Entrepreneurship and Startup · Types of New Age Business

E-Commerce and Marketplace Business Models Explained

Updated 11 October 2026 · Fact-checked

E-commerce business models classify online businesses by who sells to whom: B2B, B2C, C2C and C2B. Marketplaces connect many sellers and buyers without owning stock, while D2C brands sell their own products directly to consumers. To answer, identify the parties, who holds inventory, and how money is earned.

Understand E-Commerce and Marketplace Business Models

E-commerce means buying and selling goods or services over the internet. A business model explains who the customer is, what is offered, and how the business earns money. In exam questions, you classify a business by its parties first.

The four classic models are based on who sells to whom. B2B (business to business): one business sells to another, such as a platform supplying raw materials or office supplies to firms. Orders are large, repeat, and often negotiated on credit. B2C (business to consumer): a business sells to individual buyers, such as an online retailer of clothes. C2C (consumer to consumer): individuals sell to each other through a platform, such as a classifieds site for used goods. C2B (consumer to business): individuals offer value to firms, such as freelancers selling services or influencers selling reach to brands.

A second split is marketplace vs inventory-based. In an inventory-based model the company buys goods, holds stock and sells them itself. It controls price and quality but carries stock risk and needs more capital. In a marketplace model the platform only connects independent sellers with buyers. It holds no stock, so it can scale faster with less capital, but it has less control over quality and delivery. In India, foreign direct investment rules treat the two differently, so do not say they are the same. Do not quote specific FDI limits unless the question gives them.

A D2C (direct to consumer) brand designs or makes its own products and sells them straight to buyers through its own website or app, skipping distributors and retailers. It keeps the margin and owns customer data. The cost is that it must pay for marketing, logistics and customer service itself.

Revenue differs by model. Common streams are: product margin (inventory and D2C), commission on each sale (marketplace), listing or subscription fees from sellers, advertising and sponsored listings, delivery or convenience fees, and membership programmes. A strong answer links each model to its main revenue source.

Key rules to remember

Gross margin (inventory/D2C): Gross margin = Selling price − Cost of goods sold; Main earning of a business that buys or makes and sells its own goods.
Marketplace commission income: Commission = Order value × Commission rate; The platform earns only the commission, not the full order value. Order value is called GMV (gross merchandise value) and is not the platform's revenue.
Take rate: Take rate = Platform revenue ÷ GMV × 100; Shows what share of sales value the marketplace keeps.
Classification rule: Seller type → Buyer type → Model (B2B, B2C, C2C, C2B); Name the seller first and the buyer second.

How to solve E-Commerce and Marketplace Business Models questions

Use this order for any question on e-commerce or marketplace models, whether it is an MCQ or a case-based written answer.

1Identify the seller and the buyer in the scenario. A business or an individual on each side decides B2B, B2C, C2C or C2B.
2Check who holds the inventory. If the platform owns stock, it is inventory-based. If independent sellers list products, it is a marketplace. If the firm makes its own brand and sells directly, it is D2C.
3Name the model clearly in the first line of your answer.
4List the revenue streams that fit that model, such as margin, commission, listing fees, advertising or subscription.
5Give the advantages and limits of the model in the context of the case: capital need, control, scalability, customer data.
6If a calculation is asked, separate GMV from platform revenue and compute commission or margin.
7Close with a short recommendation or conclusion tied to the case facts.

Quickest way: Who sells, who buys, who holds stock, who pays

When to use it: Use this for 2-mark MCQs and for the first lines of a written answer when time is short.

Underline the seller and the buyer. Write the pair, such as business to consumer.
Ask if the platform owns stock. Yes means inventory-based. No means marketplace.
Ask if the brand makes its own products and sells directly. Yes means D2C.
Match revenue: margin for owned stock, commission for marketplace, fees and ads as add-ons.
Eliminate options that confuse GMV with revenue.

Common mistakes in E-Commerce and Marketplace Business Models

Reversing C2B and B2C.
Students read the letters as a label and not as seller to buyer.
Fix: Read the first letter as the seller. In C2B, the consumer is the seller, for example a freelancer or influencer serving a firm.
Treating a marketplace as a seller of goods.
The app looks like a shop, so students assume it owns the products.
Fix: Check who owns stock and sets the price. If independent sellers do, it is a marketplace and the platform earns commission and fees.
Counting GMV as the platform's revenue.
Total order value looks like sales.
Fix: Revenue of a marketplace is the commission and other fees. Apply the commission rate to GMV.
Saying D2C and B2C are identical.
Both end with a consumer buyer.
Fix: D2C is a B2C case where the brand itself makes the product and sells directly with no intermediaries. A retailer reselling other brands is B2C but not D2C.
Listing only product sales as revenue.
Students think only of the retail model.
Fix: Add commission, listing fees, advertising, subscriptions and delivery fees where they fit the case.
Giving advantages without linking to the case.
Students write memorised points.
Fix: Tie each point to a fact in the scenario, such as low capital need or control over customer data.

Worked examples

Example 1

An online platform lists products from 2,000 independent sellers and does not hold any stock. In a month, orders worth ₹4,00,00,000 are placed. The platform charges 8% commission and earns ₹6,00,000 from sponsored listings. Identify the model and compute the platform's revenue.

Show the solution

Sellers are independent businesses and buyers are individuals, so this is a B2C marketplace. The platform holds no stock, so it is not inventory-based.
GMV = ₹4,00,00,000. This is not the platform's revenue.
Commission = ₹4,00,00,000 × 8% = ₹32,00,000.
Add advertising income: ₹32,00,000 + ₹6,00,000 = ₹38,00,000.

Answer: It is a marketplace model. Platform revenue is ₹38,00,000.

Example 2

A company makes its own skincare products and sells them only through its website and app. Each unit sells for ₹800 and costs ₹500 to make. Explain the model, calculate the gross margin on 10,000 units and state one advantage and one limit.

Show the solution

The brand makes its own goods and sells directly to consumers with no distributors, so it is a D2C model.
Margin per unit = ₹800 − ₹500 = ₹300.
Gross margin on 10,000 units = 10,000 × ₹300 = ₹30,00,000.
Advantage: it keeps the full margin and owns customer data.
Limit: it bears its own marketing, logistics and customer service costs.

Answer: D2C model. Gross margin is ₹30,00,000. It keeps full margin and data but carries all marketing and delivery costs.

Exam tips

Begin every written answer by naming the model in one line, then explain it. Examiners look for correct classification first.
In case-based MCQs, underline words like independent sellers, own brand, holds stock and freelancers. They decide the answer.
Always separate GMV from revenue in marketplace calculations.
Link revenue streams and risks to the case. Generic lists score less than applied points.
Do not quote FDI limits or legal rules for e-commerce unless the question supplies them.

Practice questions from Types of New Age Business

E-Commerce and Marketplace Business Models in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

ACCA Strategic ProfessionalE-business, E-commerce and E-marketing Definitions

E-Commerce and Marketplace Business Models: frequently asked questions

What is the difference between B2B and B2C e-commerce?

In B2B, a business sells to another business, usually in bulk with repeat orders and negotiated terms. In B2C, a business sells to individual consumers in small orders at listed prices. The buyer type is the key difference.

What is the difference between a marketplace and an inventory-based model?

An inventory-based company buys and holds stock and sells it itself. A marketplace only connects independent sellers with buyers and earns commission and fees. The marketplace needs less capital but has less control over quality.

What is the D2C business model?

A D2C brand makes or brands its own products and sells them directly to consumers through its own website or app. It earns the full product margin and owns customer data, but it pays for marketing and delivery itself.

How do e-commerce businesses make money?

Common sources are product margin, commission on sales, seller listing or subscription fees, advertising, delivery fees and membership programmes. Which one is main depends on the model.