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Are you a new eCommerce business owner or a veteran entrepreneur? Regardless of which, when building or running a business, many people often want to find a ‘shortcut’, or some ‘magic formula’ to achieve success. Sad to say, such shortcuts and formulae do not exist.
Why?
So similarly, running a business is the same. You need to go back to basics and look hard at whether your business plan suits you. Read up on the different types of eCommerce business models, find the differences between them and decide which one best fits your schedule, investment appetite, and skills. Analyze them thoroughly and work through them before you leap into the eCommerce industry!
This is the way eCommerce businesses operate. It’s nothing fancy, and you will need to put in lots of hard work. But mark my words – every effort is worth it when you see that your business is finally working!
The reason is simple: there’s no one-size-fits-all ‘shortcuts’ or ‘formula’ for success. Like most things in life, getting successful at your business is about how you execute YOUR plans rather than what plan of action you are executing on. Even if I place the best business plan in front of you, it may fail if it doesn’t suit the way you work! It is just like how some people work better alone while others gain efficiency by working in groups. What you need to do is to see what suits you the best, and once you found that, work through that persistently. You should see better chances of success then!
Meanwhile here is the 5 Basic eCommerce Business Models, so that you can do a review and see which is the most appropriate model you can follow.
No. 1 Business Model: Resellers
These are the people who buy new products from elsewhere (such as manufacturers), then sell out the individual units to consumers. You can perceive them as ‘partners’ of the original manufacturers, just that they are reselling the finished products to their customers for the purpose of making a profit.
Generally, resellers sell items that already exist and can potentially be sold by many different stores. These items might be branded – bearing the name of a specific company – or generic, unique items not seen in local markets. They don’t modify their products by changing their design or packaging, but add value by doing things like:
Selling products that are not readily available.
Providing expert knowledge that buyers need.
Offering a wide or unique assortment of products within their niche.
Bundling products with complementary accessories or service
The keywords here are “specialization” and “niche”. As a rule of thumb, being a reseller is not for those who just want to sell easily available everyday items. You must possess a certain type of expert knowledge, and establish a name for yourself before you can compete against some of the biggest original retailers in the world.
Now here’s the second of the 5 Basic eCommerce Business Models that I will be talking about in this post:
No. 2 Business Model: Private Label
Sellers who do private label, or private labeling, are the people who take the generic, new products and sell them online on marketplace platforms like Amazon, but add their own brand name on the listings. This is currently one of the hottest product strategies for online sellers.
Are you a new eCommerce business owner or a veteran entrepreneur? Regardless of which, when building or running a business, many people often want to find a ‘shortcut’, or some ‘magic formula’ to achieve success. Sad to say, such shortcuts and formulae do not exist.
Why?
So similarly, running a business is the same. You need to go back to basics and look hard at whether your business plan suits you. Read up on the different types of eCommerce business models, find the differences between them and decide which one best fits your schedule, investment appetite, and skills. Analyze them thoroughly and work through them before you leap into the eCommerce industry!
This is the way eCommerce businesses operate. It’s nothing fancy, and you will need to put in lots of hard work. But mark my words – every effort is worth it when you see that your business is finally working!
The reason is simple: there’s no one-size-fits-all ‘shortcuts’ or ‘formula’ for success. Like most things in life, getting successful at your business is about how you execute YOUR plans rather than what plan of action you are executing on. Even if I place the best business plan in front of you, it may fail if it doesn’t suit the way you work! It is just like how some people work better alone while others gain efficiency by working in groups. What you need to do is to see what suits you the best, and once you found that, work through that persistently. You should see better chances of success then!
Discounts for clearance stock can be high, such as 90% off a product’s full retail price. Though that sounds like a highly profitable bargain, the quality of liquidation stock can be variable, thus one needs to assess them carefully. An effective way to source quality liquidation stock is through building close relationships with other businesses. You will be ahead of the competition for their clearance sales while getting somewhat more reliable stock sources.
On the other hand, sellers who choose this business model will always have a constant need to find new sources. After all, a clearance-based business cannot simply keep reordering their ‘bestselling products’ – it will definitely run out sometimes.
The fourth business model in the 5 Basic eCommerce Business Models is this:
No. 4 Business Model: Retail Arbitrage (RA), or Online Retail Arbitrage
These are the people who source discounted new products available in large quantities (like overstocked items) from retail stores offline or online, then resell the products at a profit. It occupies an interesting place between reselling, private labeling and liquidation, but generally differs in terms of:
Discounts of source products (and therefore profits) are usually not as high as liquidation business models.
Modifications may be made by changing products’ packaging or marketing materials, but not their design – therefore no private labels are added.
The source of products is easily accessible to small businesses and individuals.
This is a really hot e-commerce business model nowadays. Take note though, competition within RA businesses is very intense – with few barriers to selling through online marketplaces, and even fewer to buy from an ordinary retail store, RA is open to absolutely anyone with some time and capital to invest. As such, the Return on Investment margins for RA has dropped to an extremely low value – just around 5%.
Another practical concern about RA that many new sellers do not know is that some brands require reseller certificates to sell their items. Thus if you accidentally bought such items, you will end up getting stuck with a lot of goods which you have to dispose of. So do consider carefully before you decide to jump into the RA business!
Last but not least, the fifth business model in the 5 Basic eCommerce Business Models is this:
No. 5 Business Model: Used Items
These are the people who specialize in handling other people’s used items and deal with second-hand goods. This may be the least exciting out of all the previously mentioned e-commerce business models, and some may wonder if there is much money to be made through this model.
Truth is, there is. Some used items, books, for example, need a large market like Amazon or eBay to find their true value. A textbook that sells for little in a sale can fetch a hundred dollars plus online – students and academics who urgently need that exact title have little chance of finding it locally and thus are prepared to pay a high price to get it online.
If you are still skeptical about whether businesses selling used items can be successful, you can look up this company called Momox. This is the second-largest seller on Amazon – and guess what they sell? Second-hand books, CDs, DVDs, video games, and designer clothing. They turn over 100 million Euros a year, employ 1,000 staff, and one of their warehouses is as large as an Amazon fulfillment center!
So, some of you may ask now then: what about other popular buzz words like dropshipping and FBA? Are they also business models which I can follow?
Let me clarify. Both above mentioned are not e-commerce business models, but rather SERVICES provided to e-commerce business owners to help them run their businesses more smoothly.
Dropshipping is a service provided by some suppliers where they will ship their products directly to the buyer. They do not require payment until the product is sold, so you pay the supplier after the buyer pays you. Meanwhile, FBA, or Fulfillment by Amazon, is a service provided by Amazon.com where they provide their own product storage, handling, and shipping services to process orders for other companies.
For sellers with limited time, these services solve a key problem, but they don’t in themselves provide any base to build a business on. Consumers won’t buy from you just because you use drop shipping or FBA!
Clearer now? See you soon!
