2020 is almost over and we’re getting ready to go into 2021 soon. Now more than ever, people are searching for ways to earn an additional income. In fact, you’ve arrived here probably because you want to start something on eCommerce and want to know which is the best eCommerce business model in 2021. I’ve compiled as much information in here as possible for you to make an informed decision.
Latest eCommerce Forecast
The COVID19 pandemic has impacted practically every industry’s in the world lowering most sales projections. eCommerce is certainly not excluded.
According to a forecast by eMarketer last year (2019 – before the COVID19 pandemic), they anticipated global retail to expand by 4.4% to $26.460 trillion in 2020. But, recently they have decreased their forecast by almost 12% down to $190.79 billion.
What does this mean? Is the eCommerce industry going to suffer like the other industries. Very unlikely. Let me explain.
Despite the overall global retail eCommerce sales projected to be slightly lower, most countries will still see strong eCommerce growth this year. So, which countries are these? The Philippines, Malaysia, Spain and 9 other countries are geared to see more than 20% growth in retail eCommerce sales this year.
Sales in China and the US greatly impact overall global sales metrics. China’s $2.090 trillion in eCommerce means that Asia-Pacific will produce 62.6% of all digital sales ($2.448 trillion for the region overall).
So, with the forecast showing much positivity, newcomers into eCommerce or even dropshipping can be rest assured they are getting into a growth market and not a declining market.
Not too long ago, I published an article on how the shapewear is a good dropship niche market to work on. If you don’t have an idea for your dropshipping business, take a look at this article.
4 eCommerce Business Models
eCommerce encompasses all marketplaces that connect buyers and sellers. This is a fundamental significance regardless of which type of eCommerce business model you choose to focus on.
More importantly, when deciding which is the best eCommerce business model in 2021, you need to look from the perspective of whom you are targeting. Ask yourself, “who is your target market?” Whom are you planning to sell to? And why is this important? Because, if you choose the wrong business model for the wrong target market, you’re not going to see results.
For example, say your target market are single mothers who hang out in Facebook groups a lot. But instead of being active in Facebook groups, you use Google Ads instead to reach out to your target audience. What’s going to happen? You’re right! You’re not going to see results.
So, what are the four different types of ecommerce models? Let’s take a look.
1. Business To Business (B2B)
Basically, a business to business (B2B) ecommerce model is focused upon a business selling to another business.
Examples of B2B businesses that drive their primary revenue selling to other businesses would be software solutions companies, accounting and taxation companies, office furniture companies, photocopy machine companies, etc.
2. Business To Consumer (B2C)
The 2nd type of eCommerce model is a B2C (business to consumer) model.
If you look at the majority of the online businesses out there, you will realize most of them fall in this category of B2C. It simply means a business selling directly to consumers but instead of selling via traditional and conventional modes via retail, the business is conducted online via the Internet. Example of B2C businesses in Malaysia are companies like Mudah.my, Lelong.my, 11 Street Co.Ltd and Lazada.
Large B2C companies out of Malaysia would probably be companies like Staples, Wal-Mart, Gap and Amazon.
3. Consumer To Consumer (C2C)
The 3rd type of eCommerce model is known as a C2C or Consumer to Consumer model.
In a C2C model, consumers buy and sell with other consumers in a centralized environment. These online C2C websites actually allow consumers to buy, sell and trade items among on another in exchange the site takes a small fee or commission for each trade. They’re also at times called auction sites or gig sites. Examples of C2C business would probably be the likes of eBay, Zopa, Bukalapak or even Fiverr.
The site just acts as an intermediary connecting buyers and sellers and collecting a small percentage of fixed fee for each and every business transaction that happens on their platforms. Some even take it one step further to protect the consumers rights by introducing escrow services as a means of creating a trustful environment to do business.
4. Consumer To Business (C2B)
The 4th type of eCommerce business model would be a C2B model. This model is also not something many are exposed to but seems like the demand for this type of model is growing.
How this ecommerce business model works is the consumer sells goods or services directly to businesses. This could be the individual he or herself operating single-handed from home as a sole proprietor targetting larger business. Examples of businesses operating in this capacity would be companies like Upwork and Google AdSense.
Are there more than four eCommerce types?
Yes, it appears so. The four mentioned above are the most common retail ecommerce business models but they are not the only ones.
5. Business To Government (B2G)
Businesses that deal only with the governments fall in this category. Companies that are famous in the US are Synergetics Inc. in Ft. Collins, Colorado. They provides contractors and services for government agencies throughout the whole of USA.
So far, we’ve seen 5 different ecommerce business models.
Now, lets take a look at what are the 4 e commerce revenue models.
Four (4) eCommerce Revenue Models
There are many revenue streams in eCommerce but I’ll discuss about the 4 common ones which will benefit you as an individual entrepreneur.
One of the main concerns about running an eCommerce business has always been about not tying up too much capital in stock inventory. Small business owners and home-based entrepreneurs usually work on a tight business budget and cannot afford to have whatever little amount tied up in buying and keeping stock. So the four revenue models I’m going to share with you here takes this factor into account. [*hint – you’re going to love the last one 🙂
1. Private label
If you’re cash stripped and do not wish to build your own factory or warehouse, you might want to look into this model. As a private label business, you can produce products, plans or prototypes based on your customers specifications. You can send your idea to a manufacturer who will then create your customised product and some will even ship the product directly to your customers for you. This is sometimes also called on-demand manufacturing.
Pros: As soon you discover problems in the quality of the manufactured product, you can switch manufacturers or suppliers at any time.
Cons: The cost to do this is minimal as you don’t have to take up huge loans to build factories, but the manufacturer you’ll be outsourcing the production of your idea to will require you to place a minimum order, and this at times can hold you back especially if the product becomes outdated or the demand declines. You may end up getting stuck with the product.
If you want to give this model a shot, take a look at Sourcify.
2. White label
The white label model is probably quite the same as private label except that you don’t have to manufacture your idea or prototype. All you need to do is find a successful company that already is manufacturing and selling your desired product but also has a white label option in place. You just have to put your logo and sell the product. Usually you can find this model commonly in the health, beauty and wellness industries.
Pros: You save cost and do not have to build a manufacturing plant to produce your products.
Cons: The white label company will require you to place a minimum order, hence, you may end up sitting on a pile of non-moving products.
If you have a range of products and want to start with this model, check out BigCommerce. But be warned, that their pricing structure can become costly when you start generating a lot of sales.
With a subscription model, companies charge a fixed amount to deliver either products or services to consumers. We may already be accustomed to a subscription model when we look at companies like NetFlix, Maxis or Astro.
Companies dealing with a subscription model tend to be rather competitive and rely upon huge number of subscribed members to break even and make profits but then they already have several ranges of reliable and profitable products/ services, which subsequently allows them to incentivize consumers and encourage them to introduce their friends and family to get on board.
Pros: You can save huge costs and work with not only physical products but services as well.
Cons: Companies running on a subscription model usually tend to spend a lot in advertising.
This ones my favorite!
In a dropshipping model, you as the business owner will just need to tie up with the right supplier. For example, you plan to sell ‘fitbit watches’ and you have identified a supplier from China who is willing to dropship for you – of course he is also giving you a reasonable profit cut for each sale.
Next, you just have to get the order from your consumer (via your online store or marketplace store) and then send the order out with the payment to your supplier. Your profit is the difference between your suppliers price and the products price you sold to the customer. As long as you’ve paid your supplier the agreed amount for each product(s), your supplier handles everything else for you (ie. packing, shipping, labeling etc).
Pros: Practically anyone with an internet connection and a laptop can start a dropship business from home. The setup cost for this model is probably the lowest in the industry. There are literally thousands of suppliers who are willing to dropship for you. You just need to focus on promoting and marketing your dropship business via social media and other channels to drive traffic and sales.
Cons: Certain dropshipping niches can get a bit competitive and price wars do happen. If you’re solely depending on the sales of your products from marketplaces (ie. Lazada, Shoppe or Amazon), you may want to rethink your strategy.
Which eCommerce Type Is Most Successful?
I guess this is a question on every budding entrepreneur’s mind. Which is the most successful eCommerce business model to start?
Well, that depends. If you are someone who is having a huge budget and resources at hand, then I would strongly recommend the white label or private label model.
If you are cash stripped, you should go for the dropshipping model as you don’t have to worry about stock inventory, packaging, shipping etc. All you need is a laptop and an internet connection. You can start promoting your products in a marketplace very easily even though I would still encourage you to have your own branded dropship webstore, it is entirely your choice. You can start of with having a marketplace store and later upgrade to your own custom branded store.
Is It Hard To Start an eCommerce Business?
I’ve seen this question pop up quite a lot in groups and webinar sessions. And the answer is absolutely not!
It is actually very easy to start an e commerce business. It all depends on where your interest is. In which niche or topics you are keen. Next, you’ll need to figure out which eCommerce business model or type you want to work with. I believe I’ve provided sufficient info on this in this article. Pick a suitable one and start working on it.
Assuming you choose dropshipping, there are basically 2 routes you can take to make eCommerce a successful venture for yourself:-
I call this the “Do It Yourself” (DIY) route. As for many who are tech savvy and know how to use WordPress and WooCommerce, you can quickly get up and running on your own. In fact, if you’re OK with a monthly subscription based dropship model, you can try Shopify.
Whereas, for a complete newbie with zero IT background and business experience, you might want to consider the “We Do Everything For You” (WDEFY) route. (Actually I created this acronym :). In this route, you do not need any web design skills, online marketing or eCommerce skills. You just need to decide on your choice dropship business in-a-box package and we will handle everything else.
Once you place your order for your dropship business, within 15-18 days, we will hand over a fully functional eCommerce store packed with all the winning products from a reliable supplier (whom we have checked and vetted personally).
Remember, we don’t charge monthly fees and we’re giving you a Money-Back Guarantee too 😉
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