Understanding Different Types of E-commerce Businesses

Businessman shopping online with credit card
Tom Merton/OJO Images/Getty Images

Classifying e-commerce businesses is tricky. We run the risk of turning it into an inconsequential exercise, or we could end up splitting hair. To grasp a deeper understanding of e-commerce concepts, it is important to ascertain the basis and purpose of classifying e-commerce businesses into types.

The two parameters of classifying e-commerce businesses that make the most sense are:

  1. type of goods sold
  1. nature of participants

Classifying Ecommerce Business Based on Type of Goods Sold

E-commerce businesses sell:

  • Physical goods, e.g., books, gadgets, furniture, appliances, and the like
  • Digital goods, e.g., software, ebooks, music, text, images, video and the like
  • Services, e.g., tickets, insurance, and the like.

The reason such classification is important is that it gives the analyst an insight into the business model and financial model of the business. For instance, the logistics of delivering the physical goods can be a huge challenge for some businesses. Sellers of digital goods do not face that problem. When it comes to selling tickets, there are many parameters that need to be evaluated in real time, e.g., in the case of air tickets: availability, location of seats, meal preferences, refundable vs. nonrefundable tickets, and much more.

Classifying Ecommerce Business Based on Nature of Participants

The two most common participants in e-commerce are businesses and consumers.

Based on this we can come up with four primary e-commerce types:

  1. Business to Business E-commerce (B2B E-commerce)
    In this type of e-commerce, both participants are businesses. As a result, the volume and value of B2B e-commerce can be huge. An example of business to business e-commerce could be a manufacturer of gadgets sourcing components online.
  1. Business to Consumer Ecommerce (B2C Ecommerce)
    When we hear the term e-commerce, most people think of B2C e-commerce. That is why a name like Amazon.com pops up in most discussions about e-commerce. Elimination of the need for physical stores is the biggest rationale for business to consumer e-commerce. But the complexity and cost of logistics can be a barrier to B2C e-commerce growth.
  2. Consumer to Business Ecommerce (C2B Ecommerce)
    On the face of it, C2B e-commerce seems lop-sided. But online commerce has empowered consumers to originate requirements that businesses fulfill. An example of this could be a job board where a consumer places her requirements and multiple companies bid for winning the project. Another example would be a consumer posting his requirements of a holiday package, and various tour operators making offers.
  3. Consumer to Consumer Ecommerce (C2C E-commerce)
    The moment you think of C2C e-commerce eBay.com comes to mind. That is because it is the most popular platform that enables consumers to sell to other consumers. Since eBay.com is a business, this form of e-commerce could also be called C2B2C e-commerce (consumer to business to consumer e-commerce).

That is not all.

Employees can be regarded as a special type of consumer. That would give rise to a new type of e-commerce: B2E (Business to Employee e-commerce).

Likewise if we consider Government to be separate entity, as also Citizens, we can come up with many more types of e-commerce: B2G (Business to Government), G2B (Government to Business), G2E (Government to Employee), G2G (Government to Government), G2C (Government to Citizen), C2G (Citizen to Government).

Types of Ecommerce Businesses Based on the Platform

Setting up shop on Facebook is a fast-growing e-commerce segment so it has been awarded its very own bit of jargon: f-commerce. Likewise, m-commerce stands for mobile e-commerce.

Conclusion

There is a lot of value in being clear about the type of e-commerce business one is talking about. Among other benefits, it allows us to make like-to-like comparisons across e-commerce businesses.

At the same time, it helps us better understand the business model of different e-commerce players.