Finding an e-commerce model that suits you
Monday, April 13, 2015/
Maybe you’re looking to knock Amazon clear off its lofty pedestal or maybe you just want a tidy little online business that lets you work from home and run your own show. Whatever your ambition, many of the early e-commerce decisions you need to make will be the same.
These decisions may well be the difference between you thriving and nosediving. Here we’re going to take a look at the choices available to you as well as their relative strengths and weaknesses.
One of the very first things you need to work out is who your market is? Who wants what you’ve got and what’s the best way to get it to them?
If you choose to take the business-to-consumer (B2C) model, you are selling straight to the end user of your product. If you take this path you may reasonably expect higher margins per sale. However, you will likely have to take responsibility for all individual customers including shipping and you will probably have lower turnover than B2B. Advertising costs may be higher as the B2C market is harder to penetrate.
A business-to-business model (B2B) means you would be selling your products to other businesses, often in a wholesale capacity. You would be selling those products for less but you would be selling in higher volumes to fewer customers. A potential downside is that sales and payment cycles are longer and while you establish yourself you may experience a feast-or-famine scenario.
Which model you choose may very well be dependent on what you want to sell.
Digital products, on the one hand, are lower maintenance and don’t need storage or physical delivery. In many cases, like with e-books, images and software, they can be sold countless times without having to manage stock or shipping. The downside is that competition is strong and piracy in the digital game is rife.
From fashion to cars, computers, furniture, art and even houses, physical goods are the most commonly sold items online. But these goods have their challenges, not the least of which are storage, shipping, breakage, insurance and estimating consumer demand.
If you’re selling a service, doing so online can be an excellent way to build credibility, exposure and a profile. There are many consulting businesses ranging from web development and legal advice to writing and business consultation. The notable disadvantage here is that these services are manpower driven and limited to the number of hours a consultant can put in, which may mean hiring staff or freelancers.
So how do you buy the products you want to sell?
How you acquire your products may help guide you towards your final business model. Here are some of the most common ways you can do so.
Get crafty: Making products are great for hobbyists and designers. It means you can control quality to the finest detail but it can be slow or costly or both.
Manufacture: Having you products manufactured (particularly offshore) can dramatically reduce the cost of each unit but you can lose control of quality while also having to buy a lot more to make it worthwhile. Controlling IP is another costly and time-consuming consideration.
Wholesale: Relinquishing control of the creative process and buying through a manufacturer or supplier means you can save time and benefit from the reputation of established brands. But the product won’t be yours.
Dropship: This method means that you never own or handle the product. Instead you make sales on behalf of a supplier. The supplier handles and ships the product to your customer on behalf of your company. You make a profit on the price difference between what you charge and what your dropshipping partners charge you. It’s essentially a marketplace model.
How to be competitive
Finally, you will have to work out how you intend to compete in what can be a crowded marketplace.
These are the key platforms of competition upon which you can differentiate yourself and it is recommended that you do some research into this area to see what works for you:
- Price – you can be cheaper
- Quality – you can be better
- Selection – you can offer more choice
- Value adding – you engage more and educate
- Service – you can make it your priority
In the end it’s about finding the right model and right blend of elements that work with what you are trying to sell and what you need personally. Strong consideration has to be given to how much time you have, what kind of resources you have and what will be rewarding for you as a business person in the online space.
Nicole Kersh is the founder of $10 million company 4Cabling. Nicole has awards including AFR Young Women to Watch 2013, Eastern Region nominee 2013 Ernst & Young Entrepreneur Of The Year program and Deloitte ‘Technology Fast 500’ Asia Pacific Winner 2012. She recently sold 4Cabling and and now runs The Content Folk and consults in the area of e-commerce strategies.