E-commerce exists in various forms, from simple online stores to exchange sites and service platforms. Before starting out in e-commerce, an SME must think about the right model to adopt.
There are three main types of e-commerce, differentiated by their customer base and their sources of revenue: Business–to-Consumer, Business-to-Business and Consumer-to-Consumer.
Business-to-Consumer (B2C) means traditional e-commerce between a business and consumers, i.e. the sale of goods or services to customers who are individuals from a website.
B2C e-commerce can take the form of a sales site exclusively on the internet or a virtual addition to a physical store. The aim is to increase the business's customer base and visibility through online sales. B2C revenue comes from sales to individuals.
What are known as private sale sites constitute a sub-category of B2C. The principle involves offering significant reductions on products for a limited period. Generally, users have to sign up beforehand as members in order to view offers.
Dropshipping refers to an online sales site that holds no stock nor is responsible for shipping the products. The trader sells items on behalf of a third party and subcontracts the entire logistics. The products are delivered directly to the customers from a wholesaler or manufacturer.
Business-to-Business (B2B) denotes a company’s e-commerce sales to other companies. This involves exchanges between two traders or between a supplier and a business, for example. B2B revenue therefore comes from the sale of goods or services to businesses.
Consumer-to-Consumer (C2C) platforms are the internet equivalent of small ads. The website simply provides the interface and system for the exchange of goods.
C2C revenue comes either:
- From a percentage on sales. Major auction websites charge sellers when a transaction is completed between two customers (e.g. from 1% to 5% of the final sale).
- From advertising. Websites for direct selling between individuals are remunerated by advertising or by paid-for ads. The seller of goods can choose to pay for their ad to give them greater visibility.
- From a combination of the two.