The E-commerce business probability factors consist of a type of product, product price, gross profit margin, customer base, marketing budget, etc.
The three main business models of E-commerce are brand website, the marketplace, and social selling.
Is it best to create your own website or sell it on Amazon? And what about Facebook, how do people sell their products on it? You need to understand that every business model is not profitable in all situations.
The profitability of your E-commerce depends on these factors.
Key Note #1: E-Commerce Business Probability Factors
- Type of Product: What type is your product? Take in to account its:
Durability: Will it break or stay intact if it’s couriered?
Size: Is it big or small?
- Product Price
- Gross Profit Margin
- Customer Base: Where does your customer shop? Is your customer from:
Reach: How will you reach these persons?
- Marketing Budget
- Team Size
Taking into consideration all these factors, you must understand which business model you should choose.
Key Note #2: E-commerce Business Models
Let’s take 3 examples in this video.
- The first is Ramesh, who is a distributor of branded shoes. He has a lot of variety of shoes. The margins are less and he does not have helpers. He does not have a marketing budget as well.
- The second is Anil, who is a shoe manufacturer from Agra. He makes formal shoes and has between 10-15 designs. He has full margins and has a lot of marketing budget. He has lots of helpers who understand how to use the E-Commerce business.
- The third is Sunita, who is a housewife and works on her small handmade jewelry. She works on orders, but her stock is usually not ready. She does not have a helper and does not have a marketing budget as well. However, she does have a full variety.
Now, let’s understand the 3 main business models of E-commerce:
- Brand Website: This is like your digital shop. For now, we will call this ApniDigitalDukaan.com. You own this website and you have to manage it.
Marketing — Self: This means that you have to do all the marketing on your own. You have to reach the customer by any methods.
Build Technology — Self: You have the build the technology on your own.
Logistics — Self: You have to do the logistics on your own. This means that you have to choose and manage logistics.
Payment Management — Self: You have to take care of all the accounts and any other payments.
Ultimately, this is your own Digital Dukaan and everything has to be done by you.
Build Team — Self: To run this, you also need lots of other people.
- Marketplace: Now, let’s talk about the marketplace model. This can include Amazon.in, Flipkart.com, Snapdeal, Nykaa, etc. These marketplaces have made very big websites where they invite traders like Ramesh and Anil to do business and sales through their platform or website.
Instead of getting sales for you, they will take a small commission. Every website takes a different commission according to the different categories of products. Now, let’s see how these marketplaces work.
Website Management — Marketplace: They manage their own websites.
Customer Acquisition — Marketplace: They bring customers on their own.
Upload Your Product on Website — You
Product Delivery — You: When the order comes, you have to send it.
Payment Management — Marketplace: Through a fixed payment cycle, they transfer it to your account.
Return — Marketplace: If the customer wants to return the product, then also, it is the website’s responsibility. It isn’t yours.
You just get an easy model to follow and you don’t have to take care of all these other things.
- Social Selling: Some experts don’t consider this an E-Commerce channel as it is not a dedicated channel. Instead, these are social platforms where people come to socialize. However, these platforms are great opportunities and options for selling.
Let’s use the example of WhatsApp, Facebook, and Instagram. In these channels, you don’t need to create a website. But, their biggest negative point is that they are not dedicated to shopping sites.
On Facebook, you can create your own page. On Instagram, you can create an account. Through WhatsApp, you can chat with your customers and make a sale to them. In this model you have to:
Marketing — Self
Customer Management — Self
Logistics Management — Self
Returns — Self
In easy words, you have to manage everything on your own except for the platform or website.
Now, let’s come back to Ramesh, Anil, and Sunita.
For Ramesh, marketplace and social selling is an excellent model. This is because he has variety. He doesn’t require many resources. There is no risk and it takes minimum time to launch this because the technology is already ready.
On the other hand, Anil is a manufacturer, so he has a good margin, a good marketing budget, and lots of resources. Therefore, what will benefit him is his own brand website model or using the marketplace.
Now, it’s Sunita’s turn. She doesn’t have a marketing budget, neither does she have many resources or a big customer base. She is connected with her small friends’ circle on WhatsApp, so that is where she sells her goods or products by talking to the customer.
Similarly, you can evaluate your situation by looking at the above 7 points. Y