Online purchases continue to shatter sales records year after year, according to Smart Insights. Selling products and services online can be a component of several different business models. If you're stumped by the difference between ecommerce and online retail, here's a quick primer on both—including the many benefits of ecommerce—so you can make the best decisions for your business.
Online retail vs. ecommerce.
While there's a bit of overlap between the two concepts, ecommerce and online retail aren't the same thing. Online retail represents one aspect of ecommerce: the ability to buy products online. Businesses that offer online retail may have a brick-and-mortar store or operate solely through an online marketplace. An ecommerce business, meanwhile, may also use a website to sell services, such as consulting, or may provide a third-party service for smaller merchants to sell their products online.
Many online retailers are well-known brands with physical stores, from Williams-Sonoma to Costco. These retailers give shoppers the option to shop in person or online. Some retailers maintain a separate inventory for online sales, while others work from a shared inventory, offering the same things on their website and in their stores. A few are online-only retailers—for example, the clothing and home goods retailer Zulily, and formerly, Amazon.
A well-known example of an ecommerce business, on the other hand, is Etsy. The company doesn't sell its own physical products, but instead offers a platform for artists and other individual sellers to showcase and sell their goods directly to consumers.
Exploring common ecommerce models.
Harnessing the benefits of ecommerce for your business means familiarizing yourself with the most common business models:
- Business to Consumer (B2C)
- Business to Business (B2B)
- Business to Administration (B2A)
- Consumer to Consumer (C2C)
- Consumer to Business (C2B)
- Direct to Consumer (D2C)
Breaking down B2B, B2C, and B2A.
B2C is the most familiar business model, with a retailer selling items directly to consumers who visit their site. This overlaps with online retail, and offers a product directly to the end user.
B2B enables commerce between two businesses and represents a huge segment of the ecommerce marketplace. Statista reports that sales are projected to reach 1.8 trillion U.S. dollars by 2023. This model involves manufacturers selling goods or services directly to wholesalers or retailers. Typically, these transactions are volume purchases and can be anything from raw supplies to software.
B2A is similar to the B2C model, but instead of selling to the public, they sell to government entities. These products are typically government-specific and can range from legal services to vehicles.
C2C and C2B platforms.
Despite what the name implies, consumer to consumer involves three parties: the business running the platform where transactions take place, the consumer who's paying to sell on the platform, and the consumer who's buying the product. Examples include eBay and Etsy, where individuals can use the platform to create an online store with a portion of sales going to the host website.
This model creates a quick, low-stakes option for sellers who can't afford the expenses associated with creating a business in the traditional sense, such as rent, registering a company, or website hosting. Because the expenses of storing inventory are on the consumer, the platforms also benefit.
Similarly, C2B ecommerce involves individuals providing a product or service to a business. This model effectively reverses the roles of B2C and offers businesses help with tasks such as accounting or marketing. For example, Upwork allows freelancers to join an online marketplace and display their skills for potential clients in exchange for a cut of their payments.
Influencers, focus groups, guest bloggers, and industries like photography or graphic design can offer something of value to businesses via ecommerce. Besides services, some also sell digital products, such as stock images from freelance photographers to use on blogs or in marketing materials.
Direct to consumer (D2C).
D2C ecommerce is distinct from B2C because it's made up of manufacturers and producers who sell directly to end users. By cutting out distributors and retailers, direct-to-consumer companies simplify and stay lean. Warby Parker, for example, is an eyewear company that manufactures and sells prescription glasses online instead of solely through optometrists or boutiques.
D2C companies are responsible for key components of success, including their own brand image, marketing, and supply chain issues. The upside is they're in control of data and can see exactly where they're succeeding, as well as the performance of their individual products.
D2C can be a great way to make a name for yourself. Then, you can use data to locate specific areas where you might successfully offer your products using a more traditional B2B or B2C model.
The benefits of ecommerce.
For business owners who're looking for a nimble online sales solution with fewer upfront costs and lower stakes, the right ecommerce model can be a game changer. The ability to conduct business from anywhere is an attractive quality, as is your potential reach. Customers can be located anywhere, making your customer base virtually limitless. Another attractive part of ecommerce is that as you grow, your hiring can include talent from anywhere.
The scalability of ecommerce is why this business option is exploding in popularity. The ability to make sales around the clock, easily build websites or pages, and maintain different shops with different products under one website can help your business grow and prosper.
Understanding the difference between ecommerce and online retail can be confusing at first. But when you realize the wealth of opportunities that ecommerce solutions can offer, you'll feel empowered to make decisions that make the most sense for your brand. From a better customer experience to robust website metrics, ecommerce offers the data and flexibility a small business needs.
