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eCommerce Business Models Explained [+Examples]
Everything you need to know about eCommerce business models, value delivery, and revenue frameworks.
Starting a business comes with plenty of decisions, and one of the biggest is figuring out how to structure it. The way you sell products, handle inventory, and manage costs will shape your success. No single business model works for everyone. Each has its own advantages and drawbacks, and the right fit depends on what you’re selling, who your customers are, and how you plan to operate.
This is why, for this article, we’ll break down the different eCommerce business models as well as the value delivery frameworks that go with it.
eCommerce Business Models
A business model lays out how a company operates, makes money, and delivers value to customers. It covers what a business sells, who it sells to, and how pricing is structured. It also helps predict costs and plan for the future.
If you have a clear business model, you will understand your customers, set goals, and attract investors, as well as spot new opportunities and adjust when the market changes.
Business models aren’t set in stone, though. Businesses can always update them to stay relevant, adapt to trends, and handle challenges. In addition, investors and potential partners also pay attention to how a company evolves, so keeping things flexible gives the business a huge advantage. Now, let’s see what business models there are for eCommerce businesses.
B2C / Business-to-consumer model
B2C businesses sell products or services directly to consumers. Anytime you shop online for clothes, household items, or entertainment, you’re participating in a B2C transaction.
Unlike B2B (business-to-business), B2C purchases usually happen faster, especially for lower-cost items. This shorter sales cycle means these businesses often spend less on marketing per sale, but their average order size and repeat purchases tend to be lower as well.
B2C businesses span a wide range of products and services. Many rely on technology—like mobile apps, remarketing, or native ads—to connect with customers and simplify the buying process.
Examples of B2C eCommerce businesses
Online B2C companies use different methods to generate revenue and connect with customers. Some sell directly, while others act as intermediaries between buyers and sellers. Some rely on advertising, others build communities to drive sales, and many offer fee-based or subscription services.
Gymshark is a fitness brand that sells workout clothing and accessories directly through its website and app.
Another great example that nails down the B2C model is the online marketplace Trivago, which helps consumers compare hotels and other travel services without owning any of the products themselves.
Facebook can also be considered a B2C as it uses an advertising-based model to help businesses reach consumers through targeted ads based on user behavior.
And last, some subscription-based businesses cater to both B2C and B2B audiences. These include streaming platforms or publications offering content or products regularly.
B2B / Business-to-business model
This eCommerce business model is for businesses that sell goods or services to other businesses. The buyer might use the product themselves or resell it. These transactions usually involve larger orders, repeat purchases, and longer decision timelines compared to B2C.
Many B2B companies have moved from traditional catalogs to online storefronts, targeting specific markets and making it easier for buyers to shop. Online B2B sales are growing, especially as younger generations step into purchasing roles. In 2021, millennials made up 60% of B2B buyers—almost double the percentage from 2012.
Examples of B2B eCommerce businesses
Picky Bars is run by professional athletes, who use the B2B model to sell energy bars, oatmeal, and granola to both consumers and retailers.
Another good B2B example is Microfiber wholesale, which provides microfiber towels, mops, and custom cleaning products in bulk at lower prices, allowing retailers to purchase large quantities and resell them at a profit. This model helps businesses reduce costs per unit while ensuring a steady supply of products for resale.
Mac Tools is also a B2B business and a long-standing provider of automotive tools and equipment, serving distributors and professional technicians since 1938.
B2B2C / Business-to-business-to-consumer model
The B2B2C model involves a business partnering with another organization to sell products or services directly to consumers. Unlike white labeling, where a company rebrands a product as its own, customers in this model know the original provider.
Examples of B2B2C eCommerce businesses
In the US and Canada, grocery stores partner with Instacart to provide delivery and pickup services. Instacart handles the logistics and technology, со customers цан receive or collect their orders on the same day.
This business model solves two problems. Customers get fresh groceries without frequent trips to the store, and grocery stores expand their reach without managing the complexities of delivery on their own.
C2B / Consumer-to-business model
The C2B eCommerce business model allows individuals to sell goods or services to businesses. It gives consumers more control, letting them set prices or have businesses compete to meet their needs. Affiliate marketing and freelance services are common examples of this setup.
This model has grown in popularity with the rise of social media and digital platforms and offers creative ways for individuals to work with companies.
Examples of C2B eCommerce businesses
Social Media influencers promote products or services for brands in exchange for payment or perks is a C2B business model. For example, beauty influencers often review skincare products on Instagram to drive traffic to a company’s website.
Freelance platforms like Upwork also follow that model as they connect freelancers offering skills like writing, design, or software development with businesses in need.
Feedback programs are another example of a C2B business model where consumers provide feedback on products or services through surveys or reviews and receive discounts or other incentives in return.
The same goes for bloggers who create sponsored posts for brands; and stock photographers who sell images on platforms like Shutterstock, allowing businesses to buy photos for marketing or content creation.
D2C / Direct-to-consumer model
The D2C model involves businesses selling their products directly to customers without relying on wholesalers or third-party retailers. This model simplifies the shopping process for customers by eliminating the need to browse through numerous retailers.
One significant advantage of the D2C model is the ability to build direct relationships with customers. Businesses can connect with their audience more personally, increasing loyalty and long-term value. Another benefit lies in profit margins. Without third-party distributors taking a cut, businesses can retain more revenue.
Examples of D2C eCommerce businesses
Reformation is a women’s apparel brand that handles both production and distribution through its facilities and channels. Their unique selling point lies in using organic or recycled materials without compromising modern, stylish designs. Even their packaging follows sustainable practices.
C2C / Consumer-to-consumer
C2C eCommerce businesses are also referred to as online marketplaces because they connect individuals to buy, sell, or exchange goods and services. These platforms typically generate revenue through transaction or listing fees. Thus eCommerce business model encourages organic growth from motivated buyers and sellers, but often struggles with quality control and maintaining technology.
Examples of C2C eCommerce businesses
eBay is a classic example of a C2C marketplace. It used to focus on auctions but has always allowed consumers to sell items directly to other consumers.
Craigslist is another marketplace that offers a more local and community-oriented version of this model. It acts as a mostly free marketplace, helping consumers connect with others in their area. It charges for job postings to cover costs.
B2G / Business-to-government
The last eCommerce business model is for businesses that sell products or services directly to government entities at the local, state, or federal levels. These transactions typically involve bidding on government contracts through requests for proposals issued by agencies.
This model works differently compared to the previous models we mentioned, especially since government processes tend to move slowly due to bureaucracy, which can delay revenue generation and create challenges for businesses relying on quicker transactions.
Examples of B2G eCommerce businesses
Dell uses more than one business model as it offers products and services to both individual consumers (B2C) and businesses (B2B), and also supplies laptops, desktops, servers, and IT infrastructure to various government agencies. Their products are often included in government contracts for upgrading tech systems or providing hardware for public sector projects.
Another B2G example is Oracle, which provides software solutions such as cloud computing, data management, and enterprise applications for governments to manage operations like public records, financial systems, and cybersecurity.
Value Delivery and Revenue Frameworks
Those were the types of eCommerce business models. But choosing the model doesn’t mean you’re done. The next step is to figure out how to deliver your products and generate revenue in a way that aligns with your goals and resources.
Direct Selling
Direct selling means a business offers products or services directly to consumers without relying on retail stores or third-party sellers. This often takes place in informal settings like homes, workplaces, or online platforms.
This framework gives you the benefit of personal interaction between you and buyers. It’s particularly effective for products that require detailed explanations, such as tech gadgets, beauty products, or health items, as you can showcase their features and benefits in a more personalized way.
Pros:
- Full control over branding, pricing, and customer experience.
- No need to split profits with third-party sellers or marketplaces.
- Access to customer data helps with marketing and product decisions.
Cons:
- Requires upfront investment in a website, marketing, and inventory.
- Attracting customers can be challenging without an existing audience.
- Handling logistics like shipping and returns adds extra responsibility
White Labeling
White labeling involves branding and selling a product under your own name and logo, while the product itself is made and sourced from a third-party distributor.
This model is common in industries like fashion, health, and cosmetics, including products like essential oils or CBD items.
It offers the benefit of increasing brand visibility without the need to handle manufacturing. You also get to leverage the distributor’s experience and resources, which can simplify the process of offering quality products.
Pros:
- White labeling reduces the costs and effort of product manufacturing.
- It lets you focus on building your brand and marketing.
- You can quickly launch products that are already developed.
- Access to the distributor’s expertise in production and supply chain management.
Cons:
- You have limited control over product quality.
- Any issues with the distributor can negatively impact your business.
- The market may become saturated with similar products.
- Profit margins can be lower compared to creating your own products.
Private labeling
Private labeling means a business works with a third-party manufacturer to create products based on its own designs and ideas. This model eliminates the need to build a factory and manage production, while still giving the business exclusive rights to the products. After manufacturing, products can be shipped directly to customers, to an online marketplace, or back to the business for fulfillment.
This framework works well for brands that have the resources and specific product ideas but don’t want to handle production themselves.
Pros:
- You maintain exclusive rights to sell the product, which can help build brand identity.
- There’s no need to handle manufacturing, saving on production costs and resources.
- You can focus on marketing and selling rather than managing production logistics.
- The products are customized to fit your brand’s vision and ideas.
Cons:
- Initial costs can be higher due to customization and product design.
- Finding a reliable manufacturer can be challenging and time-consuming.
- You may have less control over product quality and production timelines.
- The brand is still dependent on a third-party for manufacturing and potential issues.
Dropshipping
Dropshipping is a business framework that works well for those looking to minimize startup costs and avoid managing inventory. Instead of purchasing products upfront, you sell items on your website and then forward the orders to a third-party supplier who handles the fulfillment and shipping. This model involves both B2C (business to consumer) and B2B (business to business) transactions, as you pay the supplier to fulfill orders on your behalf.
Pros:
- It has low startup costs since you don’t need to buy inventory upfront.
- You take on less risk since you’re not holding stock that may not sell.
- Suppliers handle the packing and shipping, allowing you to manage the business remotely.
Cons:
- The market can be competitive, with many people starting similar businesses.
- Margins tend to be low, so you’ll need to sell in high volume to see a good profit.
- Managing inventory can be tricky, as back orders or sold-out products from suppliers can cause delays.
Example:
A good example of the effectiveness of this value delivery framework is the success story of Jacky Chou and Albert Liu. They started a home decor dropshipping business on Shopify while working other jobs. In just eight months, they grew their business from a $3k loss to $250k in monthly revenue at 30-40% margins, totaling over $700,000 in revenue within a year. In a post in the Entrepreneur subreddit, they explained they were focusing on product research, building a brand, investing in ads, and continuously refining their marketing and products. They also stressed the importance of screening suppliers for packaging and product quality to build trust with customers.
Print-on-demand
Print-on-demand lets you sell products featuring your designs without needing to manage inventory. Once a customer orders a product, a third-party supplier takes care of the printing, packing, and shipping. It’s popular in B2C businesses, but also works for B2B, like creating client gifts or promotional items.
This model has a low cost of entry since you don’t need to buy products upfront. You simply create your design, upload it to a POD platform, and start selling. The supplier handles everything after the sale, leaving you free to focus on growing your business.
This framework is great for creative individuals looking to sell products like duffle bags, yoga leggings, face masks, canvas prints, or even blankets. Though it tends to have lower profit margins, it’s a good way to get started with eCommerce or try new products without much risk.
Pros:
- You can quickly create and list new products once your designs are ready.
- Shipping and fulfillment are handled by the supplier, reducing your workload.
- No need to hold inventory, making it easier to test new products or ideas.
Cons:
- You don’t have full control over shipping, which can lead to unpredictable costs.
- Customization options depend on the supplier and the product, limiting your choices.
Example:
FIERCEPULSE has grown into a community of over 14K followers on Instagram and reached an impressive seven-figure annual revenue. The brand’s success is driven by strong partnerships and a solid grasp of digital marketing.
Before launching FIERCEPULSE, the founders had experience running their own online store with dropshipping partners outside the USA. They saw potential in leggings and switched to a print-on-demand model, partnering with Printful.
Franchise
A franchise is a business where the franchisee distributes products and services under an established brand. The franchisor develops the brand and product, and the franchisee buys into the system to start their own business under the same name.
Franchises typically operate under a B2C model, selling products and services directly to consumers, though some may work on a B2B basis as well. The relationship between franchisor and franchisee has elements of a B2B model as well.
Pros:
- Built-in brand recognition and support.
- Established resources to quickly launch your business.
- Allows you to expand geographically without managing each new location yourself.
- Local expertise in new markets through franchisees.
Cons:
- Limited control and must follow strict rules on branding, pricing, and customer service.
- High upfront costs, including investment fees and significant startup expenses.
Example:
MrBeast Burger, created by YouTube star MrBeast, is a great example of a virtual restaurant. It operates entirely through delivery platforms and has grown to over 300 locations across the U.S. without needing any physical storefronts.
Marketplace
The marketplace model framework connects buyers and sellers through a shared platform, acting as an intermediary rather than a direct retailer. Well-known examples of marketplaces include Amazon, Etsy, and Airbnb. This framework can cover a wide range of industries and allow for transactions between businesses, consumers, and even peers.
Pros
- The platform doesn’t need to keep stock, which lowers initial costs.
- Adding more sellers can expand the selection without a heavy investment.
- Possibility to list fees, commissions, and premium memberships.
Cons
- Marketplaces often compete with established platforms in their field.
- Managing payments, disputes, and quality control can be challenging.
- The platform’s success depends on attracting both buyers and sellers, which requires a lot of marketing.
Example:
Etsy operates as an online marketplace for unique and creative goods, focusing on handcrafted and vintage items. Unlike larger platforms like Amazon that sell a wide range of products, Etsy specializes in specific categories like crafts and unique finds. Sellers on Etsy offer handmade goods or antiques, while buyers seek out special, one-of-a-kind items.
Etsy’s platform connects these sellers and buyers, making money through transaction fees and listing costs. Sellers post their products, buyers browse and make purchases, and the platform benefits from positive reviews that drive more traffic. Etsy thrives on the success of both sides, with more sellers attracting more buyers.
Manufacturing
Manufacturing is a good fit for entrepreneurs who have a unique idea or a new twist on an existing one, especially if they’ve already tested the market for their product. It works well in both B2C and B2B models, depending on the type of product.
Manufacturing suits entrepreneurs who want to create their own products and have the skills and resources to produce them. However, not every product can be made by hand, so your choices will be influenced by your abilities and available resources.
Pros:
- Lowest cost per unit, allowing for higher profit margins.
- You can manage your brand, set prices, and maintain the quality of your product.
- Creating your own products lets you make changes to features, quality, or even the entire product as needed.
Cons:
- Initial order costs can be steep.
- Relying on external manufacturers can lead to challenges, like the risk of being scammed or facing delays.
- Requires significant time and money, especially for prototyping, sampling, and refining the product.
- Making your own products is time-consuming.
Wholesale
Buying products wholesale is a great option if you want to get started quickly or if you plan to offer a variety of products and brands. It gives you a lot of options, as many products are in demand in the B2B wholesale market.
The wholesale model might be a good middle ground between manufacturing and dropshipping. In many cases, businesses see a profit margin of about 50% when selling wholesale items at retail prices.
Pros:
- Selling products people already know
- Selling well-known brands can help boost your own business’s reputation.
Cons:
- Limited ability to stand out
- Selling other brands means you have to follow their pricing rules.
- Requires you to buy a certain amount of each product up front.
- Working with multiple suppliers
Example:
Ventegros.fr is a great example of a wholesale platform, offering a wide selection of products across sectors like fashion, home decor, and toys. It’s especially valued for its competitive wholesale prices, which help retailers—big and small—get access to quality goods without high markups.
Fee-for-service
A fee-for-service business model involves selling services instead of products. In this model, businesses charge clients for their time and expertise. It’s commonly seen in various industries, including B2C (like a hair salon), B2B (such as a corporate cleaning service), C2C (like a neighbor offering yard work), or C2B (the same neighbor doing maintenance for an office building).
The service sector is rapidly growing in the US, offering many opportunities for entrepreneurs to start businesses based on their skills and time.
Pros:
- You get paid for every hour or service you provide.
- Starting a service-based business is usually less expensive.
Cons:
- Scaling can be challenging since the business depends on your time.
- Clients may push back on pricing or ask for detailed justification for the time spent on tasks.
Examples:
Consultancy is a great example of a fee-for-service B2B and B2C business. They are hired to offer advice on specific projects like market research or financial analysis. A business looking to expand into new markets might pay a consultant based on the project scope and hourly rate.
Another example is any type of IT service providers that offer specific solutions like software development or system maintenance. A company outsourcing software development might pay based on hours worked or project milestones.
This is also a good framework for artists, designers, and photographers. A client commissioning a custom painting would pay according to the project’s size, complexity, and time involved.
Freemium
The freemium framework is when the company offers both free and paid versions of a product or service. This model is often seen in B2C or B2B industries, particularly with software companies or SaaS businesses. It allows customers to try the product without committing, which helps build relationships. The goal is to get users hooked on the platform and encourage them to pay for extra features.
Pros:
- It’s easy to attract new customers since they can try out the product at no cost.
- Free users provide valuable data that can be used to improve promotions or suggest paid upgrades.
Cons:
- It can be tough to convince free users to switch to paid versions if they are already satisfied with the free option.
- There’s a higher risk of losing customers, especially if they don’t see enough value in the paid features.
Example:
Spotify operates on a freemium model. Users can access its music streaming service for free, though they’ll experience ads and fewer features. Those who want to avoid ads and access more features like offline listening and unlimited skips can upgrade to a paid plan.
Bundling
Bundling is popular in many industries, including tech subscriptions and curated gift sets. This framework involves selling multiple products or services together as a package, often at a lower price than buying each item individually. Bundling works well for businesses aiming to increase their sales or average order value.
Pros:
- Encourage customers to purchase more than they initially planned.
- Easier for customers to find everything they need.
- People see bundles as a better deal.
Cons:
- Discounted bundles can lower profit margins if not priced carefully.
- Bundling requires enough stock of all items. (for physical products)
- If a bundle includes items that aren’t popular, customers may not see it as a good deal.
Example:
Adobe offers its Creative Cloud subscription, which includes software like Photoshop, Illustrator, and Premiere Pro. This bundle provides creative professionals with all the tools they need in one place, making it a great deal. The subscription also keeps customers engaged over time as it continuously meets their design and production needs.
Affiliation
An affiliate business model lets you earn a commission or referral fee by directing customers to make a purchase from a partner. This is common in C2C marketing, where individuals promote products or services to other consumers.
Businesses can also use affiliate networks, gathering a group of individuals to promote their products and drive sales.
Pros:
- The potential for passive income.
- Affiliates can work with multiple brands.
Cons:
- Affiliates usually get a small cut of the sales, so profits can be small.
- Successful affiliates often already have an established audience, so newcomers need to put in the work to grow one.
Subscription
A subscription business charges customers a recurring fee, often monthly or annually, in exchange for access to a product or service. This model helps businesses build ongoing relationships with customers. If the product continues to meet their needs, they’ll keep paying the fee.
Many industries can use the subscription model, including streaming services.
monthly subscription boxes; membership communities; food services; and digital content (e.g., newsletters, on-demand videos). A subscription model can lead to more predictable income and stronger ties with customers, as the longer they use a service, the more valuable it becomes.
Pros:
- It provides steady revenue.
- Receiving regular payments means more money in hand for your business.
- It helps build customer loyalty.
- Opens doors for upselling.
Cons:
- Keeping customers interested and paying month after month can be a challenge.
- Products can get stale.
- If something goes wrong, it can quickly affect many customers who expect their service at the same time each month.
Example:
As we mentioned, products can get stale. If offerings don’t change or refresh over time, customers may lose interest. Services like Netflix keep things fresh by rotating movies and shows, while companies like Trunk Club adjust to customers’ changing preferences.
Hey, before you go, don’t forget to check out our other awesome articles on UI/UX design! We’ve got loads of tips and inspiration to help you create stunning designs that will blow your mind.