Main types of e-Commerce business models

Photo by Avelino Calvar Martinez from Burst

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There are four main types of e-commerce business models  organizations and individuals engage in when doing business online.  Each one is explained below for easy reference.

Business-to-Business (B2B)

One of the common business models where a business sells to another businesses. Good examples are  the businesses in the services industries like hotels, logistics, auditing and etc. Businesses also sell products which their clients can use for themselves or resell. Good example is whole business or manufacturers selling to retailers who then resells to individual customers.

The advantage of B2B model is that order sizes are usually quite large, which means high value and often the supply needs to be consistent. Therefore, B2B businesses require big capital to startup expenditure and takes time to sell.

Business-to-Consumer (B2C)

Business to consumer is the most tradition model of business. When people think of B2C, they often picture the typical street store where customers can walk in and buy things they want or need from the selves assisted and by store assistants. This type of business still exists today in all the major towns, cities and communities.

However, e-Commerce has expanded this type of business model using internet technologies and now it’s a huge industry. Almost any business can sell their products and services online. Costs of setting up an online store are lower as businesses only need a website to sell and see results. One of the downside is that B2C is very competitive and most of the online shoppers want their purchases delivered almost immediately just like they would in a normal physical store. Therefore, the pressure is on the businesses operating on B2C model to meet that expectation which can sometimes be frustrating and expensive as they will have to take care of deliveries, customer queries and etc on a regular basis.

Example of online stores using this ecommerce in Papua New Guinea are Tapioca Delight Cake Shop 

Consumer-to-Consumer (C2C)

This is an e-Commerce model where sellers uses a market place (a third party website) to sell their products. Good examples are eBay or Etsy. These market place websites allows the sellers to create a online store on their platform and they charge the businesses a reoccurring fee for using their platform to sell their products or services.

The advantages is that, seller can quickly set up a online store on the platform without investing more capital or time.

However, payments for goods and services will be collected by the market platform on behalf of the seller and then later pays them. If the market company charges the seller a percentage commission on every online sales income, then, they will normally allow the payments to accumulate (around 7 days) in most cases and then they get their commission and pay the balance to the seller.

Once, a buyer buys the product on the market platform, the owner will be notified to ship the product direct to the buyer and once the shipment is confirmed (referred to as order fulfillment) the payment will be included in the seller’s payment amount.

Good example of C2C market place platform in Papua New Guinea is Jungle PNG

Business-to-Government (B2G) and Consumer-to-Government (C2G)

These are less common models where government acts as a business. Government Departments, stationary organizations, and other units of government are not businesses but they do consume a lot of products and services in their operations.

Business-to-government (B2G).

B2G is a model in which businesses provide goods and services to the government entities. Normally on contract basis and payments are made by the government to the business owners.

In Papua New Guinea, the PNG Procurement Commission (PPC) oversees and controls all procurement of products and services for the government. Once the contracts are awarded to businesses, the payment of these are administered by the Department of Finance. PPC also as District Procurement Commissions in each of the districts and provinces to approve procurement of goods and services for their operations.

Consumer-to-Government (C2G)

C2G is a e-Commerce model in which consumers can government approved fees and taxes to various Government Departments and agencies. Good example, is individuals and organizations paying taxes to Internal Revenue Commission (IRC) or paying Investment Promotion Authority (IPA) for registration of businesses. Making payments to organizations such as IPA, IRC, PNG Customs, PNG Ports Corporation and etc  electronically are examples of C2G transactions.

Note, that in the C2C transactions, businesses become individual unit customers when they pay the fees.

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