Some people out there have dreamt of starting their own successful eCommerce business that brings great profits. But they get stuck where to start. Will it be worth it? Am I investing my time and money in the right place? What are different types of e-commerce businesses, and which are right for me?
Are you the one who has stuck with such questions and wanted to know which e-commerce business model to pick in 2021?
Yet, there is numerous option available for having eCommerce business but before you start you should know different type of business model for your eCommerce business:
10 eCommerce Business Models That Might Work For You
According to the Statista report, 1.92 billion people go for the online purchase of goods in the year 2019, and for the same year, e-retail excelled 3.5 trillion U.S. dollars.
Whether it is a small soft-toy online business or a big multinational company, the ultimate goal is to have a successful launch and keep growing with time.
Let’s get started with the first thing you need to know about eCommerce: the vast opportunities.
The eCommerce share of total global retail sales from 2015 to 2023. as you can see, e-commerce has been growing significantly, very strongly since 2015. With the year-to-year growth getting higher, this shows that there is more opportunity today than there was maybe five years ago.
You potentially can start an eCommerce business, and it is imperative to understand different types of business. Let’s start with the fundamental one:
5 Major eCommerce Business Models
Business model focusing on providing goods products from one business to another. There are many software development companies, supermarkets that buy goods from other companies, one company selling the goods or products to another company.
The business model is focusing on providing products from business to consumer to us. These are the same supermarkets, but b2b and b2c business models are understandable when they sell their goods to us.
A lot of people do not like the C2C business model. In the C2C business model, consumers provide products to other consumers. The best examples of that from C2C business models are eBay, Etsy where you have something, and you sell it to another person. You don’t need a company; you don’t need employees, don’t need an office, know how to do that by yourself, and just sell it.
It is another model which people do not consider when they want to start some business. A lot of freelancer bloggers Google Adsense users are providing a C2B business model.
5. B2G or C2G
Business to government or consumer to government businesses is a chuck of business where customers and businesses serve the government bodies such as federal, NGOs, local agencies, etc. B2G is to support the government with the required equipment.
Also Read: How to Start an eCommerce Business in 2021?
ECommerce Business Model: Ways Of Generating Revenue Also Termed As Revenue Models
Dropshipping is one of the lenient ways to pursue an online business. One can consider it as an eCommerce business strategies model in which the retailer doesn’t have its inventory; they generally function as a middleman between manufacturer or supplier and the consumer.
The drop shippers can sell a product to a customer only when they purchase it directly from the supplier and ship it directly to the customer.
Easier dropshipping was never easy as it is today. This has become possible only because of some popular dropshipping platform like:
- Worldwide Brand
- Wholesale Central
It is easy for an online business owner to start their business by finding the products they want to sell; it just buys them from such a platform and sells to a potential customer.
Pros of Dropshipping
- Low Startup Costs: The initial investment is fairly low; start it with less money.
- Low Cost of inventory: You are free from inventory.
- Low Order Fulfillment Costs: Before selling, you don’t need to spend anything on the products.
- Sell and Test More Products with Less Risk: You can even test and try products that mean if one product is not selling, then replace it with another.
Cons of Dropshipping
- Reliance on other people’s stock.
- The control over order fulfillment is somewhere less; ultimately less control over lead time.
- Less profit.
- Poorer customer service.
Wholesaling is just the opposite of dropshipping; business owners have to manage everything from stocks to inventory to order fulfillment. Besides, in such a business model, the owner acquires a better chance to build a B2B relationship.
This model’s concept is to sell bulk products to other businesses or sell them directly to the users. The wholesalers deal with the B2B model; a few operate B2C and some deal with both the models. When running the B2C model, they sell the product at a discounted price, normal price, or somewhere between both.
Some of the well-known eCommerce platforms for wholesalers are:
- Amazon Business
- X Cart
- Made in China
- Global Sources
- eWorld Trade
Pros of Wholesaling
- Consistent Buyer Interaction
- Create Room for Mobile Browsing
- Direct-to-Consumer Potential
- Eliminate Unnecessary Costs
- Increase Promotional Opportunities
Cons of Wholesaling
- Competition is high, needs more consideration to develop a pricing strategy.
- Hard to search for target retailers.
- Challenge to be on top of trends.
8. Manufacturing and Private Labelling
Manufacturing and private labeling are best for those who are blessed with specific skills and talent. Especially when you have the talent to make a product that satisfies customer needs, you can have the best in your hand. If you are doing on-demand manufacturing, you are developing more chances of being a supplier.
Being an entrepreneur, you can start your production house and start providing a good quality of products.
Pros of Manufacturing
- You can use your talent to earn profits.
- The control over the order fulfillment is all yours.
- You can set the price for the products on your own.
- You don’t get any chance to compromise with the quality of productions.
Cons of Manufacturing
- The initial investment is a bit higher.
- Warehouse, the factory is must; it can be small but must.
- Order fulfillment is all your call.
- If there is no deal, you might have to face more difficulties.
9. White Labelling
White Labelling is somewhere connected to both drop shipping and manufacturing. Here, like drop shipping, you can sell those products that have already made their market, which means you can deal with the popular brand products.
Like manufacturing, you can buy the product in bulk from others, but you can provide your brand name for reselling. Depending on your choice, you can do others’ branding or make your brand using other products.
Besides, you have to keep a stock of products while label that means you will store, pack, and even do shipping.
White Labelling Pros
- No cost of manufacturing is needed.
- You can sell other products with your brand name.
- It holds the lowest cost per unit.
White Labelling Cons
- You need to have a warehouse.
- Order fulfillment is your concern.
- Risk of getting stuck with inventory.
- The product is not unique, which means anyone can copy and launch the same product with their brand labeling.
One of the most popular, well-known eCommerce business models that we have today is the subscription model. The idea with a subscription model is that clients pay month to month or other concurred spans for an item or service. This functions admirably for IT organizations and eCommerce tools, but at the same time, it’s an extraordinary thought for items that individuals need or need consistently.
- Proper cash flow.
- Easy to prepare inventory planning.
- You can predict the income, how much, and from where it will come.
- Building relationships with customers and suppliers are easy.
- The risk of unsubscription is high; anyone can cancel the deal at any point in time.
- If a product or service is not regularly updated, upgrades, then it might lose subscriber interest.
- Making people sign up can take a longer time.
Wrapping Up: How To Select Which eCommerce Business Model Will Work For You?
Many people think that e-commerce is oversaturated and that they can’t start up a successful business.
Well, the truth is that yes, it is harder to start an eCommerce business today than it was five years ago. But there is still so much more opportunity available in the market.
However, deciding which eCommerce will work for you depends on some factors such as money, human resources, skills, experience, and much more.
If you would prefer not to put resources into an enormous stock and need the adaptability of trading and changing your commodities, print on demand or drop shipping might be for you.
Furthermore, if you think for a product launch you are energetic about and are glad to put away some money, you should consider manufacturing.
There are various reasons you had picked one model over the other; I can not impose my choice over you. It’s all your choice and opportunities to choose your niche.
Do you know the top 10 eCommerce Development Companies in 2021?
Q1: What are the different types of e-commerce?
A1: In general, we categories eCommerce business in four type:
- B2C (Business-to-Consumer)
- B2B (Business-to-Business)
- C2B (Consumer-to-Business)
- C2C (Consumer-to-Consumer).
Moreover, there are types such as
- Business to administration (B2A)
- Consumer-to-administration (C2A)
- Mobile Commerce (M-Commerce)
- Facebook Commerce (F-Commerce)
- Business-to-Administration (B2A)
Q2: What are the critical components of an e-commerce business model?
A2: Starting an eCommerce business is not that easy, like making a cake; there are various things you need to consider while starting a business. Some of the valuable components of the eCommerce business models are as follows:
- Value proposition
- Revenue model
- Market opportunity
- Competitive environment
- Competitive advantage
- Market strategy
- Organizational development
- Management team
Q3: What are some essential skills you need for e-commerce?
A3: For an eCommerce business, you need to carry some skills to help you achieve success.
- Content Marketing: You should know how to write engaging content.
- Data Analysis: Should know how to use the data analysis tool to check where you are getting the traffic, what age group is interested in your product/services, etc.
- Testing and Data Collection
- Designing & Development
- Email Marketing
- Marketing Automation