8 e-commerce business models

The world of e-commerce is vast and takes many different forms. Different companies have found different ways to approach it and find their place in the market.

This article is about one of the most fundamental types of strategy: what are sometimes called “revenue models”. These models outline the means by which companies generate profits and the types of associated costs, providing an overall perspective on how they operate.

Certainly, this is one of the most important decisions a company has to make, and it is necessary to know and carefully consider the different options. These are 8 strategies to know.

1. Direct to consumer

This is the easiest business model to describe, but perhaps the most complex to practice. The manufacturer sells directly to the public, thus also fulfilling the function of marketing the products. The shipment of orders is often left in the hands of a transport company.

What is gained in autonomy is offset by the greater need for investment and greater difficulty in specialization. The company has a wide variety of tasks and responsibilities under its control, from purchasing raw materials to public marketing and order management. Of course, the rewards are equally substantial.

2. Wholesalers

The wholesale market consists of the trade of products in large quantities between companies. This means there is less emphasis on marketing, since the items are not intended for the end consumer and these companies' activity does not depend on their promotion to the public.

On the other hand, it is also true that their reputation becomes dependent on third parties: the only contact the public has with the brand is through intermediaries.

3. Subscriptions

A subscription is a form of agreement between a company and a customer that involves a transaction that occurs regularly or as routine. It can involve physical products (for example, grocery deliveries that we want to order every week or month) or non-physical products (as when we subscribe to an online magazine or newspaper). The seller charges a periodic fee and provides the product at the agreed frequency.

This allows the company to have regular sources of revenue and build a solid, long-term relationship with a customer base. From the consumer's point of view, it can represent a good opportunity (if a good price or other form of promotion is offered with the subscription) and one less task to worry about for the month.

4. Affiliate marketing

This is often an additional source of revenue for online sales companies, and the most typical source of income for content creators, such as bloggers. Affiliate marketing is the promotion of a company in someone else's virtual space in exchange for compensation. Often, the compensation only happens based on a certain result (such as the number of times site visitors click on a link).

This is currently an important form of marketing, allowing many companies to increase their recognition among the public.

5. Freemium

The term freemium is a combination of “free” and “premium”. In this model, the seller offers a “free” – free of charge – version of a product or service, with the option to move to a superior version for a fee. The main advantage is that the potential customer becomes familiar with the product, gains trust in the company, and becomes more inclined to buy the final version. This form of business requires finding the right balance between a sufficiently attractive free product and a paid version that justifies the additional value.

6. Dropshipping

In the dropshipping model, the seller does not need to worry about production, inventory, or shipping, serving only as an intermediary. When the order is placed, it is communicated to the manufacturing company, which handles sending the item to the customer. The seller is responsible for details such as prices, images, and descriptions of the items on the website, as well as receiving the orders.

This model is obviously very simple to implement, since it requires much less effort and investment on the company's part.

7. White Label

In this approach, the seller orders the products from the manufacturer, but changes their brand and packaging to sell them as their own. This may be the right option for those interested in the marketing and promotion side of the brand, but who prefer not to get involved in manufacturing.

8. Private Label

Here, the selling company contracts another company to manufacture the product, following instructions regarding all the details: the creation of the product itself, the packaging, etc.

InPost: the right approach to order delivery

All these models have one thing in common: the centrality of the order delivery process. This is a fundamental factor for customer satisfaction in all types of e-commerce.

InPost represents the most efficient, convenient and sustainable way to approach last-mile logistics: non-home delivery. Visit our website to discover all the advantages that the InPost service can bring you.