E-commerce has a simple definition: Buying and selling goods and services online. But there are several different types of e-commerce. Understanding the different forms of e-commerce is useful for anyone looking to launch their own business. It can help you better understand the different avenues that your business can take.
- You can sell goods and services online using e-commerce.
- Depending on your needs and business model, you may choose different types of e-commerce.
- Consider what you’re selling, who you’re selling to, and at what scale when you choose your e-commerce type.
What Is E-commerce?
Everything, from the online sale of everyday products to financial services like investing in stocks, is done through e-commerce. While Amazon may be the biggest name around when it comes to selling online, your local mom-and-pop shop is probably selling its goods online.
The ability to buy and sell goods and services online has opened up a massive market for both sellers and consumers, allowing businesses to reach customers worldwide and those who enter their brick-and-mortar stores.
For consumers, e-commerce opens up a whole new world of possibilities for purchasing goods and shopping around for the best prices and services.
The e-commerce market is huge. In 2022, e-commerce constituted 20% of all sales worldwide. That percentage is only expected to grow in the years ahead.
What Are the 6 Types of E-commerce?
While e-commerce broadly refers to the idea of selling goods and services online, there are different types of e-commerce, typically defined by who is selling and buying.
If you are starting an e-commerce business, understanding these different types of e-commerce is essential to defining your business and identifying your market.
There following are the six different types of e-commerce:
- Business-to-Consumer (B2C): The most common form of e-commerce, and the one you have likely engaged in the most, is business-to-consumer. This is when businesses establish online storefronts and shops to sell their goods or services directly to consumers. A business-to-consumer e-commerce business can take many forms and sell many different things. Still, the target market is always individual consumers interested in the goods or services offered.
- Business-to-Business (B2B): Business-to-business e-commerce sells goods and services from one business to another. Business-to-business transactions can be services rendered or goods sold, often in large quantities, to another business that may sell those products directly to consumers. Wholesale sellers are often business-to-business companies, and e-commerce allows businesses to reach a wider audience of potential buyers.
- Consumer-to-Consumer (C2C): Consumer-to-consumer e-commerce is typically seen as an online marketplace. Think Etsy, eBay, or Facebook Marketplace. A consumer-to-consumer sale involves one consumer selling a good or service directly to another. It’s a model best utilized for one-off transactions or smaller quantity sellers but can be used to create a larger business.
- Consumer-to-Business (C2B): Consumer-to-business sounds backward, but there are opportunities for individuals to sell goods or services directly to businesses. This often takes the form of doing contract work for a company. Companies may hire an individual to design a logo or optimize their website. Participating in an affiliate marketing program also falls under the header of consumer-to-business e-commerce.
- Business-to-Administration (B2A): Business-to-administration e-commerce occurs when a business sells its goods or services to a public administration like the government. This can be the sale of goods like office supplies but may also come in the form of services performed. Business-to-administration e-commerce often allows businesses to bid on open contracts made available by an administration.
- Consumer-to-Administration (C2A): Consumer-to-administration e-commerce is best understood as the way that individuals may interact with institutions. It is a transaction like filing taxes or scheduling an appointment with a doctor. Distance learning or eLearning would also fall under the category of consumer-to-administration e-commerce.
Choosing Your E-commerce Type
You’ll want to consider several factors about your business as you decide which approach to take. Consider the following when making your decision:
- What Are You Selling? Before making any decision about your customer base, you’ll want to figure out what it is that you’re selling. Understanding what you are offering and how reliably you can provide that product is essential to determining your business’s details. Figure out what you want to sell before making decisions about your business model.
- Who Are You Selling To? Once you know what your product is, you can start to focus on who your audience is. Will your product serve consumers directly, or will you sell it to other businesses? Consider the expectations of each potential audience and who you would most like to serve with your product. Your best shot at success comes from understanding your product and how it helps your customer. Target an audience you can speak to and understand.
- How Much Can You Produce? Some products lend well to scale. They can be manufactured fast and sold to many people or in large quantities. Other goods or services are more specialized. Determine a feasible scale for your product as well as what your production capabilities are. The last thing you want to do is produce too much of something with little demand or too little of something with high demand.
- What Does the Market Look Like? To make the most of your e-commerce business, you must understand the rest of the market and your potential competitors. Are you offering something that they aren’t? Is there room for your product alongside others like it? More established businesses may have an advantage against you if you are entering a crowded space. Conversely, if you seek an underserved market, you may ask why no one fills the void you’ve found. Perhaps there is a reason no one else is trying it. Get a full look at the landscape before you decide on your business.