Business Models of E-Commerce

Who is trading with whom

E-commerce is usually classified by the type of parties on the two sides of a transaction — a business or an individual consumer. This gives four main models. Remember the shorthand: B stands for business and C stands for consumer, and the arrow reads 'from … to …'.

1. B2B — Business to Business

Here both parties are businesses. One firm sells goods or services to another firm through an online platform — for example a manufacturer selling raw materials or components to a factory, or a wholesaler supplying a retailer online. B2B deals are usually in large quantities, involve higher value, and often run on negotiated prices, credit terms and repeat orders. The number of transactions is smaller than in consumer selling, but each order is bigger.

2. B2C — Business to Consumer

Here a business sells directly to the final consumer through a website or app — the online retailing that most people picture when they think of 'shopping online'. Orders are typically for small quantities at listed prices, but there are a very large number of customers and transactions. This is the most visible and fastest-growing model for everyday goods, clothing, electronics, books and food delivery.

3. C2C — Consumer to Consumer

Here one consumer sells to another consumer, using an online marketplace or classified-advertisement platform as the go-between. A person selling a used phone, second-hand furniture or a hand-made craft item to another individual is doing C2C. The platform provides the meeting place, listing tools and often the payment and rating system, and earns a fee or commission, but the actual buyer and seller are both individuals.

4. C2B — Consumer to Business

This reverses the usual direction: an individual offers a product, service or price to a business, and the business buys or accepts it. Examples include a freelance designer, photographer or writer selling their work to a company through a platform, an individual licensing a photograph to a firm, or a customer naming the price they are willing to pay and a business choosing to accept it. Here the initiative and the offering come from the consumer.

Comparison at a glance