Do Not Miss This Essential One Of B2C Ecommerce: How It Works and Makes Money

Do Not Miss This Essential One Of B2C Ecommerce: How It Works and Makes Money

Let’s make this short: B2C E-commerce greatly shortens the path for consumers to make consumption decisions, it’s the core of the whole industry, also yours.

If you do your own e-commerce business, you need to know there’s a good chance that you are in B2C Ecommerce model. To make your business better, make sure you know all roles in this industry and the way they make their profit.

Just take these essential information, it’s a free meal:

B2C E-commerce Intelligence For Dropshippers

RolesHow It WorksProfitability (formula)
Product SellersBusinesses showcase their offerings on virtual shelves and consumers purchase themProfit Margin = (Net Sales - Cost of Sales) / Net Sales (AVG 5%~10%)
Businesses pay a recurring fee for access to services to increase efficiencyProfit = Number of Users * (AVG Subscription Price - Variable Cost)- Fixed Cost

Tips: Variable Cost: cloud platform, cloud facility operation and maintenance cost, etc.
Fixed Cost: customer acquisition cost, customer retention cost, etc.
Advertising ProvidersPlatforms always make traffic paidProfit = Charge by Impression Revenue + Charge by Click Revenue + Charge by Convertion Revenue - Labor Cost - Technical Cost
Payment ProviderCharging transaction fees, processing fees, or monthly fees. High frequency of transactions but small amounts relativelyRoughly Profit= ∑(1, n) Transaction Amount * Transaction Rate - Labor Cost - Technical Cost

Tips: 1. Transaction Rate: Debit cards: 0.25% to 0.6%. Credit cards: 0.3% to 0.9%. Commercial credit cards: 1.5% to 2.5%.
2. Σ(1,n)Transaction Amount = T1 * Transaction Rate+T2 * Transaction Rate+...+Tn * Transaction Rate T1= Transaction Amount NO.1 Tn = Transaction Amount NO.n
E-commerce PlatformCut a percentage of each sale or a flat fee per transaction(Take Amazon For Example)
Profit = 8%~15% * GMV + 0.99 * Quantity of Items - Labor Cost - Technical Cost

Tips: 1. 8%~15% for platform cut, rates vary for different categories.
2. $0.99 fee per item (for "individual" sellers only)
Logistics providersCharge fees for shipping goods from one location to another, minimize costs and reduce lead times to increase profitsProfit = Total Shipping Revenue - Labor Cost - Equipment Cost

Tips: Equipment Cost includes all expenses on land vehicle, aircraft carrier, sea vehicle.
Warehouse serviceCharging a fee for storage, picking, packingProfit = Total Storage Fee + Total Packing Fee - Labor Cost - Space Expenses - Material Cost

It is true that the businesses of each of the players mentioned in the table have long been interconnected, but the basic profit components given in the table can help you understand them better.

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The next article will examine the roles of B2B, don’t forget to subscribe. In this column, no empty talk, only essential information.

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