E-commerce is booming today and, since it first appeared back in 1994, it has evolved constantly. So it is obvious that any classification will end up being overtaken sooner or later.
However, I think it may be interesting to discuss the most common classes and models today, so that anyone who wants to embark on the ecommerce adventure, or is simply interested in the subject, can see the different possible options.
With this in mind, let’s try to classify the forms of e-commerce:
- From a technological point of view
- According to the business model
- Based on other types of characteristics
Let’s look at each of them.
Índice de Contenidos del Artículo
#1. By technology
Behind every website, however simple it may be, there is always a technology supporting it. A website where you can also buy things is no exception, but there are different ways to do it. We are going to move up in complexity, from the simplest option to the most complicated one, technologically speaking.
The appearance of the secure payment platform PayPal in 1998 made it possible for anyone with virtually no technical knowledge to add a payment button to their website.
The requirements to create and obtain the button are very simple: you only have to fill in a form and PayPal will give you the code snippet to add the button to your website:
Many people who sell some kind of service (courses, for example) or handmade products (crafts, personalized T-shirts…) have used this formula, which requires nothing more than having a PayPal account and a website where the button will be inserted to start selling on the Internet.
Create payment button with PayPal
Stripe
Although PayPal is still valid, today I may be more in favor of using Stripe, since the fees can be somewhat lower and it allows you some extra functionality.
That is why it is the one I chose for my own website 😉
Marketplace showcase
We could define a marketplace as an online sales platform where different sellers upload their products with images, descriptions and prices. The user finds the catalogue of products from different sellers in one place.
Think of a physical shopping centre with different shops, each one selling its own products, although they all share the same building. A marketplace is the same thing, but on the Internet. Amazon, eBay and AliExpress are some of the best-known marketplace examples worldwide.
If you have a physical store or a series of products you want to sell online and you do not want to have your own website or app, uploading your catalogue to one or more marketplaces is a good way to do it. You avoid creating and maintaining the whole technological side, but in return you will pay a monthly fee and a commission per sale to the marketplace.
You will have to do the numbers to see whether the technology savings (in time and money) make up for the marketplace costs. An important issue must be added here: by using its platform, the marketplace knows what you sell, at what price and to whom, with the risk that entails.
- Selling conditions on the Amazon marketplace
- TiendAnimal Marketplace, conditions
- PcComponentes marketplace conditions
Online Store
It is what usually comes to mind when we talk about “setting up an ecommerce”. It is copying the concept of a physical store into the digital world: a user enters the store (a premises if it is physical, a website or an app if it is online), looks at different products, chooses the one they want, pays for it and takes it away (physical store) or receives it at home in a couple of days (online store).
In both cases, the store is responsible for buying the product from a supplier, managing its stock, setting the price, serving the customer, declaring the payment and paying the corresponding taxes, among other issues.
It is easy to see the similarity between both concepts: the processes and tasks are the same; the only difference is the channel.
To narrow down a little more what is meant by “online store”, let’s detail three characteristics they all share all of them:
- Cart: the user adds different products to their shopping basket, in a similar way to how they do it in a supermarket.
- Registration: to be able to complete the purchase, the user will have to create an account on the platform. This process can be carried out in different ways depending on the data requested: to buy, the store may ask us for all the necessary shipping data -name, delivery address, phone and email, for example- or it may allow us to create an account simply by linking the Google or PayPal account the user already has on those platforms, making the whole process much more convenient. In any case, whatever method is used, the user will have registered in the store.
- Payment gateway: also known by its English name Checkout. The user will pay for the selected products using one of the enabled payment methods, such as credit card, bank transfer, PayPal or Bizum.
In turn, within online stores, the technological software used by the platform will also define some of its characteristics. It is interesting to know the different possibilities, since some will fit each project better than others.
The most common ones, ordered from greatest to least technical complexity for the ecommerce manager, are the following:
SaaS (Software as a Service)
In this case, what we do is “rent” the software needed to launch the store. We save ourselves a large part of the technical management: servers, certificates, databases, code… We use a platform focused on ecommerce and concentrate on running the business, paying a fee and/or sales commissions in return.
It has the advantage that it offers anyone the possibility of creating an ecommerce, regardless of their technical knowledge. In return, it is almost always more expensive than the other options. The most widely used platform of this type in the world is Shopify.
Shopify, set up your ecommerce very easily
CMS (Content Management System) Open Source
According to Statista, the type of technology most used by ecommerce sites around the world. A CMS has two parts: the public part of the website that customers see and the private part that website administrators will see, from where the entire platform is managed.
It is so popular because CMS software is free and very powerful. The disadvantage is that it requires certain technical knowledge to make it fully operational and maintain it.
Although these tasks have become much simpler over the years, they are still not as easy — or practically non-existent — as they are with SaaS. In short, to get the CMS ready and start selling, you need to:
- Hire a domain, which will be the name of your online store. Examples: yopongoelhielo.com, tiendanimal.es, amazon.com. It is important to know that the domain has to be available (that someone else has not bought it before). The yearly price of the domain may be around €10 approximately.
- Hire hosting and install the CMS on it. In modern hostings the process is basically choosing the CMS we want and clicking the install button. In addition, step 1 is carried out at the same time as step 2. There are good hostings to start from around €100 a year, although depending on the size the project reaches, we may need to expand the server and therefore the costs.
- Configure the CMS options, install the plug-ins we need. The essential ones are the payment methods and the shipping method.
- Define and create the categories of the product catalogue
- Upload the products: names, photos and prices, mainly,
- Test that everything works as expected: check that the payment modules work in the different PC, mobile and tablet browsers and that transactions are recorded correctly.
- Launch and publish it.
As you can see, the annual cost is relatively low (a little over €100), but it will involve carrying out more or less complex tasks. Today, the most common free Open Source CMSs are Prestashop and WordPress with the plugin WooCommerce.
- WooCommerce: the ecommerce plugin for the WordPress CMS. Great for small or medium projects
- Prestashop: a CMS for ecommerce medium and large
CMS custom development
Generally aimed at large projects. It requires development time that the other options for setting up an online store do not. In return, it is much more flexible, usually more secure, and it can adapt to our project as much as we need.
The development can be fully custom or use a CMS such as Magento in its paid version on which to develop whatever we need. It is very much aimed at integrations with other tools, such as ERP (Enterprise Resource Planning) or CRM (Customer Relationship Management)
In this case, since it requires non-pre-existing code, the technical side becomes even more important, usually with a team of developers behind it, with the cost that this entails. It is not cheap, as we are talking about projects with budgets of several thousand euros. That is the order of magnitude we are moving in if we use this kind of solution.
Magento: CMS for custom development
Marketplace
We have already defined what a Marketplace is and discussed the differences with an online store. From a technological point of view, we are talking about the peak of complexity, since, in addition to having all the elements of a normal ecommerce, another layer of depth is added: that of sellers.
In an online store, the seller is the store itself. In a marketplace, the different sellers each manage their own catalogue of products for sale. In this case, the store itself may sell all, some or none of the products offered in the marketplace, since its business model is not the sale itself, but charging each seller a fee and a sales commission.
Generally, because of the business model, it is more complex to manage than an online store, since there are certain factors you leave in the hands of sellers (mainly logistics) and therefore you do not control them.
Recommendation
If you are thinking about setting up your ecommerce and you do not have a large budget, the most common option and the one I recommend depending on your technical skills is launching an online store using a SaaS (more expensive, but simpler) or a free CMS (cheaper, but it will require carrying out technological tasks).
Any other option is too complex (marketplace), very expensive (custom-developed CMS), not very flexible (website with payment button) or too unpredictable (catalogue in marketplace).
Once we have seen the typology of e-commerce according to the technology used, let’s move on to the second classification criterion: the business model.
#2. According to the business model
Technology is not the only criterion by which ecommerce sites can be classified. There are other aspects that can be used to distinguish classes, for example, the business model, depending on whether it is based on the sale of products or services.
In e-commerce, as in offline commerce, selling products is not the same as selling services. Although certain parts are common (customer acquisition, customer support or after-sales service, for example), many others are different, mainly those related to operations. Let’s break each one down a little more.
Service Ecommerce
In this case we find two possibilities: the service is sold once or several times, or it follows a subscription model. A third option will be a hybrid between the two.
Sale of individual services
They are platforms that sell us a service on one or several occasions. Think for example of JustEat, which brings us food at home when we request it, renting a film on Google Play or booking hotels on Booking. They are all e-commerce platforms where a service is sold to us.
Subscription to a service
Netflix, Coursera or Spotify are digital platforms where we contract a service and pay a generally monthly fee to access them and enjoy their content.
Hybrid models
Filmin, the independent-leaning film and series app, allows both a monthly subscription to access most of its catalogue and one-off rental of certain films without having to pay for the subscription.
Product Ecommerce
Although we will generally associate this type of ecommerce with online stores that sell physical products, it is worth noting that there are other possibilities for generating business through e-commerce:
Affiliate sites
They consist of blogs, magazines and non-transactional sites, since they lack a Checkout process. They are known as affiliate media or simply affiliates and they talk about a product that is sold in the main ecommerce sites, such as Amazon, PcComponentes or AliExpress.
Content such as articles, product pages or reviews is created so that users become interested in them and want to buy them. Within the article or product review there are one or more links pointing to the ecommerce that sells it, so that the user knows where to get it and at what price.
You may wonder what the affiliate gains by publishing this content. The answer is that for each sale that comes from the media, the ecommerce will pay them a commission or percentage of the sale. Depending on the size of the blog and the traffic and its cost, it can be a very profitable business model. In fact, there are a large number of affiliate networks and they even specialize by sector (technology, books, drinks…)
The advantages for the blog are several: no investment of any kind is necessary (or it is very, very small) and no logistics are needed to make money selling online. In addition, since they are content websites, the maintenance cost can be very low and a single person can manage several sites of this type, especially if their writing skills, copy and SEO are strong. Finally, the legal side is also reduced to a minimum.
Of course there are also disadvantages: if the ecommerce does not have a good conversion rate, the amount of traffic the affiliate has to send to it to earn any commission will be overwhelming. Likewise, if the store is down, decides to close or changes the conditions of the affiliate plan, the affiliate cannot do much and their income may drop considerably overnight.
Finally, there is the most complex problem to solve: attribution. In a multi-device environment and with digital marketing strategies as developed as those of ecommerce sites with an affiliate plan, attributing a sale exclusively to a session coming from the affiliate media is not so simple, and even using similar attribution models there will always be discrepancies.
In addition, the bad practices used in the past by affiliates (fraudulent purchases made solely to collect the commission, cancellations or returns) have led ecommerce sites to distrust affiliate media more, which makes attribution even more complicated.
All in all, if you like writing or are good at it and find this business model interesting, you may feel like giving the idea of creating such a site a second thought: look for the affiliate plans of the major online stores in this country, run some quick numbers estimating your traffic and your site’s conversion rate (how many people click the link) and the effort required to create the necessary content. That said, you need to know that competition is fierce and that competing in SEO and getting cheap organic traffic will not be easy.
Dropshipping
Here we are getting closer to what an online store is. In fact, you may have come across quite a few during your Internet experience and they may have seemed like “ordinary” online stores. The design is the usual store design and it has registration, Checkout and payment gateway.
The main difference is the operations and logistics side: using this system we do not manage stock of goods; instead, when we sell something, the supplier itself ships it to the person who bought it, while we keep the margin between the purchase price and the sale price.
At first glance, everything is advantages. In theory it is much more comfortable to manage:
- You do not need to invest in buying products, since until the customer buys and the payment enters our account, I do not place the order with the supplier
- You save the space needed to store the goods
- Also the packaging
- In many cases, you do not have to pay shipping either
- You only have to spend time creating content on the website, trying to rank well on Google and paying the cost of maintaining the platform, which depending on the size of the site can be very small. As we can see, at this point it is identical to an affiliate site
The problem comes when there is an issue with the order, since it may happen that:
- The supplier takes longer to send the order
- It runs out of stock
- It changes the price without you noticing
- There is an incident (breakage or loss) with the shipment
- The customer does not like what they bought and wants to exercise their right of return
This is where the difficulties begin, since this model generally uses foreign suppliers (in many cases Chinese) that have extremely competitive prices in exchange for cutting costs in logistics (very long shipments, often without tracking), in customer service with long response times and in quality control systems (it is not unusual for a defective product to arrive).
The support we can give our customer is minimal, beyond refunding what they paid, which means we will lose money on that sale. In addition, our site’s image is likely to be affected by negative comments on social networks or on Google, because they will arrive as soon as your customer receives a product that does not look much like the photo they bought.
On the other hand, the legal aspects compared with the affiliate site become more complicated and you will very possibly have to register as self-employed, in the IAE, declare VAT and pay the corresponding taxes. Not to mention customs costs, which in many cases make the price lose its appeal. It is true that low-value orders usually pass “under the radar” and often it will not be necessary to pay them, but the risk is there.
You should know that quite a few people have made a lot of money with this system, especially at the beginning when it was not so well known or so exploited. The appeal of the reduced price made up for all the other inconveniences. In fact, it was perfectly possible to combine this system with uploading the catalogue to a marketplace, which increased the chances of sale, in exchange for reducing the high margin. If you found a reliable supplier, it really was a gold mine.
However, today, if you dig around a little on the Internet it is easier to find more cases of failure than success, and in fact there have been some fairly notorious ones. In part, this is because only the advantages were taken into account and the drawbacks were barely considered, which in any business project is always a mistake.
If you wonder whether it is possible to create a profitable dropshipping system in Spain today, the answer is yes. If you consider all the aspects involved (legal, customer service, product quality…), do the numbers and, most importantly, manage to find a reliable supplier, it is possible to make such a project profitable. That said, do not expect the numbers to be a panacea. In my opinion, if you are considering an ecommerce project seriously, setting up your traditional online store where you have greater control over operations in the medium term is always better.
Traditional online store
As we mentioned in the previous point, this type of platform consists of selling products at a higher price than the purchase price, generating the corresponding profit.
In this model, it is necessary to consider that operations will differ depending on whether digital products or physical products are sold.
In one case there will be physical shipments of products, while in others they will be digital and without the need for physical storage or transport companies. Therefore, ecommerce sites based on selling digital products have as much or more in common with service-selling sites than with those selling physical goods.
Marketplace
As we pointed out before, a marketplace fundamentally obtains profit in three ways:
- Monthly fee from sellers who want to appear
- Commission on each sale
- Advertising spaces for sellers on the platform
Optionally, the marketplace may have its own catalogue uploaded to the platform (as Amazon does, for example), adding a fourth source of income.
If we ignore this last point, we see that the physical side is greatly reduced: it is not necessary to have stock or ship the products, since that is something generally done by the sellers themselves. It is worth mentioning that, for an additional cost, Amazon offers to provide these logistics services (storage and shipping) for the customer, although for now most marketplaces have not adopted this solution.
It can be observed that two of the three ways of making a profit are not directly related to the transactions that take place on the platform, although obviously, if there are no sales, sellers are very likely not to continue paying the fee or paying for advertising.
For this reason, sales metrics are important –as in any of the business models we have seen so far– however, acquisition and churn (abandonment rate) of sellers and the ratio of advertising inventory sold are as relevant, or even more relevant, to achieving the project’s financial success.
The fact that logistics are lower (or non-existent) and that there are several sources of income because it does not depend exclusively on product sales may be a powerful incentive to set up a marketplace. However, it must be borne in mind that management is usually heavier and that, since you do not control the entire process, customer service becomes more complicated.
In addition, the beginning is quite complicated when you have few sellers and need to attract many more to make the project profitable. If you already have this last point well on track beforehand because of your professional career or the contacts you have, the marketplace formula is certainly a very good option. If you do not have them and your budget is limited, it is very possible that an online store will fit your current possibilities better.
As a finishing touch to this section, I would like to add that ecommerce projects evolve and that it is relatively easy to move from a successful dropshipping model to an online store with stock and its own logistics.
Likewise, some of Spain’s most successful online stores have made the leap to the marketplace model, such as PcComponentes or TiendAnimal. It is interesting that, as you focus on the initial formula chosen and your project grows, you consider making the leap to the next one at some point.
#3. Classification according to other characteristics
In addition to technology and the business model, there are a couple of aspects that also group ecommerce sites into different typologies, such as the following:
Type of customers
An ecommerce can focus on selling products or services to different types of customers: if they sell to the end customer they are usually called B2C (Business to Consumers) while if they sell to professional customers we will call them B2B (Business to Business).
Let’s explain each one a little more:
- B2C: it is possible that when we think of an online store, what comes to mind is one where private individuals buy products of any kind to use or consume. In general, Amazon could be a good example, but it has grown so much that many professionals buy there. Regarding the sale of services, Ticketea is an example of B2C ecommerce. In general, the average order and customer recurrence are lower on these platforms, in addition to categorizing the site and using more common and less technical vocabulary.
- B2B: they are digital platforms aimed at professionals or companies. It is possible that the purchase or contracting process is a little slower, at least the first time. This type of ecommerce differs from those aimed at end customers by having more specific content, more technical language, different prices or bulk discounts. In some cases it is necessary to send documentation proving that the customer is a professional in the sector in order to buy on the site.
The most important B2B ecommerce in the world is probably Alibaba, the Asian giant.
It is possible, and even common, for an ecommerce to sell to both types of customer. In fact, it is common to target the end customer and for some professionals to naturally start buying in the store.
However, when setting up the ecommerce it is important that we are clear about who we are addressing, since, as we have mentioned, there are differences in the language used, the way the site is categorized, the value proposition, search filters, logistics or payment method.
That said, you can start by aiming your ecommerce at one type of customer, while considering in your roadmap the other. When the project is more mature and you have more information about the sector and the business, it will be easier for you to adapt your project at all levels (front-end of the website, marketing, customer service, operations…) to accommodate all types of customers, professionals and individuals.
Geographical scope
The emergence of e-commerce has made it easier for a business to have a regional, national or multinational geographical scope. In ecommerce it is easier to cross borders, since this is one of the inherent characteristics of the Internet.
Although launching a multinational online store may sound too ambitious at first, it is not really that complex. It will be enough to study three main aspects:
- Legal: check which laws prevail in the country where I want to provide service. Check that there is no law preventing it and see the differences with respect to those that apply in ours (warranty, returns…). Finally, attention must be paid to the payment of the corresponding taxes, mainly VAT, where and how appropriate.
- Logistics: if you have already started making local or national shipments with a courier company, you have it easy: ask them for international shipping rates and you will have a first budget, with which to estimate how competitive you would be in terms of price in the country you want to enter. Of course, it does not hurt to request other quotes from different companies, looking for the best solution for your business.
- Language: if in the country where you want to land they speak the same language (or at least it is understood), you will have a lot done. This is what happens with Spanish ecommerce sites that want to serve South America or, closer by, Italy or especially Portugal.
If the language in the market you want to enter is different, you will have to translate the website. The good thing is that English is fairly universal, so by translating it only into that language you will already have internationalized your project a great deal. Of course, if we want to do business in France, it is better to have the page translated into French, but it would not be surprising if we received French orders with English alone.
An additional aspect is that in the country of origin it is very possible that there are English speakers (think, for example, of the amount of population of English origin on Spain’s Costa del Sol). The recommendation here is, therefore, to have the website in the language of the country of origin and also in English.
It is useful for you to know that CMSs have translations into the main languages. You only have to install and activate them. That said, the entire website will not be translated, only the “skeleton” that comes by default in the CMS (words such as “cart”, “payment method”, “search” … and similar). All the text that we have added ourselves (product sheets, blog article, FAQs, legal pages…), we will have to add it in each of the languages in which we want to present the store.
If we cannot translate it ourselves or do not have the budget to translate it professionally, services such as Google Translate or DeepL will make the work much easier for us, especially when writing content of medium length. In fact, this is the strong point of VTEX, a paid CMS for ecommerce launched relatively recently that uses different translation tools so that publishing the website in several languages is easier for the ecommerce administrator.
Finally, one language-related aspect that is important to consider is customer service: we must make clear in which language and channel we will provide support. For example, we may provide support in English on social networks or by eMail, while by phone we only do so in Spanish. It is not essential to provide support in all the languages into which we have translated the website (although it is ideal), as long as the user / customer is aware of it from the outset.
- Google Translate
- DeepL Translator, better than Google’s
- VTEX, a CMS that automatically translates content
Conclusion
And that is it, which is not exactly little. We have seen how to classify the different types of e-commerce based on the most common classification criteria. This way, if you are thinking about getting into this world, you will have some context and know the different possibilities it offers, so you can find the one that best fits your idea.
Finally, if you want to have a summary at hand, I leave you this table with the outline of everything we have discussed throughout this extensive article.
I hope you find it useful.
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