The Pros & Cons of Every Ecommerce Business Model

More and more of modern life is taking place online – and shopping is no exception. The internet has shaped the way we shop in the UK, with Nasdaq forecasting that 95% of all purchases will be facilitated by ecommerce by 2040.

That’s led to more and more ecommerce brands cropping up. The question is, how will yours stand out among the crowd in 2019? First things first, you need to decide which ecommerce business model works best for your goals.

There are several ecommerce business models out there, each with their own benefits. In this post, we’re going to be looking at some of the most popular ecommerce business models, helping you to decide which one works best for you.

Business to consumer brand (B2C)

A B2C ecommerce business model refers to a company which sells their own products directly to customers through online orders. A vast proportion of ecommerce businesses out there are B2C brands, with many also having brick and mortar stores.

Pros

There are a number of benefits of a B2C brand, the main one being the high level of control you are granted over your company. When selling your own products, companies have complete control over the whole brand experience. By selling directly to the customer, businesses can interact more with their consumers, increasing brand awareness and loyalty. The marketing freedom and removal of any middle man can also lead to a higher profit margin.

Cons

As B2C brands sell their own products, the initial start up costs can be high. Companies must commit to spending a lot of money upfront and may not see any returns on their initial investment for a while. In order to create a successful ecommerce brand, you must have the initial expertise, innovation and design. The competition is fierce for this ecommerce model, making it essential to stay on top of your game and avoid falling behind.

Ecommerce retailer

An ecommerce retailer refers to a company which sells products from a range of brands online. Typically, companies with this ecommerce business model will purchase products from wholesalers before reselling in on their platform. Retailers may also sell a mixture of their own products among those from other brands.

Pros

When following an ecommerce retailer business model, your company can reach wider audiences and make the most of the pre-established brand that they are carrying. If you’re a start-up ecommerce retailer and you manage to secure a well-known brand, for instance, you can establish yourself as a seller of those products and benefit from their loyal customers, who might then begin purchasing your other products.

Cons

Unlike B2C brands, an ecommerce retailer may not always have control over their online experience. When it comes to supply chain and inventory management, you are reliant on the preferences of the brand you’re carrying. If you sell out of a certain product and have a high demand for a restock, you are depending on the supplier having a supply of the specific product.

Smaller ecommerce retailers may also struggle with a consistent brand message. Every brand requires its own style and its own way of representing different products to stand out from the pack. This includes unique product photos with different backgrounds or colour schemes.

Another Awesome Article: The Latest eCommerce Trends

Subscription sites

A subscription ecommerce model refers to a company where customers pay a set recurring fee and receive products on a regular basis. This type of ecommerce business is on the rise, with the UK subscription box market expected to be valued at almost £1 billion by 2022.

Pros

By using a subscription eBusiness model, you can have a clearer insight into your monthly demand. It is easier to predict fulfilment, volume and demand each month, so brands can ensure they have enough stock for each of their subscribers. Due to automatic renewals, there is a steady cash flow and, typically, brands can increase customer loyalty.

Cons

With a subscription ecommerce model, customer acquisition can be more expensive and the number of returning customers is never guaranteed. New subscription sites may struggle to manage supply chain, especially if the business works with partner brands. It can also be difficult to grow a subscription business financially as the regular cost is set upfront and can be challenging to change to keep up with the market.

Dropshipping

A relatively new ecommerce model, dropshipping allows distributors, wholesales and manufacturers to ship products directly to customers, cutting out the need for a business to have an in-house inventory management system. So, rather than the manufacturer or distributor shipping the product to the brand for them to organise and send out, the product is simply sent straight to the consumer.

Pros

Using a dropshipping model allows brands to reduce their need for inventory management, saving time, effort and money. With environmental concerns growing, this model is attractive for activist consumers as the mileage of their product is drastically reduced. It can also be beneficial for start-ups, as you often do not need to commit to a set amount of stock and can drop products if they aren’t selling well or increase your stock if they’re in high demand.

Cons

That being said, in order to keep an eye on the stock and ensure the products are of the quality you desire, frequent trips to the manufacturer are required. You also have less control over the final product and so are dependent on the distributors packaging style to increase customer loyalty. Choosing a hands-on approach allows you to have more say in the final result but will require more manpower to monitor the process.

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