6 Ecommerce Business Models to Choose from in 2021
Over the past years, ecommerce businesses have been thriving. The number of sales from online stores has grown exponentially, especially lately when everyone's been stuck at home. It's no wonder why so many entrepreneurs are looking to start an ecommerce business.
And while it's easy to get swept away by the promise of huge profits, there are a few things you need to know before getting into ecommerce. So, we'll start with the basics and give you a brief presentation of the types of ecommerce businesses that you can choose from in 2021. Take a look, analyze the information and see which one best fits your needs.
Dropshipping, which is probably the simplest type of ecommerce business, is when you use a third-party supplier to fulfill orders for you, so you don't have to physically keep any of your inventory.
You can start dropshipping by setting up an online store, along with a few easy payment options such as Paypal or credit card. The rest is up to your supplier. You won't have to deal with inventory, warehousing or packaging. Every time someone orders from your online store, the supplier gets the order and ships it directly to the customer.
However, dropshipping is not always as simple as it sounds. You depend a lot on your suppliers for speed and delivery. So, if there are problems with stock or the delivery speed, that's going to hurt your reviews, even if it technically wasn't your fault.
This ecommerce business model is great for those entrepreneurs that have a good idea for a product but don't have the funds to build their own factories. In this case, you can outsource the whole production process to a private labeling and manufacturing company that will mass-produce and ship your product directly to your customers, but with your own brand label.
This business model is very flexible, as it allows you to easily and quickly change suppliers if you encounter any quality issues. The setup costs are minimal and this is also a great way to test the waters if you want to open up your own facility later.
You've most likely heard of them, as subscription-based businesses have become very popular lately (names such as Stitchfix, Dollar Shave Club or Blue Apron). This business model is based on delivering customers boxes of products at regular, set intervals. It's a very profitable venture, especially because it's easier to incentivize your consumers to add more products to their order and customize it as they please.
However, you need to do a bit of researching before getting into a subscription-based business model. Picking the right niche and products can prove to be quite the challenge, as the most successful categories are food, health, grooming, cosmetics and fashion.
The white labeling ecommerce model is similar to the private labeling and manufacturing one. You simply have to choose a product that's successfully sold by another company and sell it under a different package and label. This is a very common practice in the beauty and cosmetics industry but other niches - such as health and wellness - can thrive under this business model as well.
However, the one issue with white labeling is the fact that you're going to be stuck with whatever you order if you don't manage to sell everything. Most of the companies that deal in white labeling only produce a very limited stock. That's why it's crucial to choose a niche and product that has constant demand.
This is maybe the most expensive business model on the list, as it requires a lot of upfront capital. You will need to keep track of inventory and stock, manage customer orders and shipping information, along with couriers and the warehouse itself.
A wholesale business, as the name suggests, means you'll have to sell in bulk. It's all about the volume and if you don't want to set up a dedicated website, you can always use the services of Amazon, eBay or even Google.
Print on demand is very similar to dropshipping. The only difference is that it allows you to customize your designs and sell them on a variety of items - t-shirts, hoodies, stickers, posters, mugs, pins, phone cases and even full canvases. The customer places an order that's sent directly to the third-party manufacturer you have a contract with.
This business model is especially convenient for small artists who can't afford the logistics of an actual ecommerce platform. The third-party manufacturer will also deal with packaging and delivering it to the actual customer. Naturally, they will take a cut of your profits so keep that in mind if you want to go for this ecommerce model.
Now that you've read about some successful business models, it's time to choose one. But don't dive in head-first. You need to ask yourself some questions beforehand.
Who's your target audience? What exactly do you want to sell? How much capital are you willing to invest in this startup? What's the positioning of your business, both short and long term? What differentiates you from the rest of the sellers out there?
Once you have the answers to all of these questions, you can go ahead and set up a strong business plan. Understanding the basics of the ecommerce business is one thing. But planning and managing your brand is a whole other thing. Just take your time and don't skip any steps.
The ecommerce business you should go for is the one that best fits your needs and long-term goals. And once you choose one, make sure you stick with it. Huge business model changes could lead to loss of customer trust and revenue in the long term.
We hope this article helped shed some light on the available business models out there. If you found it helpful, don't be afraid to share it with friends!