Understanding the Different Types of e-Commerce Businesses

Some Distinct Differences Between e-Commerce Businesses

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Classifying e-commerce businesses can be tricky, but it can be important to ascertain the basis and purpose of these businesses by segregating them into categories. Some are similar enough that might seem like a process of splitting hairs, but the differences are pretty definitive all the same.

The two parameters that make the most sense are the type of goods the e-commerce business sells and the nature of the participants.

Classifying e-Commerce Businesses Based on the Type of Goods Sold

E-commerce businesses sell:

  • Physical goods like books, gadgets, furniture, and appliances
  • Digital goods such as software, e-books, music, text, images, and video 
  • Services such as tickets and insurance

This type of classification is important because it gives the analyst an insight into the business model and the financial model of the enterprise. The logistics of delivering physical goods can be a huge challenge for some businesses while sellers of digital goods don't face this problem. When it comes to selling tickets, there are a great many parameters that must be evaluated in real time. In the case of air tickets, issues such as availability, the location of seats, meal preferences, and refundable versus nonrefundable options come into play. 

Purveyors of digital goods can operate online only, whereas those who sell physical goods can take online orders and process online transactions, but then they must have a physical delivery system in place to transfer their products to their buyers.

These are close relatives of the mail order businesses of old. 

Classifying e-Commerce Businesses Based on the Nature of Participants

The three most common participants in e-commerce are businesses, administration, and consumers. There are six primary e-commerce types.  

  1. Business-to-Business (B2B): Both participants are businesses, and the volume and value of B2B e-commerce can be huge as a result. An example would be a manufacturer of gadgets who sources components online to manufacturers who use them in the creation of their own products. 
  1. Business-to-Consumer: (B2C): Most people think of B2C e-commerce when they hear the term e-commerce. A name like Amazon.com almost immediately pops up in most discussions about e-commerce. Elimination of the need for physical stores is the biggest rationale for business-to-consumer types, but the complexity and cost of logistics can be a barrier to B2C growth.
  2. Consumer-to-Business (C2B): C2B e-commerce seems lopsided at first glance, but online commerce has empowered consumers to originate the requirements that businesses fulfill. An example would be a job board where a consumer places her requirements and multiple companies bid for winning the project. Another example might be a consumer posting his requirements of a holiday package with various tour operators making offers.
  3. Consumer-to-Consumer (C2C): Think eBay.com, the most popular platform that enables consumers to sell to other consumers. Because eBay.com is a business, this form of e-commerce could also be called C2B2C—consumer to business to consumer e-commerce. 
  4. Business-to-Administration (B2A): The term "administration" relates to public administration or government entities. Yes, there is an e-government. Countless branches of government are dependent on or use e-services or products in one form or another, particularly in the areas of documents and employment. Businesses can supply these from an electronic base. 
  1. Consumer-to-Administration (C2A): Consumers can be involved in this equation as well. Although it's true that the government rarely buys products or services from individuals, it remains that individuals frequently use electronic means to transmit payments or file tax returns. 

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

Types of e-Commerce Business Models 

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

"Bricks and clicks" refers to sellers with brick-and-mortar stores or a chain of stores, as well as e-Commerce websites. "Multichannel" purveyors include physically mailed catalogs with their brick-and-mortar stores and their websites.

Think Victoria's Secret and Dell. C2C e-commerce is sometimes referred to as "piggybacking" because of the use of a major, well-known site to expedite and attract traffic. 

Conclusion

There's a lot of value in being clear about the type of e-commerce business you're talking about. It allows you to make like-to-like comparisons across e-commerce businesses. At the same time, it helps us all better understand the business model of different e-commerce players.