Which one’s best for your idea?

You have a business idea

Perhaps you’ve already begun developing it, or have even started the online business already but feel like you’re missing some underlying principles. Wherever you are in the process, it’s important to understand that at the foundation of every business is a business model. You need to know what model your ecommerce business is built upon.

Why? Because running a business involves more than just selling products or services or building ecommerce websites. Before you get to that point, you need to know the kind of business you intend to build in the ecommerce market.

Each type of ecommerce business model requires a different set of processes, systems, skills, and resources. Study the different models in this article and build your ecommerce business in the smartest and most effective way.

Value proposition

What problem do your products and services solve? How do they solve this problem in ways that are unique to your business?

For example, some people want cars that produce less pollution. But in the early days, most electric vehicles took too long to charge, had poor acceleration, and were difficult to charge away from home. Tesla solved these problems by creating its own charging network, nice looking and high-performing cars, and lower charge times.

They saw a problem and found a way to solve it.

Now, if you sell a lot of products, you may have more than one value proposition. But your overall business also has a value proposition. What is your company about? What is your mission? What can customers expect when they interact with your ecommerce company, that they won’t get anywhere else?

Pricing strategy

Whatever problem you’re solving, how much is the solution worth to your customers? Are you going for the luxury market, bargain shoppers, or somewhere in the middle? Are you going to charge flat prices, offer payment plans, use subscriptions or memberships, or something else?

How many other online stores sell similar products or services, and what do they charge? Are you serving the same markets or a higher-valued niche? Can you justify higher prices that your customers will happily pay because you deliver a better customer experience, have higher quality products, or have some other tangible competitive advantage?

Target audience

Who are you targeting? If your products solve problems faced by certain types of businesses, then businesses in particular industries are who you’re targeting, and that will affect the prices you charge. Your target market is whoever has the problem you’re solving.

And again, you may have more than one group of targeted customers, and more than one ecommerce business model. But you need to understand who you’re selling to so you can build your business strategy on the proper foundation.

Delivery model

How will you deliver your products or services? You can do this in person, all online, with shipping, using a combination of retail and shipping, with dropshipping, and various other methods. You must know how to best deliver whatever you’re selling.

Products or services

Your business can sell services, products, or both. The types of products and services you offer determine the type of model you’ll be using.

For example, suppose you want to teach online courses about gardening. You can deliver this content in written form with a physical mailing that includes a notebook along with digital files. You can deliver it via an online course platform. You can also deliver it in person at live events. Or you can do all three or various combinations.

And you might price this per course, as a bundle of courses, or with a subscription.

You could also supplement your online courses with group or individual coaching. And, you might decide to sell actual products on behalf of various garden suppliers. But you could also sell your own products as a private label created specifically for your business.

There often is no “right” business model, but hopefully you’re beginning to see how the model you choose will affect the way your ecommerce business takes shape.

In any business or organization, you’ll tend to find two kinds of people in leadership positions — visionaries and achievers. Visionaries have great ideas, but aren’t as focused on implementing them. Achievers aren’t always great at coming up with ideas, but they excel at getting things done, and done right.

Your model matters because it helps capitalize on the strengths of both types of people.

The ecommerce model you use will keep a visionary leader in check. That person might keep coming up with big ideas, and some of them might be good. But if they veer too far from your model, you can just park those ideas and return to them later.

The model also helps the achiever stay focused on the goal and the mission they’re working toward. It provides the framework on which to build everything else.

For example, if you’re a business to business (B2B) company, and someone tells you at a networking event about a great opportunity to bid on a government contract, the visionary might jump at the chance. But the achiever can remind them that your company is not a business to government (B2G) company, and working with government agencies is a completely different process than working with other businesses.

Again, it’s not to say you can’t do both. But you can’t just jump into the B2G model on a whim because someone thought it was a good idea. Here are more reasons why choosing ecommerce business models is important:

It appeals to investors

If you’re planning to raise some capital from potential investors in your business, they will want to know what model you’re using. It helps clarify in their minds what you actually do, how your business works, and what they’re really investing in.

Likewise, if you want to work with any business partners or form agreements with other online retailers and businesses in a joint venture situation, they too need to know how your business is structured and what business strategy you’re using. They need to know who they’re doing business with. They need to know more than, “We sell pet food.”

It helps narrow down your search for business assets

Knowing your ecommerce model also helps you zero in on the various tools and assets that will help your business operate and grow.

What types of vendors and suppliers will you work with? What software will you need? What internal operations systems and processes will be necessary? Your model affects your answers to these kinds of questions.

A dropshipping company, for example, will need to find suppliers who sell the types of products they want to sell, and a software platform that can sync with their suppliers.

It directs your marketing

Marketing to consumers is different from marketing to businesses. Marketing to retired consumers is different from marketing to consumers just starting their professional careers. Your business model affects your target audience. And that audience impacts your marketing strategy.

But it goes further than that. Marketing a subscription service looks different than marketing used goods, which looks different than marketing services performed in person. The systems and processes — like ecommerce content marketing, social media marketing, paid ads, etc. — required to sell and market using these approaches will be different in each case.

So the ecommerce business model you choose will affect how you do marketing.

It enables you to pivot

Market conditions change. This affects some types of businesses more than others.

For example, if your business depends on a particular type of software, what happens if that software gets updated, altered, or eliminated? What if the software company goes out of business or changes their direction?

Now, you have to change yours. Your model will point you in the direction of how to change and adapt to situations like this.

Consumer preferences and habits change. New technology emerges. Economic realities affect commerce, sometimes permanently. Other online stores emerge and the competitive landscape changes.

Ecommerce business models help keep you on track and enable you to pivot in response to changing external forces.

And in some cases, you may recognize that you need to change your model to adapt to external changes outside your control. And that’s fine if you have to do it. But it’s the recognition that you’re making changes to the core of your business that matters here.

“We’re no longer just a B2B business. We’re now also a B2C business, and here’s why.” Those are the kinds of statements you’ll make when you explain what changes are about to happen.

It helps you know what to ignore

A well-defined model keeps you from chasing after wild geese and shiny objects.

There’s no end to the pitches you’ll get from marketers telling you what your business needs. Your ecommerce model helps you evaluate which ones apply to you, and which ones have no relevance and can be quickly ignored.

You’ll also hear from friends and colleagues about some great new tool or service that helped their business, and you should use it too! Well, maybe not. Their model isn’t the same as yours. So you can just nod and say, “I’m glad that’s working well for you.”

Once you know the types of business models you can choose from, just follow this three-step process, and you’ll have the right fit.

1. Evaluate your idea

First, take a look at your business idea, your products and services, your value proposition, and your intended audience. What are you planning to sell, who is it for, and what gives you a competitive advantage?

2. Write a business plan

Next, write a business plan. This helps focus and clarify what you’re going to do, how you’ll do it, the assets and personnel required to make it happen, your initial marketing plan, the customer experience you will deliver, and projections for revenue and expenses. Will you have an online store, retail stores, a hybrid, or something else?

Writing the plan will help you answer important questions before you actually begin to work on the business, product, or service. And in this process, you’ll be forced to consider various types of ecommerce business models.

3. Find the business model that works best

As you’re writing your plan, you’ll come to articles like this one and consider the types of ecommerce business models that make the most sense for you. Pick whichever ones you want to build your business on first, and you’ll be ready to go.

So, with all that in mind, let’s take a look at some common ecommerce models. The first five models in this list are the most broad, and pretty much every business falls into one of them. Beyond that, you’ll find some specialized business models that may help you more accurately define and describe the type of company you’re building.

Business to consumer (B2C)

When the typical person thinks of a business, they most often think of a business to consumer model. This is the most common ecommerce model.

A B2C business serves consumers. Shoppers. All types of people, or some segment of the general population. If you’re selling to or serving individual people, you probably have a business to consumer model — whether you’re selling clothing, food, home repair services, yard maintenance, software, or anything else.

You may be selling to wealthy people, retirees, families, homeowners, renters, people with kids, people without kids, vacationers, car owners, non-car owners, young people, recent graduates, newlyweds, or many other demographics. Or, for businesses with a broader customer base, you could be selling online to just about everyone.

Some B2C businesses operate entirely online. Others sell through retail brick and mortar stores. And others use a hybrid model that sells in person and online.

Business to business (B2B)

The B2B model looks very different from the B2C one. Here, you’re not selling to individual people. You’re selling to other businesses. For any business to operate, they have to also buy products.

Think of something like a dentist. The dentist uses a business to consumer model, and is a service-based business. But the dentist has to buy all sorts of products to keep their clinic running. They have to buy cleaning supplies, dental equipment, x-ray films and machines, floss and toothbrushes, splash guards, mirrors, specialized lighting, and many other products and types of equipment.

All that stuff gets sold to them by other businesses using the business to business approach.

In fact, most dentists also have websites and do some sort of marketing. The companies managing their websites, their search engine optimization (SEO), print marketing, email marketing, PPC, social media, and whatever other marketing they may be doing are, for the most part, using the business to business model.

Woo is a B2B business, offering an ecommerce platform tool that companies can use to sell products and services using a variety of extensions, digital assets, and marketing education.

Just like B2C businesses, B2B businesses also tend to have particular target markets. They typically sell products to certain types of businesses. This could be small businesses, corporations, retail businesses, or local businesses. This could also be by sector, such as automotive businesses, roofing companies, restaurants, software businesses, marketing companies, hospitals, insurance companies, and any other industry you can think of.

Consumer to business (C2B)

The C2B model isn’t as commonly discussed, but due to the internet, there are more and more businesses using this model than ever before.

With consumer to business, you have an individual selling services to a business. In some ways, this can look like a B2B business, and you’re marketing to businesses if you use the C2B model. But since these tend to be mostly lone service providers, they don’t look like traditional businesses. They’re more commonly thought of as contractors.

Their business clients might pay a fee for service. Or, they might pay hourly but on a contract basis. It’s common for a C2B business to have their own service contract that may or may not get customized for each business they work with.

Here are a few well-known types of consumer to business companies:

Influencers

Social media influencers offer the service of publicity to businesses who want to make their brand more well known. The influencer pitches a product or service from that company, or just touts the brand itself, to their followers who tend to respect and appreciate their opinion and perspectives.

The business will often send a product to the influencer, who will then use it and talk about it to their followers. They may even create videos showing themselves using the product.

However the details play out, this is an individual offering their ability to publicize a product to businesses who align well with the demographics of the influencer’s followers.

Freelancers

Due to businesses such as Upwork, a whole host of freelancers has arisen in recent years. You can go online to find graphic designers, copywriters, developers, consultants, book cover artists, translators, and many other freelancers who offer services that are useful to businesses.

Photographers

Photographers and graphic designers can use websites like Shutterstock and Pixabay to sell their photos and visual creations. These are individuals selling assets that are useful to businesses for marketing purposes.

Consumer to consumer (C2C)

The consumer to consumer model is a bit more difficult to make work on a sustained basis where this is your only source of income, but some have figured out how to do it.

This often looks like resellers using an online marketplace such as Amazon, eBay, Etsy, or even Facebook marketplace The seller procures used or barely-used items and sells them through these types of outlets.

Sometimes, they hand-craft their own products and sell them individually on these same online marketplaces, which function for them as their ecommerce website.

If you have access to a steady stream of products you can sell through online marketplaces, you can create a viable income stream using the C2C model.

But again, this is a difficult model to scale, and tends to work better as just one of several income channels.

If this model is interesting to you, consider making WooCommerce your home and utilizing proven extensions to also sell on other platforms for maximum exposure and efficiency.

Business to government (B2G)

The last of the five most broad types of ecommerce business models is the B2G model. This model gets its own category because working with government agencies is very different from working with businesses or consumers.

In some cases this can feel like the B2B model if the government just calls you up and asks to purchase your products or services. For something like an office party caterer, serving a government office probably won’t look that different from serving any other business or consumer.

But typically, when businesses work with the government they have to bid for the job. You may have to formally respond to a request for proposal (RFP) and jump through a variety of hoops to win the job. The process tends to move slower because things have to get approved and vetted in ways that don’t matter to regular businesses. Government contracts are just a different animal.

And, with the business to government model, it’s harder to scale up. Winning a job with one or a handful of government agencies doesn’t necessarily mean you’ll have an easier time getting a deal with another department. There are exceptions to this, but in general, it’s a difficult model to pursue if your goal is to steadily increase your ecommerce sales.

A note about common business models

It’s worth a pause here to make a few things clear that you may already be wondering.

Yes — the same business can utilize more than one model. For example, you may have a thriving B2B business, and then you hear about an opportunity