Everything You Need to Know Before Starting an Ecommerce Business
According to a recent study 69% of Americans have made an online purchase, citing the ability to shop anywhere, be it from a bed, from work, even from the bathroom, as the biggest appeal of online shopping. This image is what the majority of people think of when they hear the term ecommerce, but mention different ecommerce models such as B2B, B2C, C2C or C2B and their eyes might glaze over.
With ecommerce thriving across most sectors, let’s take a look at the ecommerce models in operation today and how they differ from one another.
Key differences between B2B and B2C ecommerce models
A Business-to-Customer interaction is how we traditionally see commerce. While this market is growing online, the majority of transactions still take place offline in bricks and mortar establishments, the balance, however, is shifting. The B2B model, businesses supplying goods and services to each other, is also an age-old concept. Ecommerce is a nuanced, multi-faceted industry, with different approaches optimal, depending on who is interacting with whom.
1. Customer profile
A typical consumer wants a streamlined shopping platform, so it stands to reason that if convenience is a major attraction of shopping online, buyer friction has to be kept to a minimum. We have all experienced a buggy shopping cart on a website or a cumbersome check-out system. In a B2C relationship, the buyer is typically one person and the aim is to get that person to the check-out entering their credit card details, as efficiently as possible.
This is not the case in B2B model, the buyer is motivated by professional reasons, it’s their job to find a supplier. The primary focus for them is the bottom line, rather than convenience. A single consumer has complete domain over their credit card, while a buyer might need approval from a committee or manager. Often B2B platforms allow multiple accounts from a business, with a managerial account to give final approval to a transaction, after they are satisfied with the nuts and bolts of the deal.
2. Marketing strategy
Unlike other ecommerce models, the B2B typically has a narrowly focused target market. For example, Airbus will seek to appeal to airline companies or defense departments and will need to tailor their customer interaction appropriately. A B2C business will have a much broader demographic, targeted from young mothers to basketball players perhaps, casting a wider net.
It is clear from this example that there is no catch-all approach to ecommerce. When a buyer from a business is sourcing products or services, we can assume he will be knowledgeable about their benefits and will instead be focused on the product’s features. Whereas a high-street consumer is more emotionally driven, which means the benefits of the product should be clearly displayed and easily digested on the platform.
3. Customer relationship
A B2B company relies on long-term relationships with customers, once happy with their suppliers, a business will often reorder multiple times. This means the platform needs to be tailored to make reordering as convenient as possible. While this should also be implemented in B2C platforms, the sporadic nature of transactions means relationships between the supplier and customer are more fleeting.
The long-term dynamics of a B2B relationship means that as customers, businesses have a much greater lifetime value compared to a retail consumer. The vastly greater average price point of B2B vs B2C ecommerce transactions reinforces this dynamic. While harder to convert into sales, a business will potentially order greater quantities, at a higher price point for a longer period of time.
C2B and C2C – the two less traditional eommerce models
Most people will have a broad understanding of how B2B and B2C ecommerce models operate, from their own experiences online or on the high street. With C2B and C2C ecommerce models, they may have less of an intuitive understanding of how they function.
Perhaps the least obvious model, but again, one that has well-known use cases and success stories. This interaction is when a consumer provides goods and services to a business, allowing the company to extract value from the consumer and vice versa. This can be done in the form of providing data to the company through reviews or affiliate marketing channels.
A prime example of this model in action is reverse auction sites where consumers list the price they want to pay for a product. Also on sites such as Upwork, where consumers offer their services to businesses, in an inverse of the usual relationship between the two.
It may not be the first model that springs to mind when considering the different forms of ecommerce, but it is a familiar concept to just about anyone. Auction houses and classified ads provide the historical context for the C2C online marketplace. eBay and Craigslist serve as two prominent examples of platforms successfully bringing this interaction into the digital age.
The success of this model depends on its commission from each transaction and thus needs a high volume of users to be profitable. While there are success stories, there are many more examples of failed models, which proved unsustainable due to a lack of users or security issues.
B2B2C – One of the most modern ecommerce models that connects manufacturer and consumer
What is B2B2C ecommerce?
The Business-to-Business-to-Consumer model of ecommerce can be viewed as a combined forces approach by businesses with the ultimate goal of reaching and interacting with new markets and customers. This can be achieved through blogs, websites or portals connecting to ecommerce sites. With this method, the primary supplier pays the affiliate business for the users, leads or sales generated through their channels. The end result for the consumer is access to relevant products, while the producer increases their customer base without rattling any cages with their distributors.
In the B2B2C model, a manufacturer is no longer just a manufacturer or wholesaler. By developing an own store, they reduce the role of the middleman and take on the creative responsibility to drive sales through their own site.
What are the benefits of B2B2C model?
1. Removes the disconnection
On November 11th, 2018, Alibaba once again broke their own record for Single’s Day Sales, bringing in a mindblowing $30.8 billion in one day. Their own sales being aided by subsidiaries such as Lazada Vietnam (co-founded by Christopher Beselin – now Chairman and Co-founder at fram^), also offering sizeable discounts during China’s increasingly popular anti-Valentine’s Day. With people stocking up on anything from cat food to baby strollers, giving consumers access to a wide range of markets, has seen the ecommerce giants reap huge returns.
In the more traditional ecommerce models, a manufacturer often sells stock to a distributor, this could be on Amazon or through a host of other channels. The distributor will buy the inventory, charging a premium to market and distribute the product to the end user. This means the manufacturer loses control over the transnational information of the end user. There is also a loss of control over the brand and potentially the price point as the product is sold over multiple platforms and by different vendors.
If a manufacturer has their own ecommerce store that ALL sales originate in, they can maintain a close relationship with their customers and their data, while still driving sales through multiple channels.
2. Noses are kept in joint
Top B2B2C ecommerce websites work in tandem with other prongs of the supply chain, this is no zero-sum game. While the sales originate in the manufacturer’s own online store, real-time integration with the distributor allows for the third party to handle delivery of the product. While they will receive less than in traditional ecommerce models (B2B & B2C), they also are exposed to less risk, with no marketing responsibility or stock purchases.
The primary supplier deals directly with the customer and is billed by the distributor for delivery of the product. This can also be applied to brick and mortar vendors who sell the product in a store, completing the sale on the manufacturer’s platform.
Having their own online store allows the business to maintain control of the overall supply chain and gives them the ability to move to an entirely direct to consumer approach if the need arises. For the consumer, money saved through reducing the role that third parties play can have a trickle-down effect, leading to reduced prices and a more personalized user experience.
How to make the B2B2C model work?
1. Seamless integration
For some suppliers interacting with Alibaba and Amazon is a necessity, this does not mean they must forego the benefits of this B2B2C model, it just means their own store must be integrated with the other platforms. Manufacturers can ensure they receive their fair share of their place in the market, by harnessing a range of distribution channels.
One such channel is integrating with apps through SAP technology, allowing customers to put out tenders to third party suppliers or service providers. In order to gain access to the customer’s information, the third party must confirm the sale, which will place a real-time order to the manufacturer’s own store.
2. Enjoyable user experience
It matters little who the end user is if they experience friction with an ecommerce platform they won’t convert into a sale. The software must be user-friendly and more important than ever before, mobile friendly. Customers demand speed, 24/7 accessibility, and consistency across channels and that is what top B2B2C ecommerce websites must deliver. Suggested similar product displays deliver relevant content to the consumer and allows upselling and cross-selling to boost sales and aid the sales team.
3. Technological challenges
The platform itself needs an intuitive and inter-connected lay-out, with products and services appropriately grouped. It should be a very personalized experience for the user, driven by the data the manufacturer now possesses. This gives rise to a responsibility to ensure that the system’s security is tried, tested and properly certified.
Accessing a broader market brings with it practical issues that the software needs to be able to handle without impacting the user experience. B2B2C model needs to be capable of converting between different currencies, navigating tax implications and seamlessly available in a range of languages.
Choose the right strategy for ecommerce business development
After working out what product or service to offer and where/who exactly you are going to sell it to, comes the difficult part, logistics. With ecommerce business totaling sales of $453 billion last year in the US alone, it is easy to see that this is indeed a very large and multi-layered pie. There is no easy, universal answer as to what the best strategy is to grab a slice, it very much depends on the sector, product and ultimately what ecommerce models your business operates.
1. Branded business
The perfect approach for a new ecommerce business that lacks the financial clout to manufacture its own product. Instead, the product is produced by a third party and the vendor then “white labels” it with their own brand, which they must focus on building and marketing.
This strategy can be applied to any of traditional ecommerce models, but it is not without its risks. Once a manufacturer is chosen and the product is made, the business is committed to the stock, which means they will need to be very confident that they can ensure high standards are maintained by their manufacturer.
B2C businesses will try to find a supplier offering their product at a price point typically at least 50% of the retail price. They will then directly target consumers through their sales and marketing teams or online ecommerce store.
This is a strategy that requires heavy financial investment and can lead to operational difficulties for smaller businesses. They need the capital to sink into the inventory, the capacity to store it, the infrastructure to market the product and then the wherewithal to receive and efficiently fulfill the orders placed.
3. Warehousing and outsourced fulfillment
If a warehouse also operates as a distribution center, it can ease the burden on a business that has bought in bulk but is too busy or understaffed to handle shipping. The product is stored in a warehouse and listed on the company’s ecommerce store until an order is made, it is then shipped directly from the warehouse to the consumer.
One of the top popularity is FBA – Fulfillment by Amazon. Where a business ships their product in bulk to an Amazon fulfillment center, which will then pick, pack and ship your product, once a sale has been made.
4. Just-in-time purchasing
With no inventory required, there is a reduced risk for the retailer, who only purchases the product from the supplier after the order has been made. This allows for greater control over the branding of the product’s delivery and transactional information from the sale. By not being tied up with existing stock, it is much easier to test new products and suppliers.
The downside is the retailer will be hugely dependent on their supplier and will have to carry out a lengthy and meticulous vetting process of the manufacturer. Are they selling to others in large quantities? Are they available 24/7? Will the delivery process become too convoluted and inefficient?
5. Drop shipping
The potential products are sourced from a manufacturer and sold at a commission by the ‘retailer’ who never handles the product, nor holds any inventory. Once they have created their ecommerce store, they can add a wide selection of goods from different distributors, with no financial commitment on their part.
The low barriers to entry lead to an oversaturation in many markets, with slim profit margins and low-quality products the reality. Shopify and Ali Express have made it possible to open your own ecommerce business in just a few hours. Like most get-rich-quick schemes, it is often too good to be true. It takes time, networking and some exclusivity with your supplier to make drop shipping a truly profitable venture.
Build an effective ecommerce website in a crowded market
Last year, ecommerce hit $2.3 trillion in sales, with projections of $4.5 trillion by the year 2021. With such a fast growing market, it is no surprise to see that space has become increasingly competitive and more attention is being paid to ecommerce development than ever before. Consumers are becoming less patient with clunky and convoluted online stores and are now demanding intuitive and responsive systems, where they can shop without pulling their hair out.
In order to survive and prosper online, companies need to ensure that the user experience must be as friction-less as possible in order to avoid customers looking elsewhere. It has to be considered at every step of the development process, as ultimately it will dictate the success of the store and the retention of the customer base.
Key components of successful ecommerce website development
Mobile commerce or M-commerce accounts for 34.5% of total ecommerce sales, with nearly two-thirds of the global population now connected to a mobile device, it is now essential in ecommerce development to have functionality across all platforms. An easily navigated mobile site will certainly make you stand out from the crowd, with many users left frustrated by existing M-commerce options. Only 12% of shoppers said they found mobile shopping to be convenient.
The products in the store must be well organized, labeled with detailed information that allows the search bar to be an effective tool for the consumer. Providing an auto-complete function and also a filtered search option can help drive sales, with 30% of sales coming after using the search feature. Clear navigation menus, with a check-out button visible on every page and transparent information on fees and delivery times, can all have a positive effect on the end-user experience.
People do not like to wait and given the multitude of ecommerce businesses on the market, they won’t stick around long if they deem an ecommerce store unresponsive. By employing experts in ecommerce, a business can optimize its website’s performance and the resulting shopping experience of its customer. Research by Google suggests that 53% of mobile users abandon a website that takes more than three seconds to load, plugging this leak can have a big effect on your bottom line.
A global market requires an international outlook and utilizing geolocation data to automatically adjust currency and language is a great way to connect with a wider pool of customers. A world-class ecommerce platform will apply analytics and machine learning to offer a targeted selection of products based on a customer’s demographic, browsed items and order history. This is an evolving area of ecommerce website development, which when done right, can be a powerful cross-selling and upselling tool.
Making the most efficient use of all the data supplied by your customer is the key to this approach. Are they a returning customer? What device are they using? What are their interests? All the information garnered can be used to improve the user experience, search results or even the homepage can be adapted to match the user’s interests. Nobody wants to see content that is irrelevant to them, appeal to a customer’s interests and they will spend more time and money in the store.
Dubbed conversational commerce, chatbots are becoming an essential feature in ecommerce website development, whether in offering customer support or initiating sales. It is an area that Facebook is investing a lot of research in, with integrated partnerships with the likes of Uber offering an idea of what the future might hold for ecommerce. Google Home allows customers to order Dominos through voice-activated software.
The ability to integrate across different platforms and with your own existing systems is absolutely necessary for your ecommerce store, as is being able to add new features as they become available, otherwise the store will lose whatever cutting edge it once had.
In order to have customers who are happy to shop in your ecommerce store and will remain that way, it is vital that your website is clear about what it can deliver and at what cost. Information on delivery times, stock availability and shipping fees, along with a wide selection of payment options also listed, gives the customer peace of mind and can also lessen the burden on customer service inquiries.
Customer reviews can provide encouragement for those on the fence and simply having contact details on showing can reduce any buyer anxiety over who exactly they are dealing with. Security supporting SSL with full certification is a basic requirement of ecommerce development.
Get started to create your own ecommerce website or online store!
Although we have looked at a wide range of factors that have to be considered, the truth is there are many more ways to optimize ecommerce website development that we have not touched on. Almost all of them come down to one key factor, the user experience, as more and more retailers build an online presence, expect the competition to drive up the standard of the online shopping experience.
It is vital to find the best services for your business, to allow it to rise to meet these growing demands. As a full-service ecommerce provider, we offer a complete range of services needed to accelerate and maintain a high-performance site. Contact fram^ today to discuss your ecommerce models or to check out how fram^ can build your platform stand out from the crowd!