When it comes to launching an e-commerce business, one of the major decisions that you will need to make is selecting the business model to adopt. There are multiple options to choose from, but remember that not every model will be useful for your business. This article highlights some of the most crucial aspects that you should bear in mind when choosing the most appropriate e-commerce business model for your case.
Important Aspects to Consider for Maximized E-Commerce Business Profit
Prior to analyzing the specific business models, it is prudent to assess a few of the critical elements that will have a direct bearing on the profitability and sustainability of your e-commerce business. These include:
Kind of Product: Some product characteristics such as the item’s shelf-life, dimensions, and weight can have a bearing on service costs such as shipping.
Product Price: This will determine how much will be sold and what will be acquired in return.
Contribution Margin: A higher margin means more profitability with lower sales volume.
Customer Base: How well do you know the demographic profile of your audience? How extensive is your reach? These are all important factors for targeting the right model.
Marketing Budget: To what extent can you spend on marketing? This will also affect what platforms or methods you choose to promote your business on.
Team Size: The capabilities of your team will determine how complex a particular model is for your business.
Considerations for Manufacturing/Distributing: Some models are more applicable to you depending on if you are a manufacturer or a distributor of the product.
Researching E-Commerce Business Models
Each e-commerce business model has numerous pros and cons but there are three main ones:
Brand Website: In this model, a business sets up its own website with the purpose of selling directly to customers. This is ideal for companies that prefer building their brands and customer relationships without intermediaries. It gives the business a lot of autonomy when it comes to branding, the type of service provided to customers, and pricing the products.
Marketplace: Amazon, eBay, and Flipkart also let other businesses to sell through their marketplace. This is usually a good option for those that want to reach established customers without the hassle of maintaining their own web page. Nonetheless, it has its cons which include fees for these platforms and little ownership of the customer base.
Social Selling: This business model utilizes social media platforms such as Facebook, Instagram, and WhatsApp where businesses can reach directly to their customers for sales. Social selling is mostly helpful for very small ventures and for products that have elements of glamour and beauty.
Choosing the Best Model for Your Business
Knowing which business model works for you is important. Here’s how different businesses may fit into the models:
- Ramesh (Distributor) Aside from Ramesh, a distributor may also prefer using the Marketplace or Social Selling models as these allow for relatively easier and faster market access with minimal investment in infrastructure.
- Anil (Manufacturer) Similar to Anil, a manufacturer is in a position to benefit from a Brand Website or a Marketplace. In addition to selling directly to customers through the brand website, he can shop from a marketplace for a wider range of products without investment.
- Sunita (Handmade Jewelry) Social Selling is the model that best suits small businesses like Sunita’s handmade jewelry. With little available resources, Sunita sells her products on social media and directly interacts with customers without the need for extensive infrastructure.
Importance of the Evaluation Process Business Models
Selecting the right e-commerce business model is critical, and it varies depending on factors such as the nature of the product being sold, your budget for marketing, and the size of your organization. Knowing these specifics allow for better chances of growth and profit. These are the primary results of the evaluation:
Pinpoint the e-commerce business model that can be adopted: There is no a one-fit business model because brands are distinct from one another, and addressing your situation on the pivotal points would enable the selection of an ideal option.
Choose a model with confidence: Caution is taken when selecting a model that would surely be successful, but the various aspects at play enable boldness in selection.
In closing, it is crucial for businesses to assess their requirements against the discussed parameters to pinpoint the appropriate e-commerce model. With careful analysis of product type, target market, and resources base, the right decision can be made that provides a platform for growing the business and making profits.
