Ecommerce Business Models: The Top 7 Ecommerce Business Models That Are Killing It Now
We all know that there is a lot of moolah to be made off of the internet, but how exactly do we pull it off?
In this article, we’ll show you the seven hottest ecommerce business models that are taking the internet by storm.
From dropshipping to white labelling, we’ll make sure that by the end of it you can adopt a model that will blow your potential clientele’s minds.
TABLE OF CONTENTS:
- Wholesaling or Warehousing
- White Labelling
- Ecommerce Subscription Model
- Private Labelling
- The Affiliate Model
- The Hybrid Model
Wholesaling or Warehousing
One trend that has popped up is wholesaling or what is commonly referred to as warehousing. However, it does require a significant amount of money for startup costs. The reason why it has become a successful model for entrepreneurs with the capital is because of the way it is structured.
Warehousing will allow you to sell not only at the wholesale level but also at a per piece level to your consumers. This, in turn, opens up a lot of markets and also higher profit margins than other businesses of the same nature.
The downside is the massive costs associated with setting up a warehouse and buying up the initial inventory. At the same time, there is a lot of work involved in setting up.
It doesn’t end there though.
Maintaining inventory requires a team that is dedicated to predicting trends and the management of perceived demand for products. In addition, you need to be able to store customers orders and shipping information.
If you have the resources in place you can easily make money out of this model. The key here is to have a great volume to make sure that you can match your margins.
Do you want to make money real quick?
There is a legitimate reason why drop shipping is still part of the top 7 business models that you can pursue today, and the reason is that it is easy.
Out of all the business models that we have discussed and will be discussing in this article, drop shipping is the easiest and cheapest way to go forward with your ecommerce venture.
Drop shipping works like this, you set up an ecommerce website where your customers can purchase from a line of products under your brand. All you have to do is connect the supplier to the customer.
The supplier handles the product development, manufacturing and shipping, and all you have to do is to set up the storefront to collect the money from the customers.
A successful drop shipping enterprise is Wayfair.
However, there’s something that you really have to consider.
Everything that is easy comes with a major price and it’s the same with drop shipping.
First of all, you have no operational control over the way the products are manufactured so you can’t always be certain that you will get the best products for your customer’s money.
It does not end there.
Since you have no operational control, if the supplier messes up, you lose credibility with your storefront and your customer. Whatever you do online, losing credibility can really mess up your brand in the long term.
If you want to kickstart an ecommerce enterprise as fast as possible then drop shipping could be the way to go. However, if you have the time and some resources to pull something else off, you would be better off doing that.
Items that you can drop ship this year:
- Gadgets and electronics (of course you probably won’t be providing the top-level gadgets such as the phones themselves, but accessories such as wearables and wireless devices are great to sell)
- Niche items such as toys, decor for houses (depending on the current interior design fad), and even art supplies
- Clothes are always ever present in these lists, but make sure you limit your presence to certain markets like sportswear
If you choose to drop ship, make sure you do your research first. Fads are easier to work with, but grab yourself a sample before you decide to start your operations.
Facebook and social media ads are extremely helpful especially with niche products, you can easily drive traffic to your website with a strategic social media campaign. You can even create different landing pages to find out what’s working and what is not.
White labelling is one of the most popular methods of acquiring an inventory without needing to have the necessary means of manufacturing or producing a product.
If you have a market that is ready or have a brand in place, it is one of the best alternatives you have in keeping your costs low and taking advantage of the marketing that you or will already put into place.
This is how white labelling works:
- You find a supplier of a particular good or service and secure a contract for a specific item to be produced and delivered to you.
- Once the item has been produced, it is now sent to your team to be labelled under your own brand. (Hence, the term white labelling)
- Potential customers can now access the item with your branding from your own ecommerce store online.
- Simply put, it’s just changing the label of an already developed product.
The beauty behind white labelling is the fact that you do not even have to manufacture or produce the product yourself. The right marketing and/or branding is enough for you to start selling once you’ve secured the products that you need.
It’s easier than you think!
Common products that you see white labelled are beauty and wellness products. Most of the products could contain the same ingredients and the only major difference is how the products are marketed.
This method is also suitable for businesses who want to expand their current product line, but do not want to manufacture the new products themselves. This saves up on overheads and the initial cost of setting up the equipment to manufacture something new completely.
But, here’s something you didn’t know.
A great example of how white labelling services can work in business is through outsourcing in the digital marketing industry. Some digital marketing agencies that are faced with a lot of work can easily outsource some of the development work to other companies, but these products are white labelled under the main digital marketing agencies’ name.
There is one problem with this model though, especially with products, if you order too much of one item and you inaccurately misjudged the demand, you are stuck with the products in your inventory for a long time. This eats up both cash flow and shelf space.
It is absolutely vital that you are able to properly anticipate demand for an item that you want to stock.
Here are a couple of white label ideas that you could pursue:
- Cosmetics, beauty hair care products
- Clothing and accessories for both men and women
- Wellness products such as supplements
- Services that can fall under business process outsourcing
At the end of the day, anything that you know you already have a market for can be white labelled. There’s nothing wrong with it and most companies don’t even tell their customers that some of their products are white labelled.
Ecommerce Subscription Model
Everybody is familiar with Dollar Shave Club and how it was such a good business model when it started (we know about the issues that came up afterwards and how everyone was after their market share.)
However, it is undeniable that one of the best ways to secure a constant profit is by billing the customer regularly.
There are a lot of popular subscription models on a large scale like Netflix and Spotify. However, when you don’t have the capital to create something as big as these companies, there are still ways for you to work around it.
Here’s a hack you can read about.
Selling subscription boxes is a great way of generating revenue but the problem is that only some are a success and you really need to know the market you are going after.
Although there are a lot of subscription box services, it has become a great way of selling clothes, too. A great example of this and a unique selling proposition is Stitch Fix. They send you a bunch of clothes and you only pay for what you want to keep. Pretty neat, right?
Subscriptions are a great way to stimulate consistent demand for your product or service, if ever you need to install a subscription billing system for your company, you can use an application like Snipcart.
Snipcart is a shopping cart software that can help you with subscriptions and even integrate your mailing system platform into it. This, in turn, creates a more streamlined approach to how you sell subscriptions.
If you are selling a service it always helps to provide discounts to subscribe to your service for an extended amount of time. It makes sure that they are attracted by great deals and also allows them the chance to be billed continuously guaranteeing cash for your business.
But, “don’t be that guy!”
If you want to be able to give out subscriptions, make sure that you inform your customers when you will be taking money out of their account. You don’t want to be like one of those online businesses that don’t even want to inform you that you are still on a subscription. This wastes the customers’ money and irritates them.
At the end of the day, the customer is always right.
The term private labelling is a lot like white labelling with one major consideration, with white labelling you do not have a lot of options. However, private labelling allows you customizable options on a grander scale.
Wait, are you confused between white labels and private labels?
Here’s your quick guide.
White label: you put your name on a product already developed by someone else
Private label: you put your name on a product that is completely yours, except manufacturing
If you want to make more money than what you get from white labelling then private labelling may be a way for you to go. The only thing that you are really paying for when you private label is the cost of manufacturing a product to your exact specifications.
You can sell things made by other people under your brand, but there’s a bigger margin and USP in selling something that you have helped create.
What can I private label?
If you can’t find a great product to private label you can always use tools such as ASINspector to look for current trends in products from Amazon.
Let’s have a look at this.
It’s easier to sell your own brand than to sell low-quality products from someone else. You can guarantee the quality and it carries a little bit of your personality.
How do you private label?
Pick a product, find a manufacturer to source the product from with your own specifications, create your brand name, and sell, sell, sell!
One question that’s always on people’s minds is how to source a product properly and one option that you have is platforms like Sourcify.
Product ideas for private labelling:
- Women’s apparel and footwear
- Men’s apparel and footwear
- Cosmetics (especially ones that are organic and cruelty-free)
- Scrubs and wellness products
- Speciality food products (organic, gluten-free, non-GMO, and even ketogenic products can be instant hits)
- Gym supplements (protein powder and weight loss supplements)
- Speciality accessories
The Affiliate Model
The affiliate model still happens to be a hot trend and it may not die down that easily. Almost everyone in ecommerce has had a run-in with an affiliate program at least once in their lifetime and there’s a particular reason why it’s still alive.
It’s an easy way of going about things.
We wouldn’t advise you to go after the affiliate model since it has started to get harder and harder to penetrate the industry. However, it makes sense to start capitalizing on the model.
However, here’s another way of exploiting this model.
When you have your own product or service, you can always contact other affiliate marketers in order for you to benefit from the infrastructure that they already have put up. They can help push your product for a small cut of the product or service price and this can really work wonders.
In fact, even Amazon has their own affiliate system when you post a product of theirs on your website and somebody clicks on it, you get a percentage of the product price when the customer decides to buy.
Going down the affiliate route yourself requires that you have a website that specializes in a certain niche. Gone are the days of using one website per product that you have.
Although a few SEO experts will argue that it is still a good idea, most of them will still tell you that a single website dedicated to a particular theme of products can always help kickstart your campaign.
The Hybrid Model
The best approach is to use a combination of all these methods in order to create a stellar campaign that doesn’t have the pitfalls discussed in the other models. The way to do this is to capitalize on what you can provide and add the benefits of other campaigns in the process.
For example, if you’re focusing on a white label approach to your other products, you might want to consider private labelling for your main products lines that are supported by an affiliate campaign in order to generate the maximum amount of revenue you can.
While you’re at it you could also reassign some of your products to be drop shipped from your producers themselves.
Or here’s another scenario.
Let’s say you’re in the warehousing industry and your inventory for a specific product is still high because you were unable to predict the demand for that particular type of product properly, you could go towards a subscription box business to unload your inventory and still make a profit from it.
The internet has given us a multitude of ways to make money out of it and it is counter-intuitive not to be creative and just stick to one business model. These models discussed above were also created by experimenting with hybrid ways of recreating existing ecommerce business models.
Just don’t put yourself in a box when it comes to entrepreneurial creativity.
Things to Remember Before Adopting an Ecommerce Business Model
- The number of products in your ecommerce store – a lot of people fall into the trap of trying to combine too many product lines into their current structure or they are too concerned with the fact that they can’t compete with larger businesses. Yes, you are not Amazon, but one thing that you have to remember is that people have been successful just focusing on certain niches
Remember that at the end of the day, the product lines on Amazon are just a collection of different niches in a singular platform.
- Always remember to add value – sometimes customers don’t even care about the price, they just want to know how much value your brand delivers. Think about leading sports brands and the methodology in which we choose which ones we patronize.
Most of the time it is just dependent on how much extra value we can get from them. It’s not just you that is competing to be part of a particular niche, there are hundreds of entrepreneurs out there that just want it as much as you do. Customers will make a decision based on what you can offer them.
- Lower prices aren’t always the way to go – you know the adage that lower prices equal bad quality? It’s not always this way, but you have to really remember that most of the times you can be perceived to be a brand of lower quality if you cut your prices down too much.
Always aim not to disrupt the market when it comes to pricing. It affects not only your bottom line but your image and margins.
- Compete with the services that you provide – sometimes all you will ever need is to have a better return policy or free shipping in order to drive out the competition and cut your own share of the market.
Take for example BufferApp, they really take into account the views of their customers ensuring that they are not taken for granted. In that way, they have integrated the customer experience into building their business.
Whatever business model you choose to employ it has to be within the scope of your capabilities. Whilst these models are the hottest things right now, they are still dependent on your business style and your access to resources.
When in doubt, you can always go towards a hybrid approach combining many of these ecommerce business models to form your own. In this way, you get to mix and match the benefits that you may need.
So what are you waiting for? The future of commerce is online and it’s time that you make strides in launching that business of yours.