eCommerce

Which eCommerce Business Models Suit You Best?

December 30, 2021
Gist on eCommerce marketplace models!

The information in this report has been collected through secondary research after referencing Media Reports, Press releases, Business Standard, Economic Times, LiveMint, Times Now, Times of India. It is true to our best knowledge (updated December 2021), but we are not responsible for any discrepancies in the same.

Importance of ECommerce Sector

The eCommerce industry impacts micro, small, medium enterprises (MSMEs) by providing technology, financing, and training and cascading the favorable effect over to other industries. India in particular has been on an upward trajectory and is expected to surpass the US, becoming the second-largest ECommerce market in the world by 2034.

Technology has enabled innovations like hyper-local logistics, digital payments, analytics-driven customer engagement, and digital advertisements, to support the growth in the sector. The growth of the electronic commerce industry also boosts employment, increases revenues from export, provides the best products and services to the customers, and increases tax collection by exchequers in the long term.

ECommerce Growth Trajectory

This growth is indorsed by an equivalent smartphone usage, which will reach approximately 859 million by 2022. The Indian e-retail industry is projected to exceed approximately 300-350 million shoppers, stimulating the online Gross Merchandise Value (GMV) to US$ 100-120 billion by 2025.

According to Bain and Company, India’s social commerce gross merchandise value (GMV) was evaluated at US$2 million in 2021 and is expected to reach US$20 billion and US$ 70 billion by 2030, due to high mobile usage and penetration of the internet.

IAMAI and Kantar Research expect Indian Internet users to reach 900 million by 2025 with an annual compound growth rate of 45%.

What Indian government has been doing to reinforce ECommerce?

The government of India started many initiatives like Digital India, Start-up India, Make in India, Innovation Fund to support the growth of ECommerce in the country.

Global Selling in Retail ECommerce from 2014 to 2024 (in billion U.S. dollars)

Retail eCommerce was estimated at four and a half trillion USD and the corresponding revenue is projected to grow to five and a half trillion USD in 2022. The compound annual growth rate is expected to grow at 11.11% by 2025, and the average revenue per user (ARPU) is expected to grow at USD 1,017.20.

What is an eCommerce business model?

A business model is the monetization strategy – how a business should plan its resources, workouts to earn profit and minimize losses. There are six such combinations:

(1) Business to Consumer (B2C),

(2) Business to Business (B2B),

(3) Business to Government (B2G),

(4) Business to Business to Consumer (B2B2C),

(5) Consumer to Consumer (C2C), and

(6) Consumer to Business (C2B).

Let’s discuss each one of these in detail.

  • Business to Consumer (B2C) – You complete a B2C transaction when you purchase from a grocery store, eat in a restaurant, watch a movie at the theatre, or get a haircut. It is fairly straightforward when a business and consumer are directly related.
  • B2C contains five different models/methodologies – (1) Direct sellers (consumers buy from online sellers like in Amazon), (2) advertising-based (Information is made available for free and is publically displayed on the site), (3) online intermediaries (Sellers charge a percentage of every transaction), (4) community based (Make money from targeting advertisements to users based on their demographics and location), and (5) fee-based (Selling information or entertainment for a fee like Netflix, Prime Membership, Subscription-based newspapers), (6) Hybrid approach is when companies have a physical store and an online presence to maximize their customer experience.
  • Business to Business (B2B) – When a company markets its products or services to another business.
  • B2B can be broken down into two different models/methodologies – (1) Vertical, and (2) Horizontal
  • Vertically oriented businesses sell to businesses across a specific industry. In a horizontal approach, businesses are selling to customers across various industries.
  • Business to Government (B2G) – When a company markets its products and services to a local, county, state, or federal government agency. Here companies bid on projects when the government announces Requests for Proposals (RFPs). Here a local government agency can place a direct order to an eCommerce company depending upon a variety of factors like the size of the agency and its requirements.
  • Business to Business to Consumer (B2B2C) – When a company sells to another company which in turn sells it to consumers. It comprises of first business, an intermediary, and an end-user.
  • Consumer to Business (C2B) – Individuals sell goods and services directly to companies.
  • Consumer to Consumer (C2C) – Consumers sell goods and services to consumers.

Best Delivery Frameworks for your eCommerce Development Company

Five best approaches that businesses follow to endure and sustain their eCommerce businesses:

  • Drop Shipping – Businesses that focus on the front-end like store-front do not worry about managing inventory, stocking warehouses, and handling shipping.
  • Subscriptions Services – Sending products and services consistently over pre-determined intervals for an extended period.
  • Wholesaling – Ordering goods directly from the supplier, responsible for warehousing, managing, stocking, and tracking customer orders, and shipping.
  • Private Labeling – Businesses hire a third-party manufacturer to create their desired products based on their ideas and designs.
  • White Labeling – To brand and sell a product under their name but purchase and manufacture from a third-party distributor.

Conclusion: How to choose your eCommerce business model?

After a succinct understanding of the types of eCommerce business models and how they work, you can start relying on the three criteria that impacts you to move ahead – Understand your customer’s preferences, know their profiles, Understand their value proposition, interpret their business strategy, sell your products and services in a way that makes sense for your customers. Once you identify your target audience and the business model that serves your current and potential user base, assemble the correct eCommerce infrastructure and marketing tactics to calibrate your business and maximize revenue. Follow this space for relevant information on B2B, B2C, B2B2C business models.

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