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Traditional VS Innovative: What is the Best E-commerce Model?

Create Date: 2019-07-26 09:32:42

1. The Present, Past, And Future

When we are receiving packages and ordering food deliveries, can you imagine life five years ago or ten years ago? All these differences are due to the development of the innovative e-commerce model. Forward-looking e-commerce enterprises have transformed the way we do shop today and redefined what we called "POSSIBLE".

Over the past decade, the e-commerce share of retail sales in the U.S. has increased by nearly 300 percent, from 3.3 percent to 9.7 percent. Even with the flying growth, e-commerce accounts for less than 10 percent of all retail sales.

While we are satisfied with the current e-commerce development and service model, there are still plenty of opportunities in the future, especially for those who are innovative.

Today, it's easier than ever for creative entrepreneurs to realize their ideas. Every year, we can see new businesses replaced what we've always done. Perhaps the tools they use are new and improving rapidly, but the rules have not changed yet. If you want to innovate and beyond expectations, it is necessary to understand the business model and explore innovate ways.

2. Four Types of Traditional E-commerce Models

If you're starting an e-commerce business, odds are you'll fall into at least one of these four general categories. Each has its benefits and challenges, and many companies operate in several of these categories simultaneously. Knowing what bucket your big idea fits in will help you think creatively about what your opportunities and threats might be.

a. B2B - Business to Business
The B2B model is one business sells a product or service to another business, and the buyer is sometimes the end-users, but in most cases, the buyers resell to the end-users. B2B model typically means longer sales cycles, higher-order values, and more repeat purchases.

B2B model occupies the largest market share, and its market value is much higher than that of the c-side market. Companies like GE and IBM in particular, spend about $ 60 million per day on business marketing of goods. In 2015, Google found that nearly half of B2B buyers were the Millennials -- almost twice as many as in 2012. B2B online sales will become increasingly important as the younger generation become the business decision-makers.

b. B2C – Business to Consumer
B2C is the model of sales to end-users directly, which is the most common at present. We ourselves, as consumers, shopping online is the B2C model. This model has been developed to the maximum in recent years, because of the convenience of whenever and wherever possible, we can buy anything directly at the thought of it.  

The B2C purchase decision process is much shorter than the B2B model, especially for lower value categories. Certainly, the average order value and repeat purchase of B2C enterprises are also lower compared with the B2B model.

c. C2B – Consumer to Business
The C2B model is an individual to business services or sales model. This model is a complete difference in the B2C model, which is suitable for crowdsourcing projects. In practice, it comes in many different forms which providing more flexibility both for the enterprise and for the individual who provides the service.

d. C2C – Consumer to Consumer
C2C business connects consumers directly, exchanges goods and services, and sells second-hand or unused goods on websites are C2C model. Companies like Craigslist and eBay pioneered this model in the early days of the Internet. The C2C business has benefited from self-driven growth from buyers and sellers in demand but faces challenges in quality control and technology maintenance.

3. Five Types of Innovative E-commerce Models

If your business model is the car, then your value delivery method is the engine. This is the fun part-where you find your edge. How will you compete and create an e-commerce business worth sharing? Here are a few of the popular approaches taken by industry-leaders and market disruptors.

a. D2C – Direct to Consumer
To put it simply, the D2C model is "no middlemen pocket the difference", which is directly sold by the manufacturer to the end consumers. D2C mode not only eliminates middlemen directly, saves a lot of costs, but also establishes a direct and effective communication channel between the companies and consumers.

The D2C model is convenient for enterprises to manage brands and collect user information. Casper, a popular mattress seller in the United States in recent years, Away, a suitcase brand are both leaders in the D2C field.

b. White Label And Private Label
In online sales, you can either make and produce your own products or sell products under other brands, or you can sell your own-brand products-products made by other manufacturers but sold under your own brand.

You can purchase White Label Products, and also hire a manufacturer to produce unique products (Private Label Products) for your exclusive sales. With both, you can look for technical and marketing advantages based on investment in design and production.

c. Wholesaling
In the wholesale model, retailers sell products in bulk at a discount. The wholesale model has traditionally been a B2B practice, but many retailers are now selling directly to budget-conscious c-end consumers in a B2C environment.

d. Dropshipping
Dropshipping is what we usually call "no sourcing, no stocking, no shipping" model, which is an e-commerce model that has developed particularly rapidly in recent years. Its advantages are a low barrier to entry, no need to have a product supply chain but sell anyone's products.

However, one should be sensitive for products selection in Dropshipping, change products constantly, can not control product quality, product packaging, logistics directly, and high dependence on advertising, and lack of customer accumulation, repurchase rate, brand precipitation, etc. But that still doesn't stop Dropshipping from attracting sellers, who can start and make money quickly without much money or a supply chain.

e. Subscription Service
The subscription model is not new. As early as the 17th century, British publishing companies used it to offer books to their loyal customers every month. But only after the emergence of e-commerce, subscribable content and services have become extremely rich.

You can more easily imagine a subscription application, especially when you're looking at the flowers on your desk order monthly/yearly. Nowadays, there are a variety of subscription services in almost every industry, which brings great convenience to consumers and money-saving.

4. Tips For Finding The Best Model

We've talked about your broader options for choosing an e-commerce business model, now let's look at the specifics. Here are a few questions that will help you create a plan that will set your company apart. The key here is honesty and research. Spend time learning about the market you're targeting and be honest about what unique value you can bring to space.

a. Who is your customer?
* Consider what their expectations are when purchasing the type of product you plan to sell.
* Look for pain points in the way things are currently done then innovate in your way.

b. What are you capable of?
* Be realistic about what elements you can do yourself and what you will need to find
* Know your limitations but it will help you make better long-term decisions.

c. What is best for your product?
* If you are a manufacturer, wholesaling or subscriptions can help cover production costs and break-even more quickly.
* If you are a distributor, invest more heavily into direct marketing and strategies.

d. What is your positioning?
* Evaluate your competition and make sure it’s clear why your product is the best choice.
* Competing for price, selection, and convenience from the back end processes, marketing, to the website’s shopping experience, your unique value should be clear.