You have a number of options when you establish an internet business. What business strategy to pursue is one of your major considerations, aside from the product you decide to offer.

We’ll provide a high-level summary of the eight key options in this post so you may make the best choices possible at the outset of your firm.

Understanding each of these approaches is crucial if you want to pick the best one for your small business. Each approach has advantages and disadvantages, and one may be better for you and your company than the others based on your product, market, and cost structure.

Discover the right business model for you 

What is a business model?

• Common business model types
• Top business model examples
• Finding a successful business model
• Business model FAQ

What is a business model?

The phrase “business model” refers to a company’s fundamental strategy for making a profit and offering customers value. The characteristics of a strong business model describe the pricing strategy and customer value proposition. It pinpoints the goods and services a business provides, its target clientele, and foreseeable costs.

Both new and established businesses need strong business models. By spotting growth prospects, they assist businesses in understanding their clients, retaining personnel, luring investors, and supplying a lasting competitive advantage.

Consider your company’s business strategy as a living asset. It’s wise to update it frequently to stay on top of emerging trends and potential difficulties. Active business model innovation demonstrates to stakeholders your capacity for adaptation and ability to address shifting market demands if you intend to acquire financing or partner with someone.

Common ecommerce business model types

The majority of business-to-consumer transactions fall under one of four categories of ecommerce business models.

Business to consumer (B2C)

Commerce between a company and a single consumer is referred to as “business-to-consumer” (B2C) business. For instance, when you purchase a shirt from an internet retailer. This comprises traditional brick-and-mortar businesses, but it has also evolved to mean online shopping, sometimes known as etailing.

Business to business (B2B)

Any trade between two businesses is referred to as business-to-business (B2B). Suppose a SaaS provider offers software to another business. Compared to businesses that sell at the retail level, wholesale retailers often fall under this category.

As a retailer, brands can also incorporate business-to-business goods. For instance, a coffee firm may sell its beans both in bulk and to coffee shops in addition to consumers on its website (B2C) (B2B).

Consumer to consumer (C2C)

A customer selling a good or service to another consumer is known as a consumer-to-consumer business model. As in the case of selling a pre-owned laptop on Facebook Marketplace. Individual sellers frequently start out on online marketplaces, then launch an online store to establish a name and increase sales.

Consumer to business (C2B)

The growth of the creator economy stimulated the development of consumer-to-business (C2B) businesses. When a consumer sells their own goods or services to a company or organisation, that business model is being used. This kind of business plan is what you would employ if you wanted to start an online photography business or become an influencer.

Top ecommerce business model examples

Different production and transportation processes are used in various business types. Let’s examine a few distinctive e-commerce company models that you might apply to launch your enterprise.

• Dropshipping
• Makers
• Manufacturing
• Wholesale
• Print-on-demand
• Digital products
• Direct to consumer
• Subscription

Drop shipping 

The most affordable approach to launch a new business is by far dropshipping. It draws those who seek to minimise startup costs and give less thought to profitability. A wonderful business concept for someone who doesn’t want to hold and manage inventory is dropshipping.

Pros

• Low cost to start.The low initial cost of dropshipping is its greatest benefit. You never have inventory costs since you never carry goods, which is typically the biggest expense for a new ecommerce business.

• Low risk. Since you don’t actually purchase your inventory upfront, you aren’t taking the risk of holding items you can’t sell.

• Streamline sales.Dropshipping vendors will handle the choosing, packing, and shipping of your goods on your behalf. With the convenience and effectiveness of dropshipping, you can run your company from anywhere in the world.

Cons

• High competition.Dropshipping has such low entrance requirements that you can bet that many individuals are using it. The competition is fierce, and it can be challenging to stand out from the throng.

• Low margins.Due to low margins, it is challenging to compete with paid advertising space, thus you will need to focus more on developing content, services, etc. Low margins also indicate that you need to sell a lot of product to generate a respectable profit.

• Inventory syncing (back orders).You can encounter a situation where you send a shipping request to the wholesaler but the item is sold out since you are dependent on someone else’s inventory. This out-of-the-ordinary delivery delay may reflect poorly on the retailer.

The difference between the price the buyer pays and the cost the dropshipper charges you is your profit. Typically, dropshipping has low profit margins of 20% or less.

Because you never have to worry about purchasing inventory in advance or transporting goods, dropshipping has low risk in terms of potential financial loss. High levels of competition and extremely thin margins present additional danger. Slim margins make it necessary to move many units to get a respectable profit.

A drop-shipping success story

A popular dropshipping company on Shopify, Subtle Asian Treats sells adorable plush toys and cases for iPhones and AirPods. To capitalise on the bubble tea craze currently sweeping Asia, young Malaysian entrepreneur Tze Hing Chan established it.

giving customers a distinctive range of goods at reasonable prices. In order to distribute user-generated material and cater to clients of any financial means, it has also done a fantastic job of raising awareness on social media. By providing free bubble tea, the company drew thousands of local bubble tea lovers.

Makers

Making your own product is a popular strategy among enthusiasts. Making new things yourself gives you precise control over quality and your brand but comes at the expense of constraints, time, and scalability, whether it be jewellery, clothing, or natural beauty products.

The purchase of raw materials, the storage of inventory, and labour are the main expenses related to producing your own goods. The most crucial point to make in this instance is that not all goods can be manufactured by hand. Your product options are constrained by your abilities and resources.

This choice is for those who prefer to handle things themselves, have the resources available, can physically make the goods, and have original ideas. Making your own items is also an option for those who wish to have full control over the brand and product quality while aiming to minimise beginning inventory expenditures.

Pros

• Low startup costs.When you manufacture your own goods, you typically don’t need to generate a sizable quantity of units in advance to have on hand, as you would need to if you had your goods manufactured. As a result, you can benefit from having relatively low production costs, which account for the majority of the initial costs for many ecommerce enterprises.

• Brand control. Making your own product means you can create any brand you wish with no limitations.

• Price control. Going hand in hand with brand control is the ability to price your products as you see fit.

• Quality control. Making your own items gives you complete control over the quality, ensuring they meet both your and your clients’ demands.

• Agility. Making your own products can give your company the highest level of flexibility because you can quickly change the product’s quality, functionality, or even its entire design.

Cons

• Time consuming.Making your own items can take a lot of time, depending on the specific product you choose, leaving you with less time to concentrate on growing your business.

• Scalability.When your firm grows, manufacturing your items may become a problem. Although you have the choice to seek to a manufacturer for assistance as you scale up, if your clients have grown accustomed to expecting your products to be handmade, this might not be simple or even practical.

• Limited product choices.As was previously noted, the prospective items you can choose from depend on your skill level and the resources at your disposal. From person to person, this will differ.

A maker success story

Family-run Old World Kitchen started off by doing door-to-door sales in its neighbourhood. During its expansion, using Etsy was the wisest choice for moving the company online.

The company, which makes handcrafted kitchen items, wanted to grow even more, but to do so, it needed complete control over pricing, branding, and quality control—things that Etsy couldn’t provide.

Online conversions for the brand significantly increased after switching from Etsy to Shopify. While maintaining its commitment to offering products manufactured by hand, it was also able to partner with appropriate companies and raise its prices.

Manufacturing

Making your own products is advantageous for individuals who have original ideas or creative variations on existing ideas. It’s also for folks who are quite convinced that their product will sell and who have verified the market for it. This is crucial since manufacturing will demand the biggest upfront financial commitment.

You can look at manufacturing through two lenses: private label and white label. 

A manufacturer develops and markets a private label product under the brand of their company. Everything about the product, including the ingredients, packaging, and label design, is under the company’s control. The ideal option for companies looking to develop original items is private label.

One producer creates a white label product, which is then distributed to multiple merchants under their own brand names. They are generic goods that you can market to a variety of clientele.

Pros

• Lowest cost per unit. Manufacturing frequently achieves the lowest cost per unit, providing you the highest margins for your product.

• Brand control.Having your product made frees you from restrictions so you may create your own brand around it.

• Price control. Being able to build your own brand goes hand in hand with being able to set your own prices for your goods.Being able to build your own brand goes hain hand with being able to set your own prices for your goods.

• Quality control.Manufacturing your own goods gives you more control over the finished product’s quality tnd han dropshipping or buying in bulk.

Cons

• Minimum order quantities. Initial orders may involve significant launch expenses. Your inventory investment may easily be in the hundreds or tens of thousands of dollars, depending on the manufacturer’s charges and the costs of your goods.

• Trouble with manufacturers. Nothing will bring your business to a halt like being scammed by an overseas manufacturer.

• Time to get up and running. Prototyping, sampling, fine-tuning, and production can all take a while in the manufacturing process. If you intend to use a manufacturer in another country, the difficulties of this procedure may be increased, if not prolonged, due to potential linguistic, geographic, and cultural hurdles.

Based on the specific product, the manufacturer, and the order number, your margins can vary significantly when you make your goods. However, making your own goods typically offers you the highest margin potential compared to other strategies, such as buying in bulk and dropshipping.

Wholesale

Purchase of goods If you want to launch rapidly or sell a range of goods and brands, buying wholesale is a fantastic alternative. Since there are numerous products that may be purchased at wholesale prices, wholesaling offers a variety of alternatives.

Pros

• Selling established products.Purchasing in bulk usually entails less risk. Dealing with established brands eliminates the possibility of wasting time and resources creating a product that no one will buy.

• Brand familiarity. Selling well-known brands helps promote your company by encircling your own brand with positive associations.

Cons

• Product differentiation.Selling things that have already achieved success can be advantageous or detrimental. You’ll have to work extra hard to stand out from the competition and persuade potential clients to buy from you because the products are sold by a variety of shops.

• Price control.You must somewhat follow their guidelines if you sell other brands. To prevent you from offering discounts on their items, some brands will impose price limits.

• Inventory management.There probably will be a minimum order for each product when buying wholesale. The minimum order will vary by product and manufacturer, but you will need to manage inventory for reorders as well as stock and hold inventory.

• Dealing with supply partners.Dealing with many supplier partners might be challenging to handle if you carry a variety of products. The requirements may change from one supplier to the next.

Although we’ll discuss dropshipping later, the margins for wholesale are often good compared to that of manufacturing. A secure middle ground between manufacturing and dropshipping can be wholesale. Although every situation is different, it’s common to see a 50% margin on wholesale goods that are resold at retail prices.

Purchasing in bulk still involves risk. Purchasing inventory for wholesale will be necessary, but there is no assurance that you can see it. Finding a way to set oneself apart from the numerous other stores offering the same things poses maybe the biggest danger.

A wholesale success story

BLK & Bold was established by Pernell Cezar Jr. and Rod Johnson with the intention of using the sale of coffee to benefit regional communities. The business has promised to donate 5% of all proceeds to initiatives that support youth programming, advance workforce development, and end youth homelessness.

To increase sales, BLK & Bold uses direct-to-consumer and wholesale channels. Coffee shops, restaurants, offices, co-working spaces, and lodging establishments like boutique hotels, Airbnbs, and traditional bed and breakfasts make up the majority of its wholesale partners.

Partners can ask for a customised coffee and tea experience for their clients and provide a variety of in-house roasted blends, organic specialty coffees, and seasonal teas.

To increase sales, BLK & Bold uses direct-to-consumer and wholesale channels. Coffee shops, restaurants, offices, co-working spaces, and lodging establishments like boutique hotels, Airbnbs, and traditional bed and breakfasts make up the majority of its wholesale partners.

Partners can ask for a customised coffee and tea experience for their clients and provide a variety of in-house roasted blends, organic specialty coffees, and seasonal teas.

Print on demand 

Print on demand is a means to market custom products with your designs on them. You merely create the design, and a third-party printing business manufactures, packages, and ships the order when a consumer orders a product with the design.

This business concept lowers the barrier to entry for selling online, much to dropshipping. There isn’t much of an initial cost because you don’t have to pay for a product until you make a sale. This frees up money that you can use for your advertising and marketing campaigns.

When using print on demand, everything from printing to packing to shipping is handled by your printing partner.

Pros

• Create products quickly. Once you create the design, you can make the product and sell it in your online store in minutes.

• Automated shipping.Your supplier manages fulfilment and shipping. Only exceptional customer service is your responsibility after the sale has been made.

• Lower cost upfront.It’s simple to add and delete products, test new business ideas, and develop products for specialised markets because you don’t retain any inventory.

Cons

• Less control over shipping. As shipping charges frequently range for various products, they can become confusing. Additionally, if you want to design a unique unboxing experience, your alternatives can be limited.

• Limited customization. Depending on the vendor and the item, you can customise several things. When choosing which products to customise, consider base costs, printing methods, and available sizes.

Print on demand is also a great business model for creatives because the offerings are endless. You can sell products like:

• Duffle bags
• Yoga leggings
• Face masks
• Watch bands
• Canvas prints and posters
• Throw pillows
• Blankets

Depending on your pricing strategy and customer acquisition costs, on-demand products often have lower profit margins. But for individuals who are new to e-commerce or who want to test out new revenue sources for their current business, it’s a good low-risk business strategy.

A print on demand success story

Passionfruit’s founder, Liz Bertrelli, had a strong desire for a French bulldog. She made it a point to get one in 2013 if she could earn an extra $5,000.Passionfruit’s founder, Liz Bertrelli, had a strong desire for a French bulldog. She made it a point to get one in 2013 if she could earn an extra $5,000.

She launched Passionfruit, an online print-on-demand t-shirt business, despite working a full-time job at the time to achieve her objective rapidly.

Fortunately, Liz accomplished her objective in a short period of time. Her LGBTQ+ apparel brand and online store are still operating eight years, one dog, and a complete makeover later. And after appearing on Saturday Night Live, sales of her “Protect Trans Kids” t-shirts skyrocketed.

Digital products

A nonphysical asset or media type is referred to as a “digital product” if it can be sold and distributed frequently online without needing to replenish inventory. These items frequently take the form of digital files that may be downloaded, streamed, or transferred, like MP3s, PDFs, NFTs, movies, plug-ins, and templates.

Although the initial costs of making a digital product can be significant, their variable costs are typically minimal. Once an asset is created, providing it to clients is incredibly affordable.

Pros

• Lower overhead costs.You don’t hold any inventory or run up any shipping charges.]

• Scalability.Instantaneous order delivery enables you to delegate fulfilment. You may quickly automate operations as your firm expands to save time.

• Extensive product offerings.You have a few options: a freemium model where you offer things for free with the option to upgrade, a monthly fee for access to premium material, or licensing to use your digital products. You can either create a company completely focused on digital goods or add them to one you already run.

• Good future outlook.With e-learning, a market that is anticipated to be valued $374 billion by 2026, you have a tremendous chance to expand your business and effect.

Cons

• High competition.Your digital items’ equivalents may be available for free. To succeed, you must take into account the niche you intend to serve, offer top-notch goods, and understand how to develop your brand. Making a SWOT analysis of your rivals can help you uncover a competitive advantage.

• Piracy and theft. You’re at risk of people stealing and reusing your products as their own. 

• Selling restrictions. For instance, Facebook and Instagram’s commerce policies restrict you from selling anything other than actual goods through those platforms.

A digital product firm doesn’t require a big upfront investment because your income isn’t reliant on owning physical assets. Additionally, it implies that you can set rates cheaper than your actual rivals. Additionally, there are no ongoing expenses for goods and services, so the majority of the profits are yours to keep.

Direct to consumer (DTC)

Without the use of wholesalers, middlemen, or independent retailers like Amazon, the direct-to-consumer business strategy is selling goods to customers directly. It’s a brand-new business strategy that is taking off as the multichannel retailing model falters.

Consider some of the newest, most popular brands: Warby Parker, Barkbox, Bonobos, and Casper. What do all of them share? A DTC business model. Even well-known companies like Apple and Tesla are using mobile commerce as their major DTC sales channel.

These brands make it simpler for people to shop by taking the pain out of researching and narrowing their options among hundreds of competing brands.

Pros

• Own the customer relationship.One becomes a customer of Nordstrom, not Canada Goose, when they purchase a Canada Goose jacket from a store like Nordstrom. The company is unable to interact with these clients, send them emails with updates, or manage the connection in any way. You may own more relationships and boost client lifetime value by selling directly.

• Collect customer data. Selling directly enables you to gather first-party information that you may use to tailor client communications and interactions.

• Higher profits. You don’t have to share profits with any third-party distributors.

• Get feedback faster.You can quickly gather feedback to enhance your products and customer experience because you can communicate with customers directly.

Cons

• Costs of direct distribution.No shipping or storage expenses are split. To get their business up and running, DTC enterprises must make larger upfront investments.
• No built-in audience. Working with stores has the benefit of making it simpler for people to find your products. You will need to sell yourself if you are a new brand. Additionally, you don’t gain from the distributor’s expertise or sales team.

You keep control of your items’ performance by interacting with your customers directly. Selling directly is a wise business strategy for establishing a devoted customer base and enhancing profitability over time, even though it may require time and money to develop dependable distribution networks.

A DTC success story

“Made in Italy” and handcrafted leather shoes go hand in hand. Because the market is swamped with distributors, agents, resellers, and retailers, consumers who wear this sort of footwear have historically accepted its high price tag.

It wasn’t until Velasca, a Milanese footwear company, entered the market in 2013 with the intention of upending the sector by putting customers in direct contact with shoemakers.

Co-founders Enrico Casati and Jacopo Sebastio had a casual talk in the back of a cab that led to the creation of Velasca. Since then, it has developed into a thriving DTC brand that now sells hundreds of thousands of shoes in over 30 nations.

Subscription

By 2025, it is anticipated that the subscription ecommerce market would be worth $473 billion. Customers pay a recurring fee—typically monthly or yearly—to access a product or service under a subscription business model. Businesses can benefit from continued client interactions with the aid of subscription models. They will continue to pay you if they still think your offer is worthwhile.

It doesn’t matter if you’re an ecommerce business or online educator, you can start a subscription business across many industries, including:

• Streaming services
• Monthly subscription boxes
• Membership communities
• Food services

Higher revenues and better client connections might result from using a recurring revenue model. Through a subscription membership, the more valuable your product or service is to customers the longer they use it.

Pros

• Predictable revenue.You can anticipate sales, plan inventory, and determine how much to reinvest for business growth with the aid of monthly recurring revenue.

• More cash on hand. Receiving monthly payments upfront means more cash flow (and piece of mind) for your startup.

• Loyal customers.Regular purchases provide you a better understanding of consumer behaviour, allowing you to develop your products over time and draw customers back for more.

• Easier cross-selling and upselling opportunities. Customers will develop more trust in you when they use your products more frequently. Due to the fact that they are already aware of your value to them, selling them additional things is made simpler.

Cons

• High risk of churn.Churn is a disadvantage of the subscription business model. For consumers to continue paying you, you must maintain their attention and engagement.

• Varied products.If products don’t vary frequently, they get boring. Every month, Netflix adds and deletes movies. Trunk Club guarantees to put money into your evolving fashion tastes over time. To keep a subscription business running, you must keep your offerings fresh.

• Small issues, big problems. The majority of subscription businesses offer the same product to their consumers on the same day each month. Even while it looks straightforward, if your system has even a minor flaw, it can quickly escalate into a major issue if you don’t plan for it.

A subscription success story

Different types of subscription businesses exist. B2C ecommerce merchants can incorporate a subscription model into their product range, much as the well-known online sock retailer John’s Crazy Socks. Since its debut in 2016, the company, founded by 22-year-old John Cronin, has expanded into a multimillion dollar enterprise.

The company’s creator, John, chooses his favourite pair of premium socks for members of the Sock of the Month Club each month. John includes a thank-you message, candy, and discount coupons with every delivery. Additionally, 5% of every subscription is donated to the Special Olympics.

Finding a successful business model

The majority of goods will fit into one of these fundamental business models. You might not have the choice of selecting an ecommerce business strategy depending on your product or niche.

How you want to market your products will determine a lot of things. Naturally, some products will fit into particular categories. Your future company plan will be somewhat defined and shaped by the model you ultimately choose to sell under.

Use the various business models listed above as a springboard to establish a solid foundation. Then, keep coming up with innovative ways to give your consumers value. You’ll soon begin to experience the benefits of a sound business strategy firsthand, evade a number of frequent business blunders, and start your entrepreneurial journey in the right direction.