Choosing the right e-commerce business model

It can be daunting to start an e-commerce business with so many options available and industry techniques to learn. That shouldn't put you off, neither should the level of competition in certain niches.

The key is to understand your product and business goals then choose a model that suits you best. Remember your business model can be adapted as you grow and develop. 

Private label model 

The private label model is a popular starter option for e-commerce. In this model entrepreneurs with a great idea but no capacity to develop it will enlist the help of a manufacturer who will make it for them. They then label the product and market it independently. 

There are several benefits to this including a separation from competitive markets, ownership of the brand and product, and very high profit margins. There are some roadblocks to look out for but it's a solid model for new starts with great product ideas.

White label model

Like the private label model, white label ecommerce sellers are selling generic products with unique branding.

This is very good for business owners who want to get started with e-commerce but there are significant drawbacks including more competition and a lack of quality control.

Selling generic products means you have stiff competition and may need substantial marketing efforts to stand out. You will also have less access to the quality and packaging materials, meaning your company could suffer some loss to its reputation. 

The dropshipping model

The dropshipping model is a frontrunner when it comes to e-commerce for beginners.

With dropshipping you don't need to have a product or suppliers. You market the products and when customers make a purchase they buy directly from suppliers. This takes the trouble of opening distribution channels out of the business model.

While there are several benefits to dropshipping there are also many drawbacks. Owners have little control over the products being sent which can cause a customer service issue. Moreover there is stiff competition from other dropshippers in the niche as it's so easy to implement. 

The print on demand model

This e-commerce model is similar to dropshipping but a little more niche. Shop owners advertise products on their sites and when a customer makes an order a supplier prints the design and ships it. POD usually ships t-shirts, hoodies, leggings, mugs, and phone covers. 

If you are starting out with e-commerce or you have excellent graphic design skills then the POD model might suit you. It allows you to easily trade unique products worldwide. The trade off is that you have little control over the final product and the market is fairly competitive. 

Subscription service model

The subscription service model has grown in popularity in recent years with more customers willing to invest in long-term services they like.

Busy professionals for instance are likely to continue with service that fit into their schedules. Similarly, the market for self-care subscriptions continues to grow.

If you have a unique product or service you want to offer as a subscription service this model has many advantages. With good marketing efforts and a quality product you can safeguard a healthy revenue stream. You also have more control over the end-product and shipping.