Decoding E-commerce: A Developer’s View of Diverse Business Models

We are living in a time where almost everything is driven on Internet. Internet has helped mankind achieve wonders and have eased and elevated human living standard. Among gazillions of things, internet has impacted business and how they operate. Standing in long queues or driving to the local store to buy something is not a distant memory. But things have changed dramatically, now we can order whatever we want from the comfort of our couch and get it delivered to our doorstep. This mode of trading has helped us save a lot of precious time and is primarily part of one of various business models of e-commerce.

We all are developers, almost 90% of our time at the start of our career we tend to focus on the bleeding edge tech and learn about them. But as we grow in experience, it becomes paramount to be well versed with different domains as well. I know, we developers think that I am a developer just tell me what needs to be done and I will deliver. But think about this, there is a difference in doing something that you are told to do without knowing what you are doing, than doing something with the knowledge of what you are doing and why are you supposed to do this. To add one more point, it helps you with your conversation with various stakeholders and come up with relevant software architectures. In this blog post I will consolidate the some important aspects of E-Commerce domain, which I have learned over the years. At the end, I will provide certain links which you can refer to learn more about it. So let us get started.

What is E-Commerce?

To understand what is E-commerce, let us first understand what Commerce is. The dictionary meaning for the work Commerce is “the activity of buying and selling, especially on large scale” and if you want a more formal definition of the word then from Wikipedia:

Commerce is the large-scale organized system of activities, functions, procedures and institutions that directly or indirectly contribute to the transfer of goods and services on a large scale and at the right time, place, quantity and price from the original producers to the final consumers within local, regional, national or international economies.

The key points to be mindful of here are the “exchange of goods and services” and “on a large scale”.

E in the E-Commerce is “electronic”, this implies that electronic commerce, e-commerce, deals with exchange of goods and services electronically via internet. I will also provide the wiki link for e-commerce for you to quickly skim through that page as well to get some more insights(Have you heard about Super-Apps?).

E-commerce is a subject in itself and I can not cover each and every aspect of e-comm here in one single post. Instead, I think, as a developer one thing which we all should be aware of is the various business models or types of e-commerce. This should be a good starting point to get better understanding of the humongous domain of E-Commerce.

E-Commerce Business Models

Some business jargons, to get yourself comfortable with, before moving forward.

Business Model

A business model is company frameowrk for operating profitably and providing value to its customers. Features of an effective business model explain the customer Value Proposition and Pricing Strategy. The model identifies the products and servicess a businees offers, its taget customers/market, and future expenditures.

Value Propositions: A concise statement to show the value and benefits of your products and it highlights the specific problem your product solves, its advantages and superiority.

Pricing Strategy: is the method to determine the price of the product. An effective pricing strategy takes revenue, profit, consumer behavior and business goals into account.

Broadly speaking there are 5 main different types e-commerce of Business models.

1. Business to Business, B2B: In the B2B model, business sell products and services to another business. This can involve wholesale transactions, where one business purchases goods in bulk from another business for resale or internal use. For example: a company selling office supplies to other business or a manufacturer supplying parts to another company would be example of B2B e-commerce.
2. Business to Consumer, B2C: It is the most common business model, where business sell products or services to directly to individual consumers for example when you buy something on from an online retailer like Amazon. The focus here is providing seamless shopping experience to end consumers.
3. Business to Government, B2G: If the commerce happens bentween any business and government then it will happen under B2G. In B2G, business sell product and services to government agencies at different levels such as local, state, central, or federal governments. This type of e-comm often involves government procurement process and contracts. Business bidding for government contracts must adhere to specific regulations and requirements. B2G commerce covers wide range of goods and services, including tech solutions, constructions, cunsulting services, and more.
4. Consumer to Business, C2B: when consumer offers goods and services to business. This is a reverse model where individuals act as suppliers or providers, offering their skills, expertise, or products for companies to purchase. It’s commonly associated with freelance work, consulting services and user generated contents like photographs, videos etc.
5. Consumer to Consumer, C2C: Consumers directly sell goods or services to other consumers through online platforms like ebay etc.

To summarize, it is mainly about who is the seller and who is buying. And as we are doing it electronically, hence the E-commerce Business model.

Before wrapping up, let us see some common business model examples and their real life implementations.

Business model examples

1. Marketplaces: are platforms that bring together multiple sellers and buyers. They facilitate transactions between them, earning a commision or fee for each sale. Example include Amazon Marketplace, Ebay, etc. These platforms offer a wide range of products from various sellers making it easier for buyers to compare options and for sellers to access a large audience.
2. Dropshipping: In dropshipping model, the retailer does not hold inventory, instead when a customer places and order, the retailer purachases the product from a third party supplier, who then ships it directly to the customer. The retailer doesn’t handle the physical product. This model requires strong partnerships with reliable suppliers. Example of dropshipping platforms is Shopify.
3. Subscription Models: SUbscription e-comm involves customers paying a recurring fee to receive products or serviceson a regular basis. This model can offer convenience and predectibility for customers while providing steady revenue for business. Examples include subscription boxes(e.g. beauty products, meal boxes), streaming services(e.g. Netflix, Amazon Prime, etc), and gaming services(eg. Playstation Plus subscription).
4. Digital Goods: This model involves selling digital products or servcies that can be delivered electronically. Ex: ebooks, softwares, online courses, online games, music etc. With digital goods there is no need for physical shipping, making delivery instant and cost effective.
5. Brick-and-click: This hybrid model combines both physical stores(brick-and-mortar) and online platforms(click). Retailers with physical stores also offer online shopping options, allowing the customers to browse and purchase products both in-store and online. Examples: Walmart, FirstCry etc, they both have physical stores and online shopping platforms.
6. Social Commerce: This model integrates social media platforms with e-com, allowing users to browse and purchase products directly within their social media feeds. Examples include Instagram Shopping and Facebook Marketplace, where users can discover products and make purchases without leaving the platform.

I still remember when one of my friend told me about how easy and cool it was to directly buy a pair of shoes from facebook directly without leaving the platform. I thought he may have been taken to the amazon app or etc to buy the shoes, but little did I know that the facebook marketplace does that for you. This is how I was introduced to Social Commerce.

How did you encounter some of the fancy e-com models? Share that in the comments section below.

This should introduce you to some of the Business models of ecom with their examples. I would highly recomment reading the blogs of shopify to learn more about the domain in general:

Business model:

https://www.shopify.com/blog/business-model https://www.bigcommerce.com/articles/ecommerce/types-of-business-models/

Value Proposition: https://www.shopify.com/blog/value-proposition

Wiki: https://en.wikipedia.org/wiki/E-commerce