E-commerce has completely overtaken traditional shopping and redefined everything that seemed impossible a decade ago. Today, we have virtual trial rooms, assistants, and a hassle-free return process, which are big misses in traditional shopping. In 2013, E-commerce contributed just 6% of US retail sales, but it is expected to make up almost 22% by the end of 2025—that’s almost four times! The market is huge, and the opportunities that lie within it are countless. But before you jump right, it’s important to understand its basics, especially starting with understanding different e-commerce business models. 

E-commerce itself is a lucrative business model that connects businesses and buyers online. However, for businesses to get started, it is important to understand and choose the best e-commerce business model. As once you know your focus point, it becomes easier than ever to use it to make your ideas a reality. 

If you want to make your e-commerce business stand out – you will need to know what business model suits you best and how you can use it to achieve success. So, this guide will help you understand the different types of e-commerce business models and how to choose an ideal one for your business. 

Let’s get started, but first….

Market Analysis: Key E-commerce Statistics You Should Know in 2025

• The global e-commerce market will likely generate $4,117 billion in revenue by the end of 2024, growing at a CAGR of 9.49% from 2024 to 2029. (Source: Statista) 
• The number of e-commerce users will likely grow to 3.6 billion by 2029, and user penetration will increase by 49.1%. (Source: Statista)
• Shopify, being the key player in the e-commerce market, has processed more than $886 billion in sales since 2006. (Source: Burst Commerce)
• Fashion remains the largest sector for the e-commerce market in the UK, with textile, clothing, and footwear sales taking over 26% share. (Source: Statista)
• The global e-commerce market will be worth more than $7.9 trillion by 2029. (Source: Forbes)

What is an E-commerce Business Model?

An e-commerce business model is a specialized framework specifically for sellers so that they can sell goods or services online. Customers browse and buy products through a website or an app and not by visiting a physical store. This model is important in the following ways:

Firstly, it saves time by allowing customers to shop from anywhere at any time, using a computer or a smartphone.

It also enables businesses to reach a wider audience. E-commerce businesses can sell to people worldwide, not just those in their local area. Third, it can cut costs. Businesses do not need to pay for physical stores, which saves them on rent, utilities, and other expenses.

Using market data, businesses are able to understand customers’ needs and personalize recommendations and promotions, thus improving the shopping experience and gaining customer loyalty.

Understanding Different Types of Ecommerce Business Models

Starting an e-commerce business will require you to choose between the four general categories. Each type has its own pros and cons, and some businesses may fall into more than one category. Knowing which type your business idea fits into can help you think about the opportunities and challenges you might face. No matter what stage your business is in or what type of business model you have, choosing the right tools to help your business reach its full potential is important.

Here are some common types of E-commerce models:                           

#1. Business-to-Consumer (B2C)

This is when businesses sell directly to the end-user or consumer. For example, when you buy clothes, household items, or entertainment products online, you are making a B2C purchase.

The decision to buy in a B2C setting is usually quicker than in a Business-to-Business (B2B) setting, especially for cheaper items. Because of this, B2C businesses often spend less money on marketing to make a sale, but they may also have lower order values and fewer repeat purchases compared to B2B businesses.

B2C businesses sell both products and services. They use technology like mobile apps, targeted online ads, and reminder ads to market directly to their customers and make their shopping experience easier.

#2. B2B (Business-to-Business)

In a B2B business model, one business sells products or services to another. This can sometimes mean the buyer uses the product themselves, but often, they sell it again to consumers. B2B transactions usually take longer to complete because businesses often need time to make decisions. However, these transactions are usually for larger amounts and happen more regularly.

Recently, B2B companies have become more innovative. Instead of using old-fashioned catalogs and order forms, they are now selling their products through online stores. In 2021, 60% of B2B buyers were millennials, which is nearly double the number from 2012. They prefer to research and buy products online rather than using traditional methods.

#3. B2B2C (Business-to-Business-to-Consumer)

B2B2C is abbreviated for Business-to-Business-to-Consumer. This business model involves a company working with another business to sell products or services to end customers. Unlike “white labeling,” where the selling company rebrands a product, in B2B2C, the end customer knows the original company making the product.

This model combines elements of both B2B and B2C. The original company benefits from the partner business’s reach and market presence, while the partner business can offer new products or services to its customers without having to produce them.

B2B2C is becoming more popular as companies look for new ways to expand their market reach and offer more to their customers. By working together, businesses can provide better products and services, reach a larger audience, and increase sales.

#4. B2G (Business-to-Government)

Business-to-Government (B2G) is a type of business where companies sell products or services to government agencies. These agencies can be local, county, state, or even federal government bodies.

In the B2G model, businesses usually have to bid for contracts. A government agency will request a proposal (RFP), which is like asking companies to tell them what they can offer and at what price. Businesses then submit their bids, and the government chooses the best one.

This model is considered more secure because government contracts are often long-term and reliable. However, working with the government can be slow because of all the rules and procedures they have to follow. This slow pace can sometimes make it hard for businesses to see profits quickly.

#5. C2B (Consumer-to-Business)

C2B stands for Consumer-to-Business. In this model, individual consumers sell their products or services to businesses. For example, a website might let customers post tasks they want completed, and businesses bid on these tasks. 

Another example is affiliate marketing, where individuals promote a company’s products and earn a commission on sales. The main advantage of C2B is that consumers can set their own prices or have businesses compete to offer the best deal. This model is also used creatively by connecting companies with social media influencers to market their products.

#6. D2C (Direct-to-Consumer)

D2C stands for direct-to-consumer. In this model, businesses sell their products directly to the end customer without intermediaries like wholesalers or retailers. 

This allows companies to have full control over their sales and customer relationships and helps them save money by cutting out the middlemen. D2C businesses use their websites or stores to reach customers directly, ensuring a more personalized shopping experience.

#7. C2C (Consumer-to-Consumer)

The C2C model connects individuals to buy and sell goods and services from each other, often through online marketplaces. Websites like Craigslist, Alibaba, and eBay are examples of C2C platforms. These businesses usually make money by charging fees for listing items or taking a small percentage of each transaction.

The C2C model benefits from the motivation of buyers and sellers, driving growth on its own. However, challenges include maintaining quality control and managing the technology needed to keep the platform running smoothly. 

#8. White Label

White labeling is when a company sells a product with its own name and logo, but the product is actually made by another company. This means the original manufacturer creates the product, and then the seller puts its own brand on it. 

This approach is popular because it helps companies boost their brand visibility without needing to handle the manufacturing process. It’s common in industries like fashion and cosmetics, where many products are similar, and the key difference is the branding.

#9. Private Label

Private labeling is similar to white labeling but with more control. In this model, a retailer hires another company to produce a product that is sold under the retailer’s own brand name. The retailer decides everything about the product, including its specifications, packaging, and other details. 

Once the product is made, it is delivered to the retailer, who sells it as their own brand. For consumers, these products appear as if the retailer itself made them. This model is also common in many industries, as it allows retailers to offer unique products without having to manage manufacturing.

#10. Wholesaling

Wholesaling is a business model in which companies sell large quantities of products at a discounted price to other businesses. Instead of selling items one by one to consumers, wholesale businesses sell in bulk. This is different from regular retail sales.

In the wholesale model, the business acts as a middleman between the manufacturer (the company that makes the product) and the retailer or distributor (the company that sells the product to consumers). 

The wholesaler buys products from the manufacturer in large quantities at a low price and then sells them in smaller quantities to retailers at a slightly higher price, but still at a discount compared to individual retail prices.

#11. Dropshipping

Dropshipping is a popular way to run an online store without keeping inventory. In this model, you sell products that are stored and shipped by a third-party supplier, like AliExpress or Printful. This means you don’t have to handle the products yourself. Instead, when someone buys something from your online store, the supplier ships it directly to the customer. 

This makes it easy to start an e-commerce business with low costs because you don’t need to buy or store products in advance. You act as a middleman, connecting buyers with manufacturers.

#12. Subscription Service

Subscription services have been around for a long time. In the 1600s, companies in England used this model to deliver books to customers every month. Today, subscription services are used in many industries to bring convenience and savings to customers. Instead of buying products one at a time, customers pay regularly (like monthly or yearly) to receive a box of products or services. 

This model is popular because it offers a steady stream of income for businesses and makes it easier for customers to get what they need without having to reorder every time. You can find subscription services for things like food, beauty products, and even software. 

How to Choose the Best E-commerce Business Model? 

Starting an e-commerce business can be both exciting and challenging. As seen above, there are many different types of e-commerce business models, and choosing the right one can be tricky. To make a good decision, it’s important to ask yourself some key questions and understand what you want to sell.

What Are You Selling?

Before your business can succeed, you need to know what you want to sell. The online marketplace is vast, and there is always a market for various products and services. Knowing exactly what you are interested in selling is crucial.

• Physical Products: These are items you can touch and feel, like car parts, books, electronics, and gadgets. These are the most commonly sold items in e-commerce stores. If you know what product you want to build or sell, entering the online market with physical products can be straightforward and profitable.
• Digital Goods: These are products that exist in digital form, such as eBooks, software, music, and web designs. Selling digital goods has become easier as the world moves further into a digital marketplace. You have more flexibility in what you can sell and how much you can produce. 
• Services: Selling services has also become much easier with the rise of online marketplaces. Previously, services were often sold through newspaper ads or word of mouth. Now, service-based businesses can create their own websites to market their services, including consulting, graphic design, and programming.

Who Is Your Customer?

Understanding your customers is key to your business success. Consider what your customers want and need when buying the product you plan to sell. Knowing their habits and behaviors can help you create a better shopping experience and save them money.

To do this, identify any issues they face with current products or services. This is your chance to find unique solutions and make their lives easier. By focusing on these pain points, you can improve how your business interacts with customers and boost overall satisfaction. This can lead to stronger customer loyalty and better business growth.

What Are You Capable Of?

When starting a business, it’s important to build on your strengths. Think about what you are good at and what you enjoy doing. Be honest about what tasks you can handle yourself and what you might need help with. 

Knowing your limits can be tough, but it will help you make better decisions in the long run. By understanding your capabilities, you can focus on areas where you can excel and seek assistance for tasks that are beyond your expertise.

What Is Best for Your Product?

Depending on your product, different business models may work better for you. Here are some examples:

• Manufacturing Your Own Products: If you make your own products, you might want to consider wholesaling or subscription models. Wholesaling lets you sell products in bulk, which can help cover production costs quickly. Subscriptions can provide a steady stream of income and help you break even faster.
• Distributing Other People’s Products: If you sell products made by others, focus on direct marketing and growing your customer base. Investing in marketing strategies can help you reach more people and increase sales.

What Is Your Positioning?

Positioning is all about how you want your customers to see your product. You know why your product is great, but do your customers? It’s essential to make sure they understand why they should choose your product over others.

First, look at your competition. What are they offering, and how are they presenting it? Compare their products to yours. Think about what makes your product better. Is it cheaper? Do you offer more choices? Is it more convenient to buy or use?

Your unique value should be obvious in everything you do. This includes how you manage your inventory, how you market your product, and how easy it is to shop on your website. Customers who visit your site should quickly see why your product is the best choice. 

You can attract more customers and build a strong brand by clearly showing your product’s advantages. It’s all about standing out and ensuring your customers see the value in what you offer.

Conclusion

The world of online shopping is growing fast, and it’s time to join in. To succeed, you need to know the right way to sell online and choose between the best E-commerce business models. That’s where we can help you. Our team at Malicy is here to help you build a strong online store, develop new ideas, and easily grow your business. We have experts who know what works so you can focus on what you do best – running your business. 

FAQs

What is the Best E-commerce Business Model? 

The best e-commerce business model depends on your goals and resources. B2C (Business-to-Consumer) is great for selling directly to customers, while B2B (Business-to-Business) works well for selling in bulk to other businesses. D2C (Direct-to-Consumer) is ideal for brands wanting control over their sales. The best model fits your specific needs and market.

What is the Importance of a Business Model? 

A business model is important because it outlines how your company will make money and operate. It helps you plan and understand your costs, revenue streams, and target market. A clear business model guides your decisions, helps attract investors, and sets the foundation for sustainable growth.

What is Shopify’s Business Model? 

Shopify operates on a subscription-based business model. It provides an e-commerce platform for businesses to create online stores. Users pay a monthly fee to use Shopify’s tools and services, which include website building, payment processing, and marketing features. Shopify also earns revenue from transaction fees and additional services.

What is the B2B and B2C E-commerce Model? 

B2B (Business-to-Business) e-commerce involves business transactions, such as wholesaling products to retailers. B2C (Business-to-Consumer) e-commerce involves selling directly to consumers, like online retail stores. B2B generally has larger orders and longer sales cycles, while B2C focuses on individual customer purchases and quicker transactions.

What is the Impact of the E-commerce Business Model?

 The e-commerce business model has revolutionized shopping by making buying and selling goods and services online easier and more convenient. It has expanded market reach, reduced business costs, and provided consumers with more choices. E-commerce also supports new business opportunities and innovation, driving economic growth and changing consumer behavior.