The Australian ecommerce market is growing at a rate of 15% year over year. If this continues, it’s expected to be worth US $32 billion by the end of 2024. Though most of us mainly shop online for groceries and medicine, sites like eBay, Amazon, and Catch are still among the top ten for ecommerce visits and purchases. Whether you’re thinking about starting a business, or considering expanding your brick-and-mortar store, ecommerce is brimming with potential. In this blog, we’ll look at some of the most common and high-value business models in the ecommerce industry.
Standard business models
You’ve likely heard of the Business to Business (B2B) and Business to Consumer (B2C) models. The former is represented by companies like Xero, Salesforce, and Zoho Corp. that sell products or services to other businesses. Operating within the B2C model are brands like Woolworths and Coles, which sell products to end users. From these core models, others have emerged, such as Consumer to Consumer (think: Gumtree and Facebook Marketplace) and Consumer to Business (think: freelancers, mystery shoppers, and independent affiliates). You might also come across Direct to Consumer businesses, where manufacturers directly sell products or services to end consumers, or Business to Business to Consumer models, where the first business (usually a manufacturer or wholesaler) partners with the second business to sell their products or services. Brand partnerships, such as Apple selling exclusive OtterBox iPhone cases, and airlines selling hotel bookings and car hires, all fall under the Business to Business to Consumer category.
This is, by no means, an exhaustive list of ecommerce business models. As our economy evolves, businesses continue to innovate and create newer models of operation to maximise profits. Here are a few more modern business models.
Every business model we have (and haven’t) covered can be executed online—that’s what makes an ecommerce business. However, there are also specific ways to monetise in the ecommerce world.
Types of ecommerce businesses
Creators and manufacturers
Anyone who makes and sells products themselves will fall under this category. This includes most small-scale sole traders who sell items such as handmade jewellery, artwork, knitted products, and homemade chocolate. Within this business model, people who make a product sell it directly to the customer, eliminating the need for intermediaries. This gives the maker most of the profit earned. Designing and selling digital assets, like NFTs, is also considered ecommerce. On a bigger scale, companies that manufacture goods and sell them through their website, like Who Gives a Crap, Bonsoy, and Bakers Delight, also fall under this category.
This is your favourite brick-and-mortar store selling their products online. Most supermarkets and household shopping stores that offer online shopping fall under this category.
Ever seen big brands selling fandom merchandise on their website? White labelling is when a company purchases unbranded products (like t-shirts, hats, mugs, and water bottles) directly from manufacturers before customising them to sell as their own products. Most companies do this to complement their existing brand rather than as a core revenue model. However, there are also entire businesses built around white labelled products, such as Redbubble.
Gumtree, eBay, Amazon, and Facebook Marketplace are the most popular marketplaces today. However, this category also includes freelancing websites like Fiverr, Upwork, and Freelancer; software and add-on marketplaces, such as Trust Radius and G2 Crowd; and even NFT marketplaces, such as OpenSea and CoinSpot. All these marketplaces connect sellers and buyers, earning a portion of the transaction as profit.
This category includes businesses that offer products and services in the form of regular subscriptions. Examples include news and media websites (such as The Australian and the Australian Financial Review), coffee subscription businesses that automatically send you a new stock every month, and fruit and vegetable boxes that send weekly or fortnightly deliveries.
All these businesses sell to customers—people who purchase goods for their own use. Sometimes, these customers are businesses, which means the vendor is operating within a B2B model. For example, in the case of freelancing marketplaces, a small business might hire a web designer to help spruce up its online presence. Since both parties are businesses, it becomes a B2B transaction.
However, there are also many intermediaries in the ecommerce industry, involved in both B2B and B2C transactions. These intermediary models are sometimes referred to as B2B2C or B2B2B.
Types of intermediary businesses in the ecommerce supply chain
This is a high-risk and high-cost business to set up. In the supply cycle, drop-shippers operate between the online seller and their customer. For example, when you order a pair of shoes from your favourite online marketplace, the order will go directly to a drop-shipper who stocks that particular brand of shoes. The drop-shipper will then ship your order to you, with the branding of the online marketplace. This means the marketplace (or seller) doesn't have a warehouse full of stock, but instead partners with drop-shippers who do. It's a high-risk operation because if demand for a particular product falls, the drop-shipper will be stuck with more products than they sell.
Similar to drop-shippers, wholesalers also have large stock, except they don't hold onto it for as long. Wholesalers buy products directly from the manufacturer and sell them to individual retailers. Most of the risk in this business model involves acquiring products from the manufacturer, who is often located overseas. Most wholesalers have an online portal where their retailers can order stock.
Resellers and affiliates
This is where bloggers and influencers come in. They partner with brands and promote those brands to their audience. When someone makes a purchase as a result of that promotion, the affiliate gets a commission. Affiliates are legally required to inform their audience that they might receive monetary compensation from promotions.
Resellers are certified by a specific brand as authorised sellers. JB Hi-Fi is a reseller for technology brands. You'll also see resellers in the software space—often consultants who recommend and help you implement certain technology fall under this category. Resellers and affiliates can be individuals or firms.
We hope this serves as a helpful introduction to the myriad of people and business models involved in the thriving industry that is ecommerce. Have any specific topics you'd like us to tackle? Let us know in the comments below.