All You Need to Know About The Business Model of E-Commerce Companies

All You Need to Know About The Business Model of E-Commerce Companies

There are several reasons why e-commerce is growing rapidly.

 

  • Towards the end of the last decade, 50% of buyers expressed interest in buying online than physically visiting a store.
  • More than 18% of all sales will be online, transacted through e-commerce platforms.
  • By the end of 2021, the e-commerce industry is expected to witness $4.8 trillion in sales worldwide.
  • Women shop online more than men. For every $10 spent on online shopping, $6 are contributed by women.
  • The biggest percentage of those who shop online are millennials, and they make up a third of the market.
  • It is estimated that there will be 2.14 billion online buyers from around the world at the end of 2021.

With half of all internet access happening on smartphones, it has become essential that online marketplaces be optimized for mobile devices. Given that women make up more of consumers in this space than men, listing more products that intended for women or simply tweaking the e-commerce platform to make it more women-friendly can lead to a spurt in sales. On that note, focusing on products geared towards millennials can also lead to better sales figures.

If you are planning to set up an e-commerce marketplace in Dubai or anywhere else in the United Arab Emirates, then it is important to have someone who is experienced at the art of business formation in Dubai assist you. He/She can not only help you incorporate your company, but also put you in touch with a good website designer who will combine elements of good UX to cater to the above two demographics. This is how you can be successful with your e-commerce platform.

Business Models in Use by E-Commerce Companies

Some of the business models adopted by e-commerce companies are as follows

B2C: Short for Business-to-Consumer, this is the most commonly seen model of e-commerce. Amazon would be a prime example of this business model, where companies sell to individual customers. An e-commerce company that relies on the B2C model for its operations would have to spend on customer care to attend to disputes between sellers and the end users. There is a lot of valuable consumer data that can be gleaned, such as buying preferences, which can be used successfully in directed advertising to improve sales.

B2B: Short for Business-to-Business, this business model has companies selling to other companies. An online office furniture store would be a very good example of this business model, as the consumers are companies that buy from a company. Because the volume of sales on B2B platforms is high, a lot of businesses can scale up successfully simply by listing their products or services and being found by those in need of such products or services. It is also cheaper for buyers to purchase in bulk from sellers this way than from retail outlets, where the prices are higher.

C2C: Short for Consumer-to-Consumer, this business model has an individual as the seller as well as the buyer. eBay is an example of the C2C model of e-commerce. The e-commerce platform makes money by charging a commission (usually a percentage of the price) on every sale. CraigsList is another example of the C2C model of e-commerce. The C2C e-commerce company often has personnel that pick up the item from the seller’s location and deliver it to the buyer. Google Pay and Venmo are the most preferred methods of payment on C2C e-commerce portals, and there are built-in payment protection mechanisms to guard against fraud.

C2B: Short for Consumer-to-Business, this e-commerce model has an individual as the seller and a company or corporate organization as the buyer. One example of this model would be UpWork, where companies request services from individuals who list their areas of specialization and their service offerings, as well as their rates. Another example of this business model would be Fiverr, where rates for services offered by individual freelancers start from $5 and go higher, depending on the complexity of the work to be done.

Dropshipping

There are now both individuals and companies that engage in dropshipping. This is a business model where the seller doesn’t stock up on the product. When an order is received, the seller passes this on to the manufacturer who will ship the product directly to the buyer. This makes sense for manufacturers who do not wish to spend on advertising.

The dropshipper advertises their product for them and gets them orders from a market where the competition may be high. Those involved in dropshipping make a profit on the sale, but this is also fraught with an element of risk. The dropshipper is expected to refund or replace the product at no added cost in case the buyer finds it defective, failing which the dropshipper – who is also officially the seller – could face legal action.

Why Choose a Company Formation Expert for Opening Your E-Commerce Company?

At A&A Associate LLC, we have years of experience helping entrepreneurs open their companies in Dubai and the rest of the United Arab Emirates. We also help set up companies offshore. We can be counted on for everything, including Cayman Islands offshore company formation, British Virgin Islands offshore company formation, and Mauritius offshore company formation. We have successfully assisted clients from 100 countries around the world, and we have a 98% client satisfaction rate so far.

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