E-retail business in the UK continues to go from strength from strength with the global pandemic only accelerating the change in consumer behaviour and providing a further boost to the digital economy.
For start-ups entering the arena now and for the traditional bricks and mortar retailers who are making their first foray into the e-commerce world, one of the most common questions we get asked is:
What e-business model should I be using for my business?
There are several common models available to people and the key is finding the model which best fits in with your overall strategy and helps promote your business:
Business to Business (B2B)
Put very simply, this is where you sell your goods (or services) to other businesses. Your customer would then either use or sell your products directly to the final consumer.
This model covers wholesalers, distributors and manufacturers.
Business customers tend to buy in bulk so you will tend to have fewer sales but larger orders each time. As a result you will often need to hold higher amounts of stock so the B2B model often requires higher amounts of start up cash.
Business customers tend to buy on credit compared to consumers who pay at the till so greater focus needs to be given to cash flow management.
Business to Consumer (B2C)
This is probably the most popular e-business model which is where business sells directly to consumers and people can buy the goods or services online without any third parties involved.
In this model, you will need to open an online store/website where you promote your products or services and customers can place orders. It is then up to you to fulfil those orders.
This model generally requires less start up capital and consumers will tend to pay on order. It does often require greater marketing spend as you need to make consumers aware of your website and products.
You also ned to be very conscious of online reviews as a bad reputation can crush a start up business.
Consumer to Business (C2B)
This is less common and is where individuals sell to businesses. A big increase in this are in recent years has been social media influencers who sell their services to businesses to market their products.
Business to Government (B2G)
Not suitable for all products but this is where you sell your products to government agencies or public bodies.
Government contracts are generally awarded through tenders. The process of obtaining a customer is a lot more bureaucratic and the process is therefore often slower but if won, contracts tend to be a lot more secure.
Consumer to Consumer (C2C)
This is where individuals sell to other individuals sometimes through an online marketplace and the marketplace makes money by charging commission or transaction fees. eBay is a good example of this type of business model.
Working out which business model is right for you involves having a good business plan and thinking about some key questions regarding you and your business. Firstly, you need to understand your target customer.
Who is likely to want to buy your products or services?
Connected to above, what is the best way to get your product in front of your target customer? You need to have a good delivery method which makes you easy to find and easy to buy from. You need to understand your consumer’s behaviour so the process of buying from you is as pain-free as possible.
You also need to understand your product and have a clear selling proposition. What is best about your product and what makes you different to your competitors and which business model helps to enhance your strengths and mitigate any weaknesses?
As e-business continues to grow and innovate, understanding what business models to use and how to utilise them can make all the difference between a thriving business and those who fail quickly. It’s a competitive environment and only by knowing yourself and your options can e-businesses truly succeed.