4 Types of Ecommerce Business Model You Might Consider

There’s a lot more to ecommerce than meets your eye. When it comes to online selling, most of us picture a website like Amazon, but there are dozens of different business models that entrepreneurs use, with varying levels of success.

Ecommerce: Leveling the Playing Field

From the start, the Internet has presented a golden opportunity for individuals and companies of all sizes, but the “little guys” have stood to benefit the most. In contrast to traditional retail outlets and firms where customers had to show up in person to buy/rent real estate, invest in or lease equipment, or buy and store products, ecommerce enabled a business to launch and operate from anywhere with very little capital or experience.

Ecommerce also allows businesses to target a much broader and deeper customer base. Instead of being constrained to attracting consumers within a 10- or 20-mile geographical radius, the Internet gave an online company the power to target potential customers across the nation, and even the world, with relative ease.

Then there’s the cost savings. Because ecommerce companies don’t incur all the expenses of a traditional brick-and-mortar store, costs are usually a fraction of what they are for other outfits. Diamondere, one of the leading online jewelry companies, discovered this aspect firsthand.

“Online sellers save on the retail store overheads, electricity, and salary of the sales people which are then passed on to the buyer in the form of marked down prices as compared to physical stores,” Diamondere’s co-founder Anish Godha explains. The result? Much lower prices, which happily allow smaller brands to compete with the giants in their respective industries.

Another refreshing characteristic of ecommerce is its versatility. Regardless of what you’re selling or your goals, you can select from a variety of routes to monetize your products. The flexibility means you’re no longer forced to play by someone else’s rules.

If you see a promising and attractive opportunity, but nobody in your niche appears to be doing it, ecommerce will allow you to give it a shot with very little risk.

Four Types of Ecommerce Business Models

The most noteworthy facet of versatility for ecommerce is the variety of available business models. As previously stated, most people think of Amazon when ecommerce gets raised, but there’s are many other options. Aspiring entrepreneurs have ample room for creativity; consider the following four business models.

Subscription Services

Let’s face it: Most people aren’t in love with shopping. Sure, we like to buy certain items -- and sometimes it can be fun to wander the mall on a weekend -- but repeated junkets to shop for groceries or cleaning products or socks are not a big thrill. The hunt for repeated, menial purchases such as these is more often a chore than an adventure.

“Ecommerce is about convenience. With brick-and-mortar stores, you can’t shop for groceries, in your underwear, at 2am. Not without consequences at least. Ecommerce takes away many of the hassles of shopping: the commuting, the store hours, the amount of time it takes to browse, the limited selection, sometimes even the cost,” Internet entrepreneur Matt Ellis explains.

“The subscription business model takes shopping to the next level by eliminating one last final hassle: the shopping itself!” According to a 2016 study from Hitwise Retail 500, subscription box sites have grown almost 3,000 percent over the last three years.

This has been driven partly by consumers who came of age during a time when such services as Netflix and Spotify were the norm, but it’s also the simple result of both convenience and cost. From an entrepreneurial perspective, subscription businesses are attractive for many reasons.

But one stands above all the rest: Predicable, recurring revenue flow. When you have a subscription service, it becomes so much easier to predict and depend on income from month to month, something that isn’t such a familiar experience for most other companies.

Service Products

People also tend to envision physical goods when they think about ecommerce, but businesses and entrepreneurs who have services they want to sell can also get in on the action. The biggest advantage of selling services via an ecommerce platform is that overhead is far lower than it would be even with physical products.

You can honestly run an entire company out of one or two rooms of an apartment. Profit margins are high, though competition is understandably fierce in areas like digital marketing, SEO, consulting, and similar niches.

Drop Shipping

Drop shipping is another popular ecommerce business model that solo entrepreneurs often adopt when they lack a unique product idea (or space to store the product). With drop shipping, you sell products on your website that are manufactured, stored, and shipped to your customers by someone else who has the space and resources to store and ship … but not the time, money, or expertise to invest in marketing and sales.

Drop shipping isn’t as easy to use as some have claimed, but there are a few enticing success stories out there. Take entrepreneur Irwin Dominguez, for example. He went from zero ecommerce experience to $1 million in sales in less than a year!

That’s obviously not the norm, but it proves this type of opportunity exists.

Wholesaling

Finally, there’s wholesaling, or warehousing, as some people call it. You purchase products in bulk at a store, direct from a manufacturer, or from a site like Alibaba. Then you bump up the price on them and advertise and sell them from your own site.

The great thing with wholesaling is that profit margins can be substantial. You also don’t have to come up with your own product ideas to get going. The potential downside is that you can easily tie up a lot of cash in products that don’t sell.

Then there’s an issue with storing, fulfilling, and shipping orders. If you have lots of orders coming in, the process of responding to them in a timely manner can be expensive and time-consuming.

But overall, wholesaling is a route many have found to be lucrative.

Creativity Wins the Day

Ecommerce isn’t a good choice for aspiring entrepreneurs who lack creativity. The industry moves at a rapid pace. A sales strategy that qualifies as a best practice today could swiftly become regarded as useless by the end of the current quarter, or even a month.

In order to be consistently competitive over a significant length of time, you have to learn to adapt and innovate in response to the steady demands of the marketplace. In that sense, it’s like any other business.

But the real beauty of ecommerce is that the playing field for both first-time entrepreneurs and established corporations has largely been leveled. There’s also more room for error. If one business model doesn’t work for you, there’s nothing to stop you from turning to a second, and a third.

Online opportunities abound, so every entrepreneur should take advantage of them.

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