depth and dig into the five primary delivery models that you will need to consider when launching or expanding your online store. For more insights, see 5 inspiring e-commerce business models with examples.
Business to Consumer (B2C)
Business to consumer (B2C) marketing is when a company sells its products or services directly to consumers. It is the most well-known type of business. B2C e-commerce is rather simple. Every time you buy groceries, have supper at a restaurant, go to the movies, or get your hair cut, you’re engaging in a B2C transaction. You are the end user of the goods and services that these businesses provide.
Direct sellers, online intermediaries, advertising-based, community-based, and fee-based are the five different B2C models in e-Commerce:
- Direct selling – When consumers buy products from online retailers.
- Online intermediaries – Online businesses that bring sellers and consumers together and take a cut of each transaction made.
- Advertising-based – Information is given away for free and money is made from advertising on the site.
- Community-based – For example, Facebook makes money from targeting ads to users based on their demographics and location.
- Fee-based – Companies that sell information or entertainment to consumers for a fee, like Netflix or subscription-based newspapers.
Online B2C sales have been increasing in recent years. As buyers turn to the internet for their needs, many conventional brick-and-mortar stores have either closed or shifted their strategies to include digital channels.
When a company has both a traditional brick-and-mortar presence and an online shopping platform, this is referred to as a hybrid approach. To improve the consumer experience, several businesses combine these tactics with an omnichannel e-commerce strategy. Some companies, for example, now allow you to order things online and pick them up at one of their local locations.
Many businesses also allow customers to return items purchased online to local locations for a rapid refund or exchange. Businesses must rely on a platform that can quickly alter and adapt to new client needs without incurring service delays to successfully deploy the B2C e-Commerce model.
Business to Business (B2B)
As the name implies, business to business (B2B) is when a company markets its products or services directly to other businesses.
B2B e-commerce can be broken down into two methodologies — vertical and horizontal.
- Vertical – Selling to customers within a specific industry.
- Horizontal – Selling to customers across a myriad of industries.
Each approach has its own pros and cons, such as industry expertise and market depth (vertical) versus wide-spread market coverage and diversification (horizontal).
Both can be lucrative, but your strategy will depend on your products and customers. Historically, B2B businesses lagged behind their direct-to-consumer counterparts, especially in commerce innovation and digital sales, because of price negotiation and reliance on sales representatives.
The modern B2B buyer has become tech-savvy and now shares many demands and buying habits with regular consumers — convenience, flexibility, personalization, and integrated experiences are now business-critical.
Despite slow adoption of digital strategies, B2B brands are increasingly focusing on e-commerce. A Gartner report states:
"By 2025, 75% of B2B manufacturers will sell directly to their customers via digital commerce."
Business to Government (B2G)
When a corporation offers its products and services directly to a government agency, this is known as business to government (B2G).
This organization could be municipal, county, state, or federal.
Examples:
- An ammunition company selling to the US Army.
- A private engineering firm selling services to a county government to create a new water and sewer infrastructure.
Companies often bid on projects when governments issue Requests for Proposals (RFPs). Working with government entities is different from other sectors — transactions occur at a slower rate due to bureaucracy. While some purchases can happen directly on an e-Commerce website, most involve formal processes.
Business to Business to Consumer (B2B2C)
A company sells things to another company, which then sells them to consumers, in B2B2C e-commerce.
Example: A wholesale distributor sells items to retail stores, which then sell them to end users. The first business (product origin), a middleman, and the final user are all part of the model.
B2B2C can also involve partnerships where a company pays another business a commission for each sale. The main advantage is acquiring new customers, which is important for new e-commerce businesses looking for rapid growth.
Consumer to Business (C2B)
In the C2B e-commerce business model, individuals sell goods and services directly to companies.
Common example: Websites like Upwork where freelancers offer services, and businesses hire them through the platform.
Another example is influencer marketing platforms like Upfluence or GRIN, which connect brands with individuals who can promote them on social media.
Benefits: Consumers can set their own price and often gain wider reach and visibility.
Consumer to Consumer (C2C)
In C2C e-commerce, consumers sell goods or services directly to other consumers. This is often facilitated by third-party websites like eBay, Craigslist, or Etsy.
These platforms allow smaller businesses or hobbyists to sell products without managing their own online store.
Top 5 Frameworks You Can Use for Your e-Commerce Business
So, once you’ve figured out which business model actually works for you, the next big thing is deciding how you’re going to get products into customers’ hands. There’s no one-size-fits-all answer here — it depends on your budget, how much control you want, and how much time you’re willing to spend on logistics.
Here are five pretty common routes people take:
- Drop Shipping – You don’t touch the products at all. A third-party supplier handles storing, packing, and shipping. You just focus on selling.
- Subscription Services – Instead of selling once, you send products to customers on a regular schedule. Think of something like meal kits or coffee subscriptions.
- Wholesaling – You buy in bulk from suppliers, keep the products yourself, and ship them out when orders come in.
- Private Labelling – You work with a manufacturer to make your own product designs, and then you sell them under your own brand.
- White Labelling – Similar to private labelling, except you take an existing product and put your branding on it.
Choosing the Right Model
Here’s where a lot of people overthink it — but really, it boils down to a few simple things:
- Know your customer – What do they actually like? How do they shop? What annoys them?
- Know what you’re bringing to the table – What makes you stand out? What’s your strong suit? And yeah, be honest about where you’re weak too.
- Match the method to your situation – If you make your own products, that’s one route. If you’re just distributing, that’s another. The “best” option is the one that makes the most sense for your customers and how you operate.
