by When you are in the process of building your own ecommerce websites, there are a lot of choices to be made and a lot of things to be considered. The choices you make are going to build your business, so it is necessary to choose everything wisely. The biggest and most important choice of all the other choices is your business model.
To the people who are new to the business world let us guide you that a business model is an organization’s plan for successful operation of a business, how it will generate revenues and make the profit. In this article, we will guide you through which and how to choose the business model for your ecommerce business.
Let us begin
Ecommerce Model
There are two types of business models:
- B2B: Business-to-business
- B2C: Business-to-consumer
Let us get into the deeper details
Who Do You Want To Sell To?
There are a million types of ecommerce stores, all have their different criteria, categories, plan, etc. For instance, How the products are sources, the types of product, where the products come from, are they a curated collection. Now, let us take a look at two of the major types of ecommerce businesses that you can run.
B2B (Business-to-Business)
B2B (Business-to-Business) model is a business plan which refers to the model where one business sells to another business. This model involves both advantages and disadvantages to selling to other businesses versus selling to the end consumers. The pros of selling to other businesses are that number of orders and repeat orders are typically larger and more frequent. However, there are fewer businesses than consumer and sales cycles are typically longer with a price being a heavy contributor to purchase decisions.
B2C (Business-to-Consumer)
Business-to-Consumer is a business plan which means that you are selling directly to the end consumer that will be using the product. It is the most common type of business model and most of the people think of this business model while building their ecommerce store.
Also, there are some business models which are not known to many, including the B2G (Business-to-Government).
What Types of Product Do You want to Sell?
Now, that you have the knowledge of the business models it is now time to check what types of products are you willing to sell.
Physical Goods
Physical Goods are the type of goods that hit the mind of most of the businessman when it comes to building an online store and makes up the majority of online ecommerce businesses. Although the physical goods are most popular product types, there are few challenges along with them like inventory storage, shipping, breakage, and insurance.
Digital Goods
Digital goods are also one of the popular types of product which many ecommerce owners choose to sell. The main advantage of these products is that it does not require any inventory storage or physical delivery. Addition to that the other advantage is selling digital products is piracy. Digital Goods include music, ebooks, videos, images or software. The digital products can be resold thousands of times over, so their margins are considered the best. Also, they come without the headaches associated with shipping and inventory management.
Services
The third and the less commonly used product type that the ecommerce store owners choose to sell are services. Online services involve consulting, web design and development, content writing/editing and a whole host of other service options. The idea of selling services can be a great way to get exposure and build credits but it comes along with the limitations of scalability.
How Do You Want to Acquire Your Products?
You have your business model ready and you know which products you are going to sell but, now the question arises how will you acquire these products. We will help you with this, here we will discuss four major types of methods for acquiring your products.
MAKE
People who are creative and fond of making things on their own can produce their products on their own. Whether it be jewellery, natural makeup products, making the products on your own will give you the power to control the quality and the brand but comes at the cost of high time commitment and scalability.
The primary investment in making the product yourself include the purchasing of raw materials, the storage of inventory and labor. The only disadvantage is that your product choices are limited to your skills and available resources.
MANUFACTURE
Another option that you can use to acquire your product is by finding a manufacturer who can produce the product for you. When you choose the manufacturer you have the option of sourcing one domestically or from overseas. As, you might be someone who might expect, a domestic manufacturer, in general, will cost more than a manufacturer from overseas countries like China, Taiwan, etc.
WHOLESALE
Buying wholesale items is simple and a straightforward process. You purchase your inventory direct from the manufacturer or from a middleman supplier at a discounted wholesale rate, which you, in turn, resell at a higher price.
Buying wholesale products is a lower risk business model compared to manufacturing for a few reasons. One of them is, you are dealing with well-known and established brands in the market so you don’t run the risk of wasting time and money developing a product no one wants.
DROPSHIP
The main idea behind dropshipping is selling products that are not actually yours. The process starts by taking orders from your online ecommerce store and forwarding them to your supplier/dropship partner. They then ship the product to your consumer on behalf your organization. You can fill your pockets with dropshipping by making a profit from the price difference between what you charge to your consumers for a product and what your dropshipping partners charge you for the same product.
When you get done with all this, the last thing that matters is how do you want to compete with others in the market? As this will shape the future of your business. The options for competing with others are Price, Quality, Selection, Value, and Add Service.
When you have the answers to all the four major questions mentioned in this article then it will provide you with a good start to putting together some major components of your ecommerce business model. Having a business model will not only increase your chances of success but also the amount of enjoyment you get from the building, launching and growing your online business. Also, if you wish to know about this in detail do visit this blog by Shopify. Do let us know how we will help you recognize your business model in the comment section below.
