electronic commerce is generically defined as the set of commercial transactions carried out via the Internet. However, this definition is reductive since e-commerce does not end in the simple transaction, but can also embrace other phases and aspects of the negotiating relationship between the producer (offer) and consumer (demand). E-commerce, therefore, also concerns all commercial relations, created through the use of computers and telematic networks, which are aimed at exchanging information directly related to the sale of goods and services.
Four Traditional Types of Ecommerce Business Models
This business model allows the user to purchase and then possibly subscribe, generally monthly or yearly, to a product or service. When the contract expires, the user decides whether to renew it or not.
In recent years we have witnessed a growth in this type of eCommerce, born above all for publishing, software and digital products, but also cleared through customs in the world of physical products, such as Boldking for razors and Huel for food, where the decisive factor is convenience as the customer receives a supply of selected products at regular intervals.
Often subscription discovery boxes are sold, which are nothing more than boxes delivered to the subscriber’s home containing various products chosen at the seller’s discretion.
In this way, the seller is concerned exclusively with the marketing of the products, without the related tasks related to the production, packaging and shipping processes which are, instead, the responsibility of the supplier.
The seller, once the transaction has been made, will send the order to the supplier (dropshipper), who will ship the product directly to the buyer.
The eCommerce platform, therefore, only has the purpose of processing the payment and acting as a bridge between the customer and the supplier, transmitting the purchase order to the latter.
There are no manufacturing, warehouse, shipping, and packaging costs in this model. However, the actual payoff may be low as suppliers often impose sales prices that limit offers and discounts.
Furthermore, having no control over shipments, should there be a delay or misunderstanding on the part of the supplier, adequate customer assistance must be provided.
Although a large initial investment is not required in terms of purchasing the goods, both economic and time investments must be made for marketing, promotion, and above all for finding the right suppliers.
This business model can be indicated both in the startup phase and when you want to start marketing products not yet present in the target market, using a supplier from another country as a drop shipper. In the latter case, it is good to check the international regulations on the import of goods.
Wholesalers are those companies that purchase large quantities of products from different suppliers and then resell them at a lower price than the market price.
An example of this business model is undoubtedly Alibaba, the Chinese eCommerce giant.
As can be easily understood, this model, unlike the previous one, requires both huge investments for the supply and management of the warehouse and for the management of orders and shipments.
At the base of this type of eCommerce, there are the volumes of purchase and consequently of sales. Therefore, if you intend to use this strategy, promoting your products on multiple platforms such as eBay, Amazon and Google become essential.
- White label
Widely used in many sectors, the white label model requires the supplier to produce the goods, and those who sell it personalize it with their own brand and packaging.
Several influencers have recently used this strategy to sell white-label products through their accounts.
The critical factor in this business model is demand. Many manufacturing companies, in fact, require a minimum order to proceed with production. If the sales of the product were to be low, the goods would remain in stock.