Nigeria was the 33rd largest market for E-commerce with a revenue of US$6.9 billion in 2021, placing it ahead of Denmark and behind Colombia.

The global e-commerce market size was valued at USD 5.82 trillion in 2023 and is expected to grow at a compound annual growth rate (CAGR) of 14.7% from 2022 to 2027. Increasing penetration of the internet is an opportunity you need to take advantage of as a business owner.

What is E-commerce?

E-commerce also known as electronic commerce is the buying and selling of goods and services over the Internet. E-commerce is powered by the internet. It is conducted over computers, tablets, smartphones, and other smart devices at the comfort of the user(s).

Every digital business has a trend to create or follow based on what business model is operated by the business.The E-commerce sector is a very competitive one. Getting the right information on the business model you operate and how to operate it will put you ahead of your competitors in many ways.

If you’re thinking of starting an online business or already have one, choosing the right e-commerce model can make a lot of difference. With so many options out there, it can feel overwhelming to figure out which model fits best with your goals, budget, and audience. But not to worry, we’ve got you covered. 

What Are E-commerce Models?

E-commerce models are basically the different ways you can set up and run your online business. They dictate how you source your products, sell to your customers, and manage your overall business operations. Here’s a quick look at the most common models:

The Business To Customer(B2C) model

(B2C) is when a company markets its products or services directly to end users. It is the most widely known form of commerce .Alot of e-commerce is B2C as it is easy for businesses to target specific consumers online. Businesses are able to put their products online, allowing the consumer to purchase the products in the comfort of their own home, saving them some precious time. Business-to-consumer (B2C) is the business model of selling products directly to customers and thereby bypassing any third-party retailers, wholesalers, or any other middlemen.

There are typically five types of online B2C business models businesses used online to target consumers. They are:

1. Direct Sellers:

This is the most common model in which people buy goods from online retailers. These may include manufacturers or small businesses or simply online retailers set up by brands to purchase their products. 

For example, if customers want to buy a Dell laptop, they can go to the manufacturer’s website directly, gather product information, and order it.

2. Online intermediaries:

 These are intermediaries who don’t actually own products or services but exist to put buyers and sellers together. Sites like Jumia, Amazon, Jiji,etc fall into this category. These intermediaries profit from a percentage of the product sales.

3. Advertising-based B2C:

This model uses free content to get visitors to a website. Those visitors, in turn, come across digital or online ads. It is the B2C method whereby companies advertise their products and services on a platform with significant reach. Through this, they make sure more and more people would come to know about their offerings and click on the ads to make a purchase.Sellers generate revenue by getting the leads converted on the goods and or services for sale. One example is media sites like Youtube,  a high-traffic site that mixes advertising with its native content. 

4. Community-based: 

Businesses use community-based platforms that host like-minded people’s ideas, opinions, or interests and host targeted advertisements. It helps brands promote and sell their products and services directly to customers.

 Sites like Meta (formerly Facebook), which build online communities based on shared interests, Quora etc.help marketers and advertisers promote their products directly to consumers. These websites  target ads based on users’ demographics and geographical location.

5. Fee-based: 

Consumer sites like Netflix charge a fee so consumers can access their content. The site may also offer free but limited content while charging for most of it. There comes the point where the service provider requests a premium subscription to have access to additional content. They are fee-based B2C businesses.

Now that I’m sure you understand what B2C businesses are all about, let’s move to the second business model.

The Business to Business (B2B) model:

In the business-to-business model, businesses and organizations exchange goods and services. For example, one company may contract with another business to provide the raw materials needed to manufacture a shoe, disinfectant etc

Business-to-business refers to business that is conducted between companies, rather than between a company and individual consumer. A good example is a business transaction between your business and Digitalbizguru.

B2B ecommerce can be broken down into two methodologies, vertical and horizontal

Vertically oriented businesses sell to customers within a specific industry while in horizontal oriented businesses , you are selling to customers across different types of industries.

These two business models are the most common. But there’s more. We have Business to Consumer(B2C) and Consumer to Consumer (C2C).

The Business to Consumer Model (B2C)

Imagine you’re shopping online for a new phone case. You search for it on Google, click on a website, and voilà! You find the perfect case. You pay for it online, and it gets delivered to your doorstep. Sounds familiar, right? This is an example of the Business-to-Consumer (B2C) e-commerce model in action!

In simple terms, B2C e-commerce is when businesses sell products or services directly to individual consumers like you and me through online platforms or websites. It’s like a virtual store where you can browse, buy, and receive products without even leaving your home. 

In the B2C e-commerce model, businesses act as sellers and individual consumers act as buyers. Transactions basically occur between businesses and consumers. In B2C, online platforms or websites facilitate connections and transactions. 

The Consumer to Consumer Model (C2C)

Have you ever bought something from a friend or family member online? Maybe you purchased a used book from a classmate on Facebook Marketplace or bought a gently used video game from a friend on eBay. Perhaps you’ve sold something yourself, like an old phone or a piece of clothing to someone you don’t know online. If so, you’ve participated in the Consumer-to-Consumer (C2C) e-commerce model.

C2C e-commerce is like a virtual garage sale or swap meet where individuals buy, sell and trade goods and services with each other online. It’s a platform where people can connect, negotiate prices  and exchange items without the need for a middleman like a store or a business. This model is all about empowering individuals to take control of their buying and selling experiences, and it’s becoming increasingly popular.

In this business model, individuals act as both buyers and sellers. Transactions occur between consumers, not between businesses and consumers. Online platforms or marketplaces facilitate connections and transactions and goods and services can be new or used.

Breaking Down Popular E-commerce Models

Now, let’s dig a bit deeper into some specific e-commerce models so you can see which one might be the right fit for you.

Dropshipping

Dropshipping lets you sell products without the hassle of keeping inventory. When a customer buys something, your supplier ships it directly to them. It’s a super low-risk way to get started since you don’t have to buy stock upfront.

Pros:

– Minimal startup costs—you don’t need to buy inventory.

– No need to worry about storing or shipping products.

– You can sell a wide variety of items without significant investment.

Cons:

– Profit margins can be on the lower side.

– You don’t have full control over the quality or speed of shipping.

– You’re reliant on suppliers, which can be a bit of a gamble.

It is best for those that are  just starting out, testing new product ideas, or wanting to run an online business without heavy investment.

Private Labeling

Private labeling is all about creating your own branded products. You source items from manufacturers, put your brand on them, and sell directly to customers. It’s great for building a unique brand identity.

Pros:

– You have full control over branding and marketing.

– Higher profit margins than dropshipping.

– Opportunity to build brand loyalty.

Cons:

– Requires upfront investment in inventory.

– You’ll need to manage logistics, warehousing, and shipping.

– More risk if products don’t sell as expected.

It’s usually best for entrepreneurs who want to create a recognizable brand and have some capital to invest upfront.

Subscription-Based

Subscription e-commerce charges customers on a recurring basis, delivering products or services regularly. You see this in businesses like Netflix, beauty boxes, and meal kits.

Pros:

– Predictable and recurring revenue stream.

– Builds long-term relationships with customers.

– Potential for higher customer lifetime value.

Cons:

– Can be costly to acquire new subscribers initially.

– You need to consistently deliver value to keep customers.

– Subscription management can get complex.

It’s usually most suitable for businesses offering products or services that are used regularly and where customers appreciate the convenience of automatic delivery.

Wholesale

Wholesale is all about buying products in bulk and selling them at a markup, usually to other businesses. It’s perfect for those looking to move large volumes of products.

Pros:

– High-volume sales can lead to substantial revenue.

– Opportunities for repeat business with B2B clients.

– Less crowded than direct-to-consumer markets.

Cons:

– Requires significant investment in inventory upfront.

– Thin margins in price-sensitive markets.

– Managing logistics and orders can be challenging.

Entrepreneurs ready to handle larger operations and looking to serve other businesses always find this model most convenient.

How to Choose the Right E-commerce Model for Your Business

Choosing the right model is all about aligning it with your specific needs and goals. Here’s how you can decide which one’s the perfect fit:

Step 1: Identify Your Niche and Audience

Who are you selling to? Are they businesses, individual consumers, or other sellers? Knowing your audience helps you pick a model that fits best. For instance, if you’re selling handmade crafts, C2C might be your go-to. If you’re targeting business buyers, B2B could be the way to go.

Step 2: Consider Your Resources

Take a good look at your budget, time, and skills. Dropshipping might be a good starting point if you’re working with limited funds. Private labeling, on the other hand, is better suited if you’ve got some capital to invest and want to create a strong brand presence.

Step 3: Research Your Market

Check out what’s happening in your industry. What models are your competitors using? Are there any gaps you can fill? Staying on top of trends and understanding your market landscape will help you make a smart choice.

Step 4: Test Your Ideas

You don’t have to go all in from day one. Test the waters with a small-scale version of your chosen model. Maybe start with dropshipping to gauge interest before diving into private labeling or wholesale. This allows you to see what works without too much risk.

Step 5: Plan for Growth

Think ahead. Will your chosen model allow you to scale? If you start with dropshipping, can you transition into private labeling as you grow? Choose a model that not only fits your current needs but also supports your future ambitions.

Finding Your Perfect E-commerce Model

There’s no one-size-fits-all solution when it comes to choosing an e-commerce model. The best approach is to understand your goals, resources, and what you want to achieve. Whether you’re just starting out or looking to expand, choosing the right model is a crucial step toward building a successful online business.

So, take your time, do your research, and don’t be afraid to test and tweak your approach. The right e-commerce model will not only help you run your business smoothly but also set you up for long-term success. 

Now, go out there and make your online business dreams a reality.