To Sell products under $5 is an awful idea since that rate is relatively low…
Ecommerce Business Models are a broad topic, but I am going to do my best to make you understand its components; today, we are going to be looking at the introduction, foundation stuff, and other aspects of eCommerce business, more so for beginners who want to start an eCommerce store online.
This module is for anybody new to e-commerce or even if you have been in e-commerce, but maybe you don’t understand the full spectrum of everything that is out there and available.
This will be where we start by talking about Ecommerce Business Models and then move through as a progression to walk you into the foundation of how you will be setting up your e-commerce business and brand.
What Is eCommerce?
To start, let’s just look at some of the basics. Ecommerce is just something that means selling things on the internet. Alright! Then there are several Ecommerce Business Models for this.
Many people are out there right now because of people selling courses in the online marketing world.
They think of e-commerce as just dropshipping or printing on demand, which is not true. There are many different types, and even within the different types of business models, first, you have to think about what type of business model.
Because there’s really, there are two main classifications that are going to apply to 99.9% of people watching this.
Types of eCommerce business models
That’s either that you’re going be selling business to consumer (B2C) or you’re going be selling business of business (B2B). Whichever one Is fine like it’s completely up to you. I just want you to be aware that they’re differences.
A very typical drop shipping and print on demand are going to be selling straight business to the consumer, and a lot of times, you know, business to business is going to be marketing agencies, professional services, and wholesale goods.
Business To Business (B2B)
Like if I set up an agency and help local businesses get more customers through Facebook ads or get or get more customers through local marketing and SEO. That’s a business to businesses service. Right! And it’s a marketing agency; it’s still eCommerce, though. eCommerce doesn’t mean you have to sell physical products.
It’s just anything you sell online. All Right! So, business to business is a form of e-commerce, and these are just some examples.
Business To Consumer (B2C)
Business to consumer is generally going to where you sell them a lot of the physical products stuff, where you’re selling dropship items or print on demand, but it doesn’t have to be. It could be information products as well.
Whichever way you think about it, it’s more business to the consumer because it’s generally like a solopreneur, somebody getting started, or food and beverage.
These are all just some examples of different categories. This is not a complete list, but I just want you to get in the mindset that when it comes to business models, there are two parts – first, you have to understand whether you are selling business to business or are selling business to consumer.
Once you know who you’re selling to, you need to choose the model you want to use to sell to that audience. Okay! There are five core Ecommerce Business Models that I’m going to talk about. There’s:
- Print on demand,
- Private labeling,
- Selling your product or service
Understanding Dropshipping Business Model
Dropshipping is a trendy Ecommerce Business Model right now because of the low barrier to entry. There are millions of product choices and lots of automation tools, which may be why you’re on my blog.
Dropshipping is a low-barrier entry model to get into. It’s become very trendy because of that, is like a make-a-money online idea, but it’s certainly not the only business model, and I’m not even going to say it’s the best business model.
Because I want you to think about it, we go through this that there are multiple options, and I’m going walk you through how you choose one that you feel is right for you.
All right! But if you’re unfamiliar with dropshipping, this is the idea you set up a store.
You find third-party products at a wholesale cost like I find a necklace at $3, I put it on my store for $20, the customer buys the necklace, you keep that seventeen dollar profit, and then your supplier ships the item to the customer you never have to touch it.
That’s what drop shipping is, and when done right, it can be a lucrative, really great business model because it’s something where it’s low risk and there’s no inventory; the barriers to business are not there.
But when it’s not done right, and we’re gonna talk about this, but when it’s not done right then, it can be a nightmare.
Here’s a dropshipping example for a store that’s been around and is still doing very well; they’re called sugar and cotton; you can look them up. They are sourcing products direct from China.
These are not their products; they’re not making these; they are just sourcing products, putting them on their website, and reselling them using social media ads for a profit. That’s an example.
What Is Print On Demand
Print on demand is very similar to drop shipping. It’s kind of technically a form of drop shipping, but the difference with print-on-demand is that you are not selling somebody else’s already created products.
You’re taking an item like a shirt, a poster, and apparel and then printing some design on it.
Then you are reselling it.it’s similar to dropshipping because you are not fulfilling the item, right? Some third-party fulfillment companies can link to your store, so you take a t-shirt and put a design on it. I take a t-shirt and put an econ empire’s design on it.
Then somebody goes to my store and buys that, the order is routed to my fulfillment partner, they print the shirt, and then they ship it.
Print on demand is one of the best business models because there are many advantages to what you can do with print on demand.
It can be unique and brandable, you can make designs specifically for a niche, and there’s so much unprecedented opportunity right now because it’s not a race to the bottom like drop shipping is.
Print on demand is something where you’re selling unique designs that are difficult to copy to people. Still, we’ll talk about print-on-demand and dropshipping in later modules.
For now, I just want to introduce you to the business model. Here’s an example of a print-on-demand store, gearbunch.
Its a fantastic example of print on demand, and you can see some of the categories they have here: leggings, capris, yoga pants, hoodies, and shoes.
Basically, in the shoe category, they are taking these designs, these are unique custom designs that they’re making, and then they’re uploading them to this product, this shoe product. Then if somebody comes and buys this, their third-party fulfillment center will print that item and ship it to their customer.
It’s a unique model, as you can see, because this type of design on that shoe doesn’t exist anywhere else. In fact, up until very recently, it wasn’t even possible for me to print a hamsa design on sneakers and then go on social media for people who are interested in hamsa and show them this exact design in this exact item; you see how specific and how unique the connection, how brandable that connection can be there.
That’s why print-on-demand can be a fantastic business model when you understand it and know how to set something like this up.
This is where dropshipping generally evolved to. Because private labeling is a little bit more difficult because you have to know what you’re selling.
You want a proven product idea when you private label because you’re going to have to order in bulk, you’re going to have to get your packaging, and it can even go even further than that to where you’re getting involved in the manufacturing process.
The advantage is private labeling or that it’s, again, it’s very unique. It’s your brand. When you’re dropshipping, anybody can drop ship that same item, all they have to do is to be able to find where you’re getting the supply from, out of China, which is generally not difficult, and anybody can sell it.
It becomes a commodity and, again, a race to the bottom where you’re all selling until it bottoms out and nobody can sell it and I’m not ragging on dropshipping because you can make a lot of money by doing it.
Private labeling is when you can build your brand, private labeling is when I can take whatever I was selling and put my brand on it, and now it’s specific.
And I can bring that item in bulk to my fulfillment house and start creating a much better customer experience because I can have my own packaging, my own inserts, and my own logo on it.
So, this is, and the advantage to private labeling is that you aren’t necessarily manufacturing the product yourself, you just need to find a good manufacturing partner with a proven idea and then build a brand around that and do the marketing.
Private labeling is probably the best business model when you can evolve to that point. An example, I’m sure that all of us have heard of Kylie cosmetics which is now considered a billion-dollar company and has put Kylie Jenner’s path to becoming the youngest billionaire ever. The amazing thing about Kylie cosmetics it’s that Shopify store.
Shopify has written up a whole success article on her, but the amazing thing about Kylie cosmetics is that she did not invent this product.
Right! This is private labeling at its finest where. She found a third-party manufacturer that already produces these types of items, and then she went to them and said, “Hey, I’m Kylie Jenner; I have a massive social media brand; I want to create my beauty product.”
They take what they already have; they work with her to formulate something that is specific to what she wants and what she likes, and then she builds her brand around it, builds her packaging around it to make it very unique and very specific to her and then she uses her social media brand to launch it and does 300 million dollars in sales in the first year.
That’s not something anybody can duplicate because she’s one of the largest Instagram celebrities in the world, but the point is that she is not making this product; there’s nothing super unique here, except for the branding, except for her.
That’s why private labeling can be so powerful because while none of us may be celebrity influencers, you can still create an amazing brand. You can still create amazing marketing, and when you’re able to do that, you stand out from everybody else that might be able to try selling the same type of thing.
Generally, when you private label as well, you can bring that manufacturing in; since you’re working directly with the manufacturer, you will get even lower margins because you’re ordering in larger quantities.
So, that’s the advantage to private labeling, but again it’s not where you’re going to start.
This is where you evolve because you will have to know what you’re doing, know how to build a brand, know how to market, and connect with suppliers.
But again, it’s still something that you’re going to evolve to me because it’s going to require startup investment, and it’s going to require time.
So, you need money and time to start a private label brand, so you’re already going to have some success, in my opinion.
I think you should already have some success before you move into private labeling.
Subscription Business model
This is also a difficult one when you’re just starting because, again, this will require you to know your niche.
It will require you to create your supply chain by investing in your packaging and branding, you know, because of the subscription model when you’re selling physical products.
Now it’s important to know that you can also sell digital products as a subscription model. And that’s a lot easier because you’re just delivering the content online, but most people, I think, are here to learn how to sell physical products and when it comes to a subscription model, that’s going to be more difficult.
You’re going to have to understand your logistics pretty well, for you know when somebody signs up to when they’re re-bill is when the product goes out, and how are you syncing all of your deliveries that are going out and reaching a customer on a uniform time frame each month, regardless of who signs up and who drops off.
Some challenges obviously can be figured out because other people like Birchbox are already doing it and have proved this model. I have never personally built a subscription business myself for physical products.
This is just a model I want you to be aware of, and give you an example of a company doing this now.
I understand and know how it works, but I just want to let you know that I haven’t built one myself. The advantage to a subscription model, of course, is that you are creating recurring revenue.
You still have to deal with a churn rate, but you’re creating repairing revenue, and that’s a really powerful thing anytime you can do that.
I like the digital subscription model better because there is no physical product fulfillment that must be shipped out.
So your margins are a lot higher, and money is easier to collect, but either way, the advantage of subscription is a recurring revenue model, which can be powerful when you’re able to build that.
But again, for physical products, I think it’s a tough place to start unless you just have this amazing vision and idea that you’re willing to invest in and spend time and go all in.
But that’s a choice for you. You have to decide that because it’s going to require time and effort to be, maybe require investments if you don’t have the money yourself, to be able to get that all set up, get your packaging, branding, your minimum order items that you need.
Then finally, your product.
This is not every business model in existence, but I think these are the main ones that will apply to just about everyone here.
This could be a product that likes to scrub daddy right; it could be your product that you invented, it could be that you’re a small business owner and you already have products you sell within some type of retail location, and you want to expand into e-commerce.
Maybe you have your brand, whether you make the product yourself or you don’t make the product.
But that’s generally where this is going to apply. Somehow you are making packaging and shipping the products on your own. That’s what will happen for your product until you find some type of co-packer or hire some type of fulfillment team.
Most people start with their product by packaging it and shipping it right from their home, hiring family and friends to help them out.
You know, hiring college kids or whatever to be able to start small and ship and then eventually move into some type of co-pack or warehouse that can ship for you, and they can integrate with your online ordering system.
Again, I also want to note here that this could be a digital product. Your product or own service doesn’t necessarily need to be physical. This covers a lot of areas. This could be if again if you’re an existing small business.
That has products to sell, or maybe you are like a cleaning service, or you know phone booth service or something that could be expanding into an e-commerce channel and that’s your product or service, or you could have a digital product. I hope you are learning something new in this Ecommerce Business Models guide.
You could sell a course or some master class or any type of you-know information.
It’s valuable to people, but again, the point here is that you are the one creating it, you’re the one controlling it, you’re the one packaging it, and you’re delivering it, whether shipping it or delivering it online.
This is something that can be a fantastic push to start. The only barrier to entry with your product is you have to be the one that has the idea; you have to have something unique and creative that is already in existence or that you’re already building.
Here’s an example from a highlighted Shopify store called Jasmine’s kitchen; you can see that they have their kitchen products where they’re selling flavors and sorted flavors and seasonings.
They’re selling Indian cooking kits, so they’re using a Shopify store to be able to list their products online, and then when somebody buys it, it gets shipped from wherever their local fulfillment center is. So, they started as a small business and then expanded into e-commerce.
Now it’s important to know here after we have gone through these business models that no business model has to be standalone.
It doesn’t mean you can’t mix and match; your business cannot evolve from one thing to another.
For example, you could have a business selling dropshipping products, and you eventually start adding a subscription model.
You could have a dropship plus the print-on-demand store. Say, for example, golf, and if you’re in the golf niche, you could sell and dropship golf products while also creating your line of golf t-shirts.
They could both be sold in the same store. There are multiple ways that you could mix and match these types of things, even within the business-to-business and business-to-consumer model.
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If you have your product, say you might sell it directly to consumers for your retail price, and then you may also have a wholesale price that you’re willing to sell directly to businesses.
All right! So, this module or this lesson here was just meant to give you an overview of what I think the main business modules are that most people are using.
Ecommerce Business Models Summary
Again, I believe that 95% of people will fall within these categories here.
So, you’re new and you’re just getting started, I wanted to be able to give you this introduction to understand the different Ecommerce Business Models, and in the next post, we’re going to look at now how to start narrowing into what business model is right for you and where should you be starting.
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