Many of us aspire to increase our income in life. Some find ways to do so, like selling digital products, engaging in online sales, or starting a blog, just like me. Through my work in the logistics industry and collaborations with e-commerce entrepreneurs, I've realized that the internet offers money-making opportunities. For instance, I have a customer who sources products from China, ships them to the US, and profits from serving American consumers.
In this blog, I'll share insights from my e-commerce experiences with various customers. I've noticed that there are ample opportunities for those with the ambition to launch an online business and secure a good income.
What is the business model?
A business model serves as the blueprint for your success in the business world, outlining your plan for making things work. There's a variety of business models to choose from, but it's not a random decision. Your business model should naturally evolve from what you're offering, who your customers are, and how you're pricing your products or services. Once you have a clear understanding of these three factors, you've essentially defined your business model.
If you're already involved in e-commerce, it's likely that you have a business model in place. You might have even crafted a unique one, as creative entrepreneurs often do in the e-commerce realm. Your business model isn't merely a label; it also helps establish your specific niche in e-commerce, setting you apart in a competitive landscape. However, whether you're just starting out or contemplating the growth of your existing e-commerce venture, remember that a business model is akin to a template. What may work seamlessly for one product or a particular customer base may require adjustments to fit another situation, and that's perfectly acceptable.
What are Ecommerce Categories?
I would say this is the interesting and critical part when deciding on the business model for your entrepreneurial journey. So, basically, e-commerce businesses can be categorized into four types, as outlined below. Again, it's crucial to learn this because, in the end, when you truly embark on the entrepreneurial journey, you won't be dealing with individuals. Instead, you'll be dealing with different parties involved in your business. Therefore, you need to be able to communicate effectively with them.
Let me share a very simple example: when you reach out to a third-party logistics provider (3PL) asking for logistics services, particularly fulfillment services for your business, they might ask, "Which sales channels are you selling?" It may seem basic, but for some who couldn't answer this, it's a challenge. This is my genuine sharing based on my own experience in my work.
Alright, getting back to the main topic, here are the four business categories:
Business-to-Consumer (B2C)
The title can provide more clarity about the concept. As an e-commerce seller, you'll be directly selling products to individual customers. Your store can be a physical brick-and-mortar shop or an online store created through e-commerce platforms like Shopify, Bigcommerce, Woocommerce, and more.
For instance, if I were your customer and I purchased a lipstick from your online store, this would indicate that you're operating under the B2C (Business to Consumer) business model, which involves selling products to individual consumers.
Business-to-Business (B2B)
This category includes the services or products that businesses, factories, or wholesalers offer to other businesses. Let's say you are a trading company supplying car parts to an automobile manufacturer, or perhaps you are a factory producing furniture such as chairs and tables, which are then sold to a Direct-to-Consumer (DTC) brand. Essentially, this is similar to B2C, but nowadays, the term "DTC" has become a popular search term.
Consumer-to-Consumer (C2C)
In this category, individuals sell various items, either products or services, directly to someone else, typically through online transactions. It's highly reliant on online transactions. A prime example of a significant C2C marketplace is eBay, a platform you're probably well-acquainted with. These are marketplaces where individuals can sell their products without the necessity of establishing a legal entity.
Consumer-to-Business (C2B)
This category includes the services/products that individuals sell to businesses, such as companies, factories, or agencies. Let's consider graphic designers who offer their work to companies in need of illustrations for their marketing campaigns, or Key Opinion Leaders (KOLs) who promote a brand's products. For instance, Fenty Beauty collaborates with KOLs who have a substantial audience to boost lipstick sales and revenue.
So, I've just walked you through the four major categories of business models you can choose to follow. Remember that the first step is to define the model you'd like to start with. Whatever you choose for your business, I'm confident that it will fit into one of these four categories in the end. If you have any doubts, please feel free to leave your comments in the blog section, and I'll address them for a fruitful discussion.
What are the Ecommerce Business Models?
Alright, in this section, I would say this serves as the roadmap for you all to follow. Just based on the basics mentioned above, you already understand that there are various business models that differ according to your product selection, market, and pricing strategy.
Retailer
An ecommerce retailer follows the B2C model, selling a range of brands across one or more product categories, such as clothing, electronics, jewelry, and so on. Similar to a brick-and-mortar retailer, an ecommerce retailer, like Boohoo or SHEIN.com, procures products from wholesalers or suppliers. It warehouses the inventory in a fulfillment center, preferably one specializing in small-parcel direct-to-consumer (DTC) fulfillment, and subsequently resells these products to online consumers. The retailer seeks out profitable, unique, or popular branded products that align with the store's identity and are likely to drive traffic to its website.
Marketplace
I'm pretty sure you're familiar with Amazon, eBay, Etsy, as they are highly popular in the logistics world, categorized as "marketplaces" where you can register as a seller. Of course, there will be procedures for you to follow to become a seller. If you successfully sign up, you can list your products, run marketing campaigns, and start receiving orders. Some may have the question of whether non-US/AU/UK citizens can sell products on Amazon, and the answer is yes, you can. As long as you can register as a successful seller and these marketplaces offer you a fulfillment model to work with. Let me elaborate:
With Amazon, you can either send the stock to Amazon DCs (Distribution Centers), and Amazon will take care of the rest, including pick/pack and preparing the orders for your customers. This is often referred to as "Amazon FBA." If you're not familiar with this, please visit one of my blog posts.
For Etsy and eBay, these marketplaces do not offer fulfillment options, so you'll need to pack the orders yourself. If you're located outside of your target market, you'll have to send each order to the end customer by air or express, which can be quite expensive. Alternatively, you can seek out third-party logistics providers (3PLs) in the target market to assist you in handling the fulfillment process, including picking, packing, and shipping your customer orders.
Private Label/White Label
This falls under the category of DTC or B2C. Typically, with private labeling, you have products specifically manufactured for your business. This ecommerce business model is ideal for entrepreneurs who aim to establish their own brand and maintain greater control over their product's quality. Unlike dropshipping or wholesale, private-labeling demands a substantial upfront investment. You'll be required to purchase inventory in bulk and may need to cover the costs of warehousing space for product storage.
For instance, you might discover a factory in China on Alibaba that can provide private labeling services under your brand. However, this usually comes with volume commitments or a Minimum Order Quantity (MOQ).
Wholesaler
An ecommerce wholesaler buys branded goods from manufacturers, brands and stores the inventory in a warehouse or distribution center, and resells it in bulk to retailers. Ecommerce brands that manufacture their own goods and sell directly to consumers may also sell wholesale to retailers. Example like this guy Barnerbrand down on their website footer they offer the retailer/distributor model.
Dropshipping
This model is popular for anyone looking to start an online business. You don't have to hold any stock; all you need to do is find your niche and locate a supplier who can provide the products you want to sell. AliExpress or JD dropshipping can be good sources to consider. You just need to set up your online storefront using popular platforms like Shopify, Bigcommerce, or WooCommerce. Then, run marketing campaigns to drive sales and leave the picking, packing, and shipping to your supplier on AliExpress or JDshopping.
Print on Demand
Following dropshipping, print on demand (POD) is another option that is popular nowadays for those starting their business ventures. This business model is well-suited for products like t-shirts, mugs, water bottles, and more. You may not necessarily need design skills, but being creative and having an innate sense of color, design trends, and unique design ideas is essential. Some major POD companies include Printify, Printful, Gelato, and so forth.
Final Thoughts
In addition to the ones mentioned above, there are many other business models such as crowdfunding, subscription boxes, and affiliate marketing. You have the freedom to pursue any of these from my perspective. I've listed some of the major models that I often come across in my work, but there are no limits or strict rules you have to adhere to. Just go, try, make mistakes, rework, and eventually, you'll discover the best way to build your e-commerce empire.
Personally, I've gone through a process of trial and error, and I've found that I love writing blogs to share my knowledge with you all. I hope you'll find them helpful.
I'm looking forward to seeing you in the next blogs! Cheers!