In previous chapter we learned about basic prospects and components of a good eCommerce plan and how it can help you to rain your online store with orders. In this chapter we will brief you about second part of business planning and read about business model in detail.
Before you actually pull your socks, get into the boots and start your business, it is a scheme that you first create a wire frame of your business and establish a business model. When you will go through deep research and all the section of your eCommerce business plan, you will figure out your business model. eCommerce is a big sea and there are bulks of ways to sell you products online with the help of different business models. Your business model depends upon what you sell so it is very crucial to analyze your business model.
There are generally 4 business models which are,
Business to Business
This model stands for platform where a business sell its products or services to another business. It simply means business selling to another business. It is loaded with upcoming as well as shortcomings when you sell directly to businesses. Upcoming points for your business includes large quantity of orders and these orders are consecutive and frequent. There are less number of business when compared to number of consumers and so sales cycles are longer and more futuristic.
Business to Consumer
This business model deals directly with customers or the end user who going to consume that product or service. This model let sell directly to customer. It is one of the most common and most running business model and most of people understand eCommerce business with this model only. This model offers a good profits and creates a branding for you as well.
Consumer to Consumer
This model comes in when you let one customer sell their products or services to another user. This model lets you work as a mediator who just coordinate between users. It is one of the safest business model where you are required to put very limited resources as most of your tasks are accomplished by your shoppers themselves.
Consumer to Business
This model is one of the most innovative business model where businesses do not sell anything to consumers but consumers sell their stuff to businesses.
There are many other business models as well including B2G (business to Government) but they are less common and less fruitful too.
What you are going to Sell?
As we have studied major business models, now we will have some glimpses of how to set your business model and by choosing what to sell. There can be anything that a business person want to sell if they have meet all the requirements of those goods. As I said it can be anything, from a nail to a rocket but the only conditions is you will have to have it before you sale it.
Let’s differentiate products in 3 different categories and figure out how to put them in business models,
It is the least common niche among all. It is the best way to create credibility and to build good reputation in the market by selling your services online. It also fuels a good exposure for you but it also restrict you as providing services are done through a person and thus you will be depending upon that person’s schedule and availability. These services can be consultations, content writing or content designing, web designing and developing, and all the other acts where you need to host a task and assign to someone else.
Selling physical products are the most famous sort of goods that are sold online but it bears a many components that are quite difficult to handle like manufacturing, shipping, storages, returns, breakages and insurances. Selling physical product is the most utilized and most common range that is dealt by majority of eCommerce site. These physical products can also be categorize further into subcategories on the basis of their utility and services.
Providing digital products bears advantages and disadvantages also, but the benefits are great with this. It is also very popular niche among the online offerings. The best thing about digital products is that they do not ask for any manufacturing, warehouse or storage or any physical delivery unlike physical products. Digital products can be music, videos or movies, ebooks, images software and the stuff that is digital and can not be received physical. Its disadvantage is the threat of piracy that it comes with. As one copy can be sold limitless times so it also provide cost free margins with some small maintenance charges. It also release you from the responsibilities of shipping and inventory.
How are you going to Deliver?
How you are going to get products can creates a lot of difference on your business models. We will have to distinguish manufacturing of your products on the basis of its manufacturing and how you are going to get your offerings before you sale it. It can be differentiated in 4 different ways to decide how your customers can acquire your products.
It’s very time taking and also needs a lot of scalability. Generally it is mostly preferred by hobbyists and people who are expertized in making of any products. Hand making of products provides full control on quality and design of products but it also restrict your production limit.
While you manufacture your product range, your pricing would be composed by costing of raw material, warehouse or storage charges and labor as well. One of the core short back of this is your compulsion to your product range which will be confined to your skills and your available resources.
Apart from making your products with hands there is another way of manufacturing, where you can find some manufacturers who can produce your inventory. There is a wide market of manufacturers located at your place as well as overseas too. Producing your products domestically will be convenient for you but producing your products overseas will be convenient for your pocket, especially in countries like India, China, Indonesia and Taiwan.
It is one of the most simple and successful way of acquiring your product range. All you are supposed to do is to fix a wholesale rate which must be fair minded lower than your selling price and then just buy someone else’s product and earn your margins. Wholesale allows you to work on low risk as you are not needed to take the charge of manufacturing and it also make you limitless. You can sell anything you want, all you have to do is to find right suppliers and fix the perfect rates. It saves a lot of your time and energy that you were supposed to put on manufacturing. This thing ease you in maintaining your warehouses and storages smoothly.
Drop shipping is the most risk free and the easiest model of eCommerce business but it also makes you dependent on your merchants and vendors. In this model you just need to find merchants and set your margins with them. Afterwards you are just supposed to forward your orders along with the shipping details to your vendors, they will complete the shipping process. Though it is very hassle free, yet it drops all the responsibilities on you and delivers very low margins. This model also make you free from storage and manufacturing hassles.
How to win the race?
You are not the only one running in this race, there are numbers of people running along with you in this competition. So it is necessary to make a strategy and plan how you are going to complete with your competition. To figure out this thing we will have a sight on some of the important aspect that can make you advance in this head to head. These aspects are,
Contending on the basis of low prices is not a good idea at all because there are other eCommerce heavyweights who can buy ultra large quantity and sell it on the very low rates but it would not be possible for you to do this. For example at very certain events Walmart face even losses by dealing on selling prices that below than their buying price, to kill the competition and capture the market.
You can beat the best if you provide the best. By providing best quality products, you can get advanced in competition and boost your sales. It will also create a brand value for you and you will also be able to sustain longer in the market.
Your store can be a preferred pick if you provide a wide range to your visitors to pick. You don’t have to overload them with too much of choices but you can classify your range and present them with filters. Though it put a big burden of maintaining a large storage and massive manufacturing, but drop shipping can be the way to help you.
It is among the most innovative way to add a star in your reputation. By providing different kind of added services, you score a good relationship with customer, credibility, up selling and many other benefits. It separates you from the market with a different image. Your added on services can go beyond guides, manuals, and descriptive acts, you can also try to deliver further added services.
If you have a good supporting system and all the available resources that can drives a good service providing mechanism then it can help you very efficiently. Though as a small business it is difficult to build such a big system but it creates a direct impact on your business.
This is it for this chapter and our session on your business model. In all the above provided section, we have covered all the information that you should have about deciding your business model including its components as well. In our next chapter we will study next two part that are Market Analysis and Marketing & Sales. You can contact our eCommerce consultants, if you have question about this chapter of eCommerce business planning, its introduction and basics, you can access to them right form here. Please read