E-commerce business model

The e-commerce business model is one of the most common online business models. It involves selling products or services directly to customers through a web-based platform.

Key characteristics

Direct revenue: E-commerce businesses make money by charging for products or services.
Customer acquisition: They spend money to acquire customers through various channels, such as paid advertising, affiliate referrals, and search engine optimization.
Conversion funnel: The traditional e-commerce model is based on a conversion funnel, where a visitor goes through a series of steps to make a purchase. However, modern e-commerce is more complex, with search, recommendations, and social media playing a significant role.

Types of e-commerce businesses

There are two main types of e-commerce businesses:

Transaction-focused: These businesses focus on maximizing the value of each individual transaction. They may not expect frequent repeat purchases.
Relationship-focused: These businesses focus on building long-term relationships with customers. They encourage repeat purchases, loyalty, and user-generated content (such as reviews and wishlists).

Key metrics

Some of the key metrics for an e-commerce business include:

Conversion rate: The percentage of visitors who make a purchase.
Average order value (AOV): The average amount of money spent per order.
Customer acquisition cost (CAC): The cost of acquiring a new customer.
Customer lifetime value (CLV): The total amount of money a customer is expected to spend over their lifetime.
Churn rate: The percentage of customers who stop making purchases.