E-commerce Business Models: Choices you can make

“I must have a prodigious amount of mind; it takes me as much as a week, sometimes, to make it up!”― Mark Twain

The decisions you take in ecommerce are highly linked to your choices, directly impacting revenue, the decisions you made. How can you sustain your ecommerce business given the constraints? What role would you love to play in your ecommerce business? There are many choices available for you that make a distinction in the way you run your ecommerce business.

There are many types of ecommerce business models available. Within each model you can assume different types of roles so that you can optimize profit and add more value to your business. But there’s more to it. Let’s look at some of the business types you can adopt

• Wholesaling
• Manufacturing and Private Labeling
• Drop shipping
• White Labeling
• Subscription

Wholesaling

The wholesale business stocks inventory and fulfill orders itself. It’s exactly the reverse logic of drop shipping, and has much more potential to gain more loyal customers as it is de facto for a B2B business model. “Wholesale pricing” could attract a lot of customers since it has been perceived as lower-than-retail price.

Many wholesalers only engage in B2B transactions, and their business operations may be specifically designed only for the fulfillment of bulk orders. Others sell only B2C, whether at normal prices, discounted “wholesale” prices, or somewhere in between.

Wholesalers generally prefer B2B transactions, and bulk order fulfillment is their main operational area: however, some wholesalers opt for B2C or B2B transactions at normal or discounted prices.

Manufacturing and Private Labeling

Manufacturing makes us confused between a large factory manufacturing with sensitive machines and workforce and small manufacturers, making handcrafted items at a constricted space, but small manufacturers are more common in ecommerce.

A manufacturer can be a future seller; it’s a large manufacturer that engages in B2B or a small manufacturer that sells online.

Private label manufacturers, which make products with brand and logo for other companies, come to the rescue of those businesses that can’t invest in resources to manufacture their own products. These products can be delivered cheaper compared to products made by original manufacturers though you should not compromise on product quality.

Drop shipping

Products for sale are identified and transferred to the supplier, who then ships the products directly to the customer. Here, the seller is acting as an intermediate channel between customer and supplier; indeed, the seller manages to keep the seller price from supplier. Drop shipping allows businesses to keep any inventory on hand.

Drop shipping is greatly benefited from zero inventory cost, warehousing space etc. ; also, the seller is able to dispense with fulfillment costs including packing and shipping.

Drop shipping has its own share of disadvantages including supplier location, supplier performance etc. This model can be adopted by those sellers who are new to ecommerce, and you ultimately compete with other drop shippers potentially selling at lower price than yours.

Wise drop shippers enter this business model with their eyes wide open and a good plan. Market research and inching down are very important, as are identifying any possible weaknesses of your suppliers. Many drop shippers order some of their own products to see how securely (and accurately) their orders are being shipped.

Clever drop shippers execute this business model after having studied it deeper, and done enough market research.

White Labeling

There are many sellers that want to brand their own products despite not having enough resources to manufacture. White label manufacturers cater to these sellers and produce a generic product (without brand and logo) that can be later customized with the seller’s branding. White labeling can be a good way to sell high-quality products with your own branding.

The products are shipped by the drop shipping suppliers that also offer white label services including packaging so that customers receive your branded products.

Subscription

Subscription service enables you in a great way to stack up recurring revenue and customer loyalty.

Disposable items, pet food, cat litter, kitchen supplies diapers, and products of this kind are frequent purchases. Customers need them handy, but customers get miffed at constant reminder on the part of the seller. Subscription businesses offer automatic, recurring orders of products like these. This is more convenient for customers, and profitable for you.

The “box” is another type of subscription, where a business lets customers sign up for a regular delivery of a package that includes a bunch of selected items. Newspapers are a good example of a subscription service.