The business models for startups in this cut across several eCommerce industries.
These models answer correctly the 4 WH questions of a successful eCommerce business.
- What is your business about? (Your Aim)
- Why are you doing this business? (Your Purpose)
- Who does your business serve? (Your Customers)
- How do you serve your customers? (Your Process)
My aim with this article is to show the best online business models available and how you can apply them to your eCommerce or SaaS startups.
What Are Online Business Models?
Ecommerce business models are methods by which a company can achieve sustainability while generating income.
Do you know how one-time successful companies suddenly became a failure? Did they lose their competitive advantage?
These companies had great products and wonderful services. What could be the problem?
The answer to these questions is simple.
They rejected innovations and strategies that would have helped their long-term sustainability.
If you were alive in the 70s, you will argue it is impossible for billions of the human population to converge in one place.
Facebook, Twitter, and other social networks made it happen.
Perhaps it was impossible to watch and talk with people in a different continent from yours.
Skype, Zoom, and other video calls software made it happen.
In today’s digital world, change in methods and medium has become of necessity.
Your chance of success for the next 10 years depends on your ability to maximize these business models.
Innovations of Business Models and Strategies
How the rise in the use of technology influences the creation of ecommerce business models and strategies.
1. Social Media
Research shows that people on average now spend one-third (8 hours) of their day on social networks.
Facebook on its own covers over 10% of the world’s population (over a billion users).
2. Free Contents
With a lot of websites, giving out free content, users want the entire internet to be free.
- Wikipedia with free information
- YouTube with free videos
- Facebook with free chats
3. Data Analytics
Access to data has helped a lot in business model innovations.
When you have access to millions of existing data, it’s easy to notice similarities in users’ usage.
Types of Online Business Models
1. Add-on Business Models
One of the best ecommerce business models for SaaS Startups.
In the add-on business model, you give the basic product or service at a lower price. And then offer extra add-ons for higher prices.
You end up making more money than you could have to sell the package as a complete whole.
Also, your customers will prefer it this way since they can choose the package they want without buying it all.
Have you been to the airport?
You will buy the ticket for a cheap price, but end up paying more for extra services like food, beverages, travel insurance, and luggage charges.
This type of online business model is perfect for eCommerce businesses where the core cannot do without the parts.
I offer my web design service at a cheap price and sell more on extra packages like SEO, content marketing, maintenance, and more.
Having an eCommerce website is not enough, you need my other services like SEO, marketing, and more.
My clients get to choose if they want my extras or settle with the basics.
If you want to go with this eCommerce business models, I advise you to focus your marketing on your basic offering.
2. Affiliate Online Business Models
A business model and strategies to sell more with less marketing.
To operate in this model, you give affiliates a unique link to track their sales.
You may choose to pay either by click or views (also known as impressions).
Supposing you sell many products, you can pay your affiliates by a percentage of the total products sold or by a fixed price irrespective of the number of products sold.
Google AdSense operates this eCommerce business model.
Companies pay Google to list their ads (banners, text, or videos) across its platforms.
Google then pays affiliates a certain percentage of the commission to place the ads on their blogs.
3. Auction Business Models
A business model where both the seller and the buyer win.
These are decentralized types of business models where no single buyer determines the price of a product.
The owner may start with an initial offering price, but the buyers end up deciding what price it will sell for.
When the price (war) is over, the highest bidder commits to buying the products.
The owner will most time sell the products faster than if he had used the fixed price method.
Also, the seller determines the minimum acceptable price for his product, so he doesn’t run at a loss.
For the buyer, it favours him because he doesn’t have to spend beyond what he can afford.
Auctions have been around for ages. In the old, they auction women off to their husbands.
The evolution of the internet made this eCommerce business model more promising and acceptable.
eBay today is the largest website operating this business model types, with over a billion transactions.
There is another reverse type of auction where the sellers bid rather than the buyers.
An example is when a traveler mentions the amount he has to pay for travel. Airline companies have to bid for this price to have the customers.
Also, you can use this online business model, if you run a service marketplace.
A user comes to your website and states the services he wants.
Service providers then bid for this service till the user picks one.
4. Rent Ecommerce Business Models
Best Internet business model for high-end products.
We are in a generation where people prefer access to assets. A time when people prefer usage to ownership.
This is an old business model where a customer rents a product or service for a certain period of time.
Buyers love this model because they don’t have to pay for the entire price of the products.
You can set up an eCommerce website where customers rent cars or tools and return at a particular time.
Airbnb is one company that has applied rent the online business model in the real estate industry.
And Uber used the same business model in the car industry.
What products or services can you put on an eCommerce website where people can come to rent instead of buying the whole?
Mostly the rent business model is best for products with high costs like building a house, owning a car, or a sophisticated machine.
5. Marketplace Business Model
Two-sided online business models where buyers meet with sellers.
This means the increasing number of one group (buyers) attracts the other group of sellers.
To excel in the marketplace business model, you must create a balance between the two groups of people using the website.
You make money from the marketplace by making it free for one and paid to the other.
Searchers use Google for free while advertisers pay to have their ads on the search engine.
The initial launch of a marketplace is always the hardest. Most sellers wouldn’t upload their products excepts there is a large buyer’s base.
Also, if you choose this business model, you should allow for the interaction between buyer and seller.
Examples of companies operating the marketplace online business model are Jumia, Amazon, eBay, and more.
6. Subscription Business Models
One of the untapped ecommerce business models
This is one of the business ideas in Nigeria that very few people know about.
Most of the internet business models of today monetize their platform with adverts.
They allow users to use the platform for free and then filled the site with ads. News websites are bad about this.
Subscription online business models work on the idea of selling a product or service to receive recurring revenue.
It allows a single customer to pay every month or year for a product or service until he or she cancels.
Founders of WhatsApp, Jan Koum and Brian Acton, built WhatsApp with a subscription online business model in mind with a charge of $1 per year.
$1 per year may mean nothing to you, as it seems like small money. But if you consider collecting $1 from over 500 million users, you will marvel.
7. Freemium Business Models
One of the best online business models of Web 2.0 and above
The Freemium business model is most common among businesses delivering services online.
The abundance of information on the internet has taught us there are alternatives to what we already have.
Free news blogging, free listing, free software, free tutorial, free music, and video.
So, people search the internet for hours to find products for a cheaper price or even for free.
We realize later that the difference in price does not worth the time spent in searching.
A freemium business model works by asking users to sign up on your website. In return, you offered them the basic version of your service.
The basics must not be too limited, else they walk away. And it must not be too complete that they see no need to upgrade. Balance is the key here.
Your duty is to persuade enough users of the free version to convert to the premium package.
Conclusion on Internet Business Models
As you adapt to these business models, make room for continuous innovations.
It’s possible you feel relaxed with your current business model since it is paying the bill.
I want to remind you, the companies who refuse changes yesterday are no longer existing today.
In one word, you need to innovate without changing the core principle of your business.
All that is good can be great. All that is best can be better. Making today better than yesterday is the new pursuit.
You can contact me when you need a digital marketing expert to help executes these online business models and strategies.