E-commerce has quickly evolved to suit the demands of the global consumer. It has adapted to overcome different kinds of challenges — geographic, logistic, and infrastructural — to become a genuinely globalized business. The industry is now filled with players that are not simply online marketplaces but companies with niche functions or specific target markets. In this article, I’ll discuss the most popular e-commerce business models.
E-commerce Business Models
There are four significant types of e-commerce business models:
Business-to-Consumers (B2C E-commerce) — Companies involved in selling consumer goods through an online first medium.
E-commerce Enabling — Companies that help retailers, brands, or manufacturers operate their businesses online. It includes companies providing ancillary services like shipping, reverse logistics, payments, and software solutions.
Business-to-Business (B2B E-commerce) — Companies that enable businesses to buy goods and services from other businesses. Such companies may operate as marketplaces, listing platforms, e-distributors, or tech and software providers.
Cross Border Commerce — B2B and B2C online first companies that facilitate the sale of consumer goods from merchants or sellers located in other countries.
Social Commerce — E-commerce solutions that use social networks like Whatsapp, Facebook, or online communities for buying and selling products.
B2C and B2B were the first models in online selling. It is either a business selling directly to consumers or selling to another company online.
When e-commerce started to gain popularity, brands and online sellers needed help to scale their online businesses faster, and this is where e-commerce enablers get into the picture. Enablers help businesses in their online selling needs, such as warehousing, fulfillment, and marketing.
Cross Border Commerce and Social Commerce are the newest business models in e-commerce in search of more channels to push online sales.
Investment in E-commerce
From 2015 to 2018, investors focused on B2C e-commerce and then shifted to B2B from 2018 onwards. E-commerce Enablers are consistently getting more and more funding through the years, signifying the importance of ancillary services in e-commerce. Investors are also slowly getting into the budding sectors of cross border and social commerce.
The recent decline in B2B and B2C E-commerce funding shows that the sectors are now mature, primarily consolidated, with a handful of late-stage champions. Investors are pouring their money into E-commerce Enablers suggest that online consumers no longer need more online selling platforms. Still, the transaction volume growth will require more companies doing support services such as marketing, online store operation, customer support, fulfillment, and logistics.
With improved global logistics infrastructure, consumers aren’t apprehensive about ordering products outside their home countries. This applies particularly to consumers looking for luxury items. As more online shoppers are looking to purchase overseas goods, cross border commerce is seen to grow in the future.
Social commerce is a new selling model and is on the rise. As people continue to spend plenty of time online and influencers driving purchase decisions, social commerce will be a crucial tool for merchants to generate sales. Also, online reviews and recommendations are seen as drivers for online purchases.
Venture Capitalists Lead E-Commerce Funding Rounds
In terms of the number of funding rounds, venture capital funds are by far the most active investors, followed by corporate investors, private equity funds, and angel investors.
The next article will dive deeper into the E-commerce industry's investment activity and have a closer look at the global top investors.
About Rocket Equities
Rocket Equities, a corporate finance and M&A advisory firm for fast-growing mid-sized companies in Southeast Asia.
Latest fundraising news on E-commerce from Rocket Equities- Great Deals raises US$12M from Navegar to be the Alibaba of the Philippines.