Four major types of E-Commerce markets can be classified as Business to Business (B2B), Business to Consumer (B2C), Business to Government (B2G) and Consumer to Consumer (C2C).
Let’s take a look at those different types of E-Commerce in details.
1. Business to Business (B2B)
Business to Business (B2B) E-Commerce caters to needs of a business, transactions and distribution.
Definition: Business to Business (B2B) E-Commerce caters to the needs of other businesses which are the target market for both product and service industries. The business is conducted directly for business customers rather than the end user – individual consumers. Technically, this type of E-Commerce can exist both online and off-line.
Purpose: Business to Business (B2B) E-Commerce is used to attract, develop, retain and cultivate relationships with corporate customers. It is used mainly to streamline the supply chain processes such as purchasing processes, automate manufacturing and support other corporate processes, so the business can deliver the right products to customers quickly and cost effectively.
Examples: Corporate banking, sales management software, online suppliers of equipment and spare parts, telecom operators offering communication services, company insurance, general maintenance of company websites and sales apps, advertising agency services, inventory management software. Supermarkets and other department stores use barcode scanners at the cashier and in other areas in the business to monitor inventory, pricing, etc.
Companies: Amazon.com supplies books to retailers such as Barnes & Nobles. Other example include Alibaba, Global Sources, ECPlaza, etc.
Benefits: Business to Business (B2B) E-Commerce offers cost-saving benefits and higher efficiency. Businesses use technology to develop improved working relationships with partners in the supply chain. It is done through capturing, gathering, analyzing and sharing information about customers and company operations. Product and service providers constantly develop new concepts that help other firms to conduct more business faster by making better and more informed decisions.
Drawbacks: Consumer marketing strategies used for selling products to individual customers are not suitable or sufficient for marketing B2B goods and services. Corporate clients are professional buyers who have a totally different agenda and needs than consumers like you and me. Using the wrong marketing strategies to target business customers can waste business resources
2. Business to Consumer (B2C)
Business to Consumer (B2C) E-Commerce sells directly to customers and provides other necessary services.
Definition: Business to Consumer (B2C) E-Commerce caters directly to the needs and wants of end-users who are consumers. The products are sold to them by businesses.
Purpose: Business to Consumer (B2C) E-Commerce is used to target individual people who are the target market. Many companies are engaged in both B2B and B2C E-Commerce though. The business can advertise and sell products through using its own company own website, other websites matching the target demographics or social media sites such as Facebook or Twitter. Additionally, sales leads can established as visitors leave their contact details. Market research about important consumer data can be carried out online by asking visitors to answer questions on the website or in the app.
Examples: Daily consumer products such as food, clothes, music, books or home appliances. Technological companies such as Google, Microsoft or Yahoo! which target both other businesses and individual customers who can carry out searches on their websites.
Companies: Amazon.com sells books directly to private individuals. Other examples of businesses engaged in Business to Consumer (B2C) E-Commerce include Tmall, Allegro, etc.
Benefits: Business to Consumer (B2C) E-Commerce makes it possible to offer current customers and potential customers access to a large amount of information about products; way more than was possible in traditional business. Also, consumers can access their digital products such as songs, movies or E-Books on the spot. Customers can also easily return to the online shop to place further orders.
Drawbacks: Online businesses specifically directed at consumers have to change existing business models and come up with new business models which might costly and time consuming. Providing good customer service online is necessary and many require hiring additional workers.
3. Business to Government (B2G)
Business to Government (B2G) E-Commerce is when business organizations provide goods and services the governmental bodies on both national and local levels.
Definition: Business to Government (B2G) E-Commerce refers to electronic transactions between businesses and government entities. The Business to Government (B2G) E-Commerce model has the same definition as Business to Administration (B2A) which also includes businesses specializing in distributing products and services to the state.
Purpose: Business to Government (B2G) E-Commerce is used to sell a wide variety of information, digital services and digital products to various government institutions and government agencies. It also includes all publicly-funded agencies, subdivisions, affiliates and other governmental entities.
Examples: Business to Government (B2G) E-Commerce caters to the needs of the government both the state government, federal governments, regional governments and smaller local governments. The United States government spends nearly USD$7 trillion on government procurement every year accounting for between 10%-15% of the country’s GDP. The state agencies will prepare contracts, put out tenders and ask businesses to participate in bidding. All businesses interested which can meet the government’s strict requirements will now calculate the project’s pricing submission. Then, the government will review and select the most suitable company and to sign a contract.
Companies: Companies such as General Dynamics, Lockheed Martin and Raytheon Technologies produce military equipment ranging from weapons and war machinery, electronic equipment, military defense systems development, etc. supplying those products to the US armed forces. Other examples involved in Business to Government (B2G) E-Commerce include General Electric (GE) or Boeing.
Benefits: Business to Government (B2G) E-Commerce offers the possibility to secure extremely large orders worth billions. These transactions are stable and can often bring significant profits for businesses, if the bidding is successful. B2G businesses with previous successful history of working with the government have more opportunities and higher chances of winning bids. Also, thanks to online transactions, transaction times are significantly reduced comparing with traditional way of doing things. These das many governments’ data systems have been converted to digital storage, so processing things is faster.
Drawbacks: The Business to Government (B2G) E-Commerce model is very complex and requires strict compliance with heavily involved business laws, regulations and legal documents. It is because government institutions and agencies are strictly supervised and audited. Many small and medium businesses have problems dealing with government businesses as they are not familiar with the way government enterprises work. Also, governmental agencies often have a slow decision-making process which is more time-consuming than in private businesses.
4. Consumer to Consumer (C2C)
Consumer to Consumer (C2C) E-Commerce is when customers trade with each other for either good and/or services.
Definition: Consumer to Consumer (C2C) E-Commerce caters directly to the needs and wants of end-users who are consumers. The products are sold to them by other consumers.
Purpose: Consumer to Consumer (C2C) E-Commerce is used to when consumers trade with other consumers. E-Commerce platforms, such as eBay, that enables customers to trade with each other, but often charge sellers with small fees for listing items for sale. Nevertheless, it is highly cost-effective as it minimizes the advertising cost to consumers as third-party providers are not involved.
Examples: Second-hand goods such as furniture such as tables, chairs, sofas. Also, second-hand home appliances such as TV sets, microwaves or blenders. Larger items such as motorcycles or cars can also be traded online between individual consumers. Services can also be provided online between two or more individuals such as private tuition.
Companies: Taobao.com, which is owned by Alibaba, is the world’s largest C2C market which features billions of products on its website. The online platform called eBay enables customers to trade with each other selling both new and second-hand items. Other examples of companies engaged in Consumer to Consumer (C2C) E-Commerce include Taobao, Craigslist, etc.
Benefits: The Internet has enabled customers to have greater interaction with each other. Consumer to Consumer (C2C) E-Commerce is expected to continue growing, hence provides opportunities for increases sales. The increased use of courier services such as DHL, UPS and Fedex as well as online payment providers such as PayPal, WeChat Pay and Alipay has made C2C much more accessible for everybody and efficient.
Drawbacks: Quality control can be a problem for the buyer as well as lack of payment guarantees from the buyer. There are no formal contracts signed between to consumers trading with one another as the whole transaction is based on trust. Consumers may lack the confidence sometimes to pay other people, preferring to buy from an online business instead (B2C).
All in all, four main types of E-Commerce markets include Business to Business (B2B), Business to Consumer (B2C), Business to Government (B2G) and Consumer to Consumer (C2C).
