Pakistan has observed significant growth in the e-commerce industry, making it the 46th largest e-commerce market with a revenue of $4 Billion in 2020. These numbers are attracting youth and many others to start their e-commerce businesses.
To successfully market your product and make your business successful, you need to identify the e-commerce business model you will follow.
Let’s start with a basic understanding of an e-commerce business model and why it is important to have one.
What is an E-commerce Business Model?
The e-commerce business model refers to the model a business follows to sell goods and services online. It can be any of the business models listed below. If you wonder which e-commerce business model is for you, the following three questions might help you.
- Whom do you want to sell?
- How do you want to sell?
- What product are you selling?
The basic purpose of a business model is to attract and engage customers by answering how they want it and when they want it. Let’s discuss the six types of e-commerce business models.
Types of an E-Commerce Business Model
There are six main types of e-commerce business models listed and explained below:
1. Business-to-Business (B2B)
If your product/service is most suitable for business, then the Business to Business e-commerce model is best suited for you. Almost 23.6% of businesses in the US follow the B2B e-commerce model.
| Pros | Cons |
| Bulk purchases and repeated orders from a single buyer | Reaching out and pitching to an established business is not an easy task |
| Economies of scale favor both buyer and seller | Your product needs to be competitive |
2. Business-to-Consumer (B2C)
If your products/services focus on individuals, you should go for the B2C e-commerce model. As this model is focused on people, your product needs to answer consumers’ pain points to be effective.
| Pros | Cons |
| Businesses directly connect with customers hence less friction and higher user satisfaction | Higher level of management and security due to the inverted power structure |
3. Consumer-to-Business (C2B)
This model refers to a business where a single individual serves business needs through its products or services. A simple way to understand this concept is a freelance business. Freelancers serve businesses through their products/services, making them role models in the C2B business.
| Pros | Cons |
| Your customers are the marketers | Less quality control |
| Every project has room for research and experiments to strengthen your skills | Payment and dealings aren’t that easy |
4. Consumer-to-Consumer (C2C)
You can guess by the name of this business model. In this e-commerce business model, a single individual fulfills another person’s needs. This is a highly efficient business model since people can buy and sell services independently.
| Pros | Cons |
| Extremely convenient | Less quality control |
| Less time taking than other models | Higher chances of fraud |
5. Business to Government (B2G)
In this model, businesses serve government agencies with their products/services. In Pakistan, you have to bid to get a government contract which allows you to provide the government with goods and services.
| Pros | Cons |
| Larger and more stable earning | Not meeting deadlines can cause penalties |
| Chances of winning the next project increases | Complying with legal requirements can be cumbersome |
6. Business to Business to Consumer (B2B2C)
This is a combination of B2B and B2C business models. In this e-commerce business model, a business sells its service/ products to other businesses, officially distributing them to individual customers online.
A simple way to understand this business model is through understanding how wholesaler, retailer and customer chain works. A wholesaler, which is itself a business, offers its goods to a retailer. The retailer then distributes the product through an e-commerce website to its customers.
| Pros | Cons |
| Builds brand value and streamlines the sale process | No direct access to the customers |
| Increased credibility helps increase sales which is good for all three parties | Commission by retailers increases the price of the end product |
These are the six types of e-commerce business models. Find out which one is most suitable for your business by studying your customers and goods/services.
Which model do you prefer and why? Let us know in the comments below.
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