Basic E-Commerce Business Models – Understanding B2B, B2C, B2G and Others

Filipino Millennials are finding ways to break into the industry of their choice through e-commerce. Today, more and more businesses are taking advantage of the benefits of social media to get a glimpse of what’s in demand and what customers look for in a service or product.

There are numerous opportunities for people willing to take a leap of faith to start their company. However, managing a business is not that simple. It takes a deep understanding for startups to maximize their true potential.

Learn about the most popular e-commerce models for business startups and see which one resonates with your business style the most!

Business-to-consumer (B2C)

The B2C business is the most common e-commerce model for startups. Essentially, it focuses on selling products or services to consumers through an online store or platform. It’s simple to understand and even easier to be a part of. It’s also flexible in that B2C businesses can survive with minimal marketing. However, brand awareness and publicity are important aspects that shouldn’t be underestimated. Expect to enter an extremely competitive market if you invest in B2C.

Business-to-business (B2B)

With B2B businesses, logic triumphs all. This e-commerce model focuses on marketing products or services to other businesses (startups and corporations) on how said services can financially benefit them.

Think of it like this:

  • Business B buys a 12-month license from Business A for their software. This purchase ensures that Business B can see a return on investment because of how they plan to utilize the provided software.
  • Business D buys a bulk of bananas from Business C. With this purchase, Business D can split the bulk for its two stores: One that makes desserts and one that simply sells fruits in a remote area.

In other words, B2B is concerned with companies providing a way to earn or improve profits. It’s commonly used by industries that rely on raw materials and e-commerce services.

Business-to-business-to-consumer (B2B2C)

B2B2C may seem like a mouthful, but the concept is quite simple to understand. Basically, it’s a model that focuses on getting a brand’s products to a consumer using an intermediator. For example, Sports Central, a store that carries sportswear from well-known brands like Adidas and Reebok. Though these two brands primarily sell their wares through their respective stores, they both know the value of exposure. Middleman stores, like Sports Central, can maximize the sales potential of their products because, as intermediaries, they are a hub for brands of similar wares.

Government e-commerce

Also known as business-to-government or B2G, this model name may come off as politically driven. But in reality, B2G focuses on providing services to government entities and agencies. It’s not as popular as the other models due to the bureaucracy of working for governments, but there are opportunities for profit here if you manage to land a decent contract.

Direct-to-consumer (D2C)

It’s as straightforward as it goes with this model. Small businesses use D2C to target audiences they can reach, such as limiting themselves to a city or specific places. But it’s not just the convenience that makes D2C popular. The lack of an intermediator in this model means that companies can be intimate with their clients, building a reputation that feels more honest. Of course, the business needs to make an effort to go without an intermediary. But startups that do this right can last long through sheer determination and positive word-of-mouth.

What is Value Delivery Method?

Now that you’ve learned all there is to know about e-commerce models; the most natural transition is knowing the best value delivery method to utilize for your business.

Value delivery methods focus on how your product can bring the most value to customers using it. Essentially, it’s all about how you present the quality or the exclusivity of what your business is selling. For example, if you’re selling a subscription for weekly meal bowls, your value delivery method are the weekly meal bowls. If you’re selling a video game console, then you’re selling the technology within and its ability to play software exclusive to it.

White Label

White labels are products sold by a major brand under their name and logo but manufactured by a third-party distributor. This method is popular with many small-time businesses, such as ones that focus on cosmetics and supplements. Large companies, on the other hand, utilize this as a way to boost brand awareness and publicity without spending too much on manufacturing costs.

One good example is the alleged story of Purple Oven’s rise to prominence by word-of-mouth within the food industry. The business was once the main distributor of baked goods for a certain huge coffee company. Said coffee company made a killing with this partnership, though it only lasted for a short while when the manufacturer’s identity became the talk of the town.

Private Label

Private label operates similarly to the white label option. Businesses get their products produced by a third-party manufacturer and have a say on the specifications and manufacturing costs. It’s the closest thing to “in-house manufacturing” due to the company or retailer’s tight control over how the products are made.

Wholesaling

The wholesaling approach is the art of selling bulk goods to customers at a slightly lower price than buying them in singles from competitors. This method is popular with manufacturers looking to sell to intermediaries for convenience, and they will be able to sell them at a profit however they see fit.

Dropshipping

Dropshipping is a business in which a store acts as the intermediary between the consumer and a manufacturer that produces exclusive and often expensive goods. The middleman store would take the customer’s order, and have them pay the total price and an extra fee which goes directly to their profits before making an order to the product manufacturer. In other words, it’s a business that relies on connections and exclusivity.

E-commerce is a flexible business to get into. Just watch out for the pitfalls that come with this kind of opportunity. Remember, profitability isn’t just about the quality of the products you are selling. Customers also regard friendliness and service as deciding factors on whether or not they’ll support your business. It’s also worth noting that if your e-commerce website is SEO or UI optimized, customers have an easier time shopping for what they need. So, strategize well and choose the suitable e-commerce model before you invest your savings into the venture

How can I maximize my e-commerce potential?

Regardless of how proficient you are with business, you still need to contend with your competitors online. The best way to maximize your e-commerce potential is to utilize Shopify as your platform and have a team of professional e-commerce SEO experts. Doing this won’t just improve your website’s readability, but it can also improve your findability in search engines. Shopify e-commerce SEO can no doubt carry you to the top if done correctly.

In need of a trustworthy all-around digital marketing agency in the Philippines?  

You’ll need a team of experts to ensure you get the upper hand in digital marketing. LeapOut Digital can provide your business with everything you need to get it to prosper.

 

Get your consultation today!

Jeoffrey Asuncion