Ecommerce Business Models definition
Ecommerce Business Models is 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 wants to start an eCommerce store online.
This module is for anybody that is new to e-commerce or even if you have been in e-commerce but maybe you don’t have an understanding of the full spectrum of everything that is out there and available.
This is going to 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 are going to 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 to this.
A lot of people out there right now because of people selling courses in the online marketing world.
They think of e-commerce is just dropshipping or just print on demand and that’s not true. There’s actually 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’s really 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 there’re different.
A very much typical drop shipping and print on demand is 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, wholesale goods.
Business To Business (B2B)
Like if I set up an agency and I 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 where, 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, but really it’s more business to consumer because it’s generally like a solopreneur, somebody getting started or food and beverage.
These are all just like some examples of different categories, obviously this is not a complete list but I just want you to get in the mindset that when it comes to business models, there’s two parts – first you have to understand are you selling business to business or are you selling business to consumer.
Once you know who you’re selling to, then you need to choose what model you want to use to sell to that audience. Okay! There’s basically five core Ecommerce Business Models that I’m going to talk about. There’s:
- Print on demand,
- Private labeling,
- Selling your own product or service
Understanding Dropshipping Business Model
Dropshipping is a trendy Ecommerce Business Models right now because of low barrier to entry. There’s millions of product choices out there, lots of automation tools, this may be in fact exactly 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 make a money online idea but it’s certainly not the only business model and I’m not even going say it’s the best business model.
Because what I want you to think about is, we go through this that there’s 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, basically 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, 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 dropshipping is and when done right it can be a really 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 around and doing very well, they’re called sugar and cotton, you can look them up – basically they are sourcing products direct from China.
Like these are not their products, they’re not making these, they are just sourcing products, they’re putting them on their website and they are 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 dropshipping. 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 or a poster, apparel and then you’re printing some sort of design on it.
Then you are reselling it.it’s similar to dropshipping in a sense that you are not fulfilling the item, right! There’s third part fulfillment companies that can link into your store, so basically you take a t-shirt and put a design on it. I take a t-shirt and I 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 in my opinion actually one of the best business models right now because there are so many advantages to what you can do with print on demand.
It can be so unique, so 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 actually selling unique designs that are difficult to copy to people, but we’re going to talk about print on demand and dropshipping more specifically 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 like some of the categories they have here in leggings, capris, yoga pants, hoodies, shoes.
Basically in the shoes 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 shoes product and 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 really unique model as you can see because this type of design on that shoe doesn’t exist anywhere else and 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 you know how to set something like this up.
Ecommerce Business Models : Private labeling
This is where generally dropshipping 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 own packaging and it can even go even further than that to where you’re getting involved in the manufacturing process.
The advantage is private labelling or that it’s again, it’s very unique, it’s your brand.When you’re dropshipping, anybody can dropship that same exact item, all they have to do is to 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 it becomes kind of like 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 with doing it.
Private labeling is when you can build your own 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’m able to bring that item in bulk to my own fulfillment house and start creating a much better customer experience because I can have my own packaging, I can have my own inserts, I can have 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 be able to build a brand around that and do the marketing.
Private labeling is probably the best business model when you’re able to 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 path to become the youngest billionaire ever and the amazing thing about Kylie cosmetics, it’s a shopify store.
Shopify has actually written up a whole success article on her but the amazing thing about Kylie cosmetics that she did not invent this product.
Right! This is basically private labeling at its finest where she was able to find a third party manufacturer that already produces these types of items and then she goes to them and she says “hey, I’m Kylie Jenner, I have a really massive social media brand, I want to create my own beauty product.”
They take what they already have, they work with her to formulate something that is specific what she wants and what she likes and then they she builds her own brand around it, build her own 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.
Now obviously, that’s not something that just 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 actually 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 a celebrity influencers, you can still create an amazing brand and 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’re able to bring that manufacturing in, like since you’re working directly with the manufacturer you’re going to 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 to because you’re going to have to know what you’re doing, know how to build a brand, know how to market, know how to 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 and so you’re already going to have 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 difficult one, I think when you’re just starting out because again this is going to require that you know your niche.
It’s going to require you had creating your own supply chain investing in your packaging and branding, you know because the subscription model when you’re selling physical products.
Now it’s important to know that you can sell digital products as a subscription model as well. 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, to 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.
There’s challenges there that 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 that’s doing this now.
I understand it and I know how it works but I just want to let you know that personally 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.
For me personally, I like the digital subscription model better because there is no physical product fulfillment that has to 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 and that can be really 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 like this amazing vision and this amazing idea that you’re willing to invest in and spend time and you know 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, your branding, your minimum order items that you need.
Then finally your own product
This is not every business model in existence but I think these are the main ones that are going to apply that just about everyone here.
This could be a product that like to scrub daddy right, it could be your own 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 own 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’s going to happen really for your own product until you find some type of co-packer or you hire some type of fulfillment team.
Where most people start out with their own product is 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.
Now again, I also want to note here that this could be a digital product as well. Your own 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 course, you could sell some type of master class or any type of you know information. It’s valuable to people but again the point is here is that you are the one creating it, you’re the one controlling it, you’re the one packaging it and you’re the one delivering it, whether that’s shipping it or delivering it online.
This is something that can be a fantastic push to start. The only barrier to entry with your own 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 own 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, doesn’t mean your business cannot evolve from one thing to another thing.
For example, you could have a business that sells dropshipping products and you eventually start adding a subscription model as well.
You could have a dropship plus 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 own line of golf t-shirts.
They could both be sold on 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.
If you have your own product, say you might sell it direct to consumer for your retail price and then you may also have a wholesale price that you’re willing to sell direct to businesses.
All right! So, this module was or this lesson here was really 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 are going to fall within these categories here.
So, you’re new and you’re just getting started, I really wanted to be able to give you this introduction to understand the different Ecommerce Business Models and in 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. Read Next Choosing Your Business Model : Weigh Your Options