Electronic commerce, often penned as “eCommerce or E-Commerce”, is the trading in services or products using technological equipment “computer networks”, such as online social networks or the internet. This pulls on technologies such as mobile trading, supply chain management, electronic funds transfer, Internet marketing, electronic data shift, online transaction processing (commerce), inventory management system and automated data collection system. Recent electronic trading consistently uses the World Wide Web (www) for one part of its transaction, although it could also use e-mail as another technology.
At the point of starting an online business, you will have a list of choices to make even before preparing a Financial Model. These choices you make at the starting may end up being the most important aspect of the business as they will definitely define your business model and may also be the life blood of your business future.
Here, we will show you the major choices you need to make when starting your online business and the possible choices to make right from starting your business.
Now, let us check them out.
- Who is your target? Who are you planning to sell to?
There are millions of ecommerce stores with great differences. These differences is seen in their source of products, what types of products they produce or deals on, what type of collection and many more. Here let us take a brief look at the two types of electronic business you can operate while we drifts further to explain how they can be operated profitably.
Firstly, commonly called ‘B2B’ (Business-to-Business)
Business to business trading is the type of business model where one business either larger or smaller sells to another business. Here, it doesn’t matter which is smaller or larger but there is sale transaction between the two businesses. What I mean is the direction of business flow is not from smaller to larger or larger to smaller but the consideration is there is transaction between two businesses. There are both merits and demerits to this type of trading or trading with the final consumer.
Secondly, often we call this B2C (Business-to-Consumer).
Business-to-consumer simply means a direct sale to the final consumer that uses the product. This is the most prevalent type of business today and often when people talks about electronic trading; this is what they always talk about.
Also to be noted is that there are other business models what are less prevalent and one of these is B2G (Business to Government).
It should be noted as well that there are other business models that are less prevalent, also B2G (Business-to-Government).
- What type of product do you engage in production?
Having discussed the two types of online trading or business, we should go further to look at the variety of products you can sell online or electronically.
Physical (concrete) Goods
The first thing people think of when considering online trading is selling physical goods and this is the most prevalent of online ecommerce businesses. Yes, physical goods are the most prevalent product forms of item to trade, it also have a lot or host of challenges. These challenges include shipping, insurance, breakage and most importantly, storage.
Another products is Digital Goods
These are also prevalent products for trading just as the physical goods but have little advantages to physical goods. Here the storage or physical delivery of the physical products is not needed. Digital products could include anything like ebooks, music, image, software or videos. These products are a lot interesting but there is a great disadvantage. I know you can guess where I am pointing! Piracy. Piracy is the biggest disadvantage any ecommerce digital product could face. I also want you to know that however pirated a digital product could be, it stands a great chance of survival as these products can be sold and resold over a thousand if not million times.
Another product type to trade online is “services”.
Another product that can be traded online is services. Although this is less common but the world is taking its path. Online services can varies from content writing, content marketing, consulting, web development and design, and many others. This could be a great way of building integrity and gain a lot of exposure but this could have a limitation, ‘scalability’. The reason for this is services are consistently delivered by a person and this is just a sale of your time and its a limit.
- Now let us talk about product acquisition. How do you intend to acquire your products?
This should be known that the physical goods types even to an extent the digital goods could also be divided in different ways. One of the easiest way to do this is to divide them is by the method they are acquired. Your product can be acquired in four different ways and we will examine them.
Make your product.
For many people who finds engaging in their product as an hobby, this could be their common approach to get their products. Whatever be it, either fashion, beauty products, jewelry or what else, making your own products gives you control over the product quality and brand. Although this may come at a cost and that is “high time commitment and scalability”. The primary value in making your own products is the purchasing of raw materials needed; the storage of your records and your manual labor.
This is worthy of note here that not all your products can be made by just hands. If you must make your products yourself your limitations will be your available resources and your skills.
Manufacture your product
If your product goes beyond your making the choice you have next is to look for and pay a manufacturer to produce that product for you. Looking for a manufacturer may not only be done locally, it could also be internationally where you source a manufacturer from another country or location. Often as expected a local manufacturer may charge you for production than a manufacturer in another location would.
Buying your products ‘Wholesale’.
Acquiring products wholesale is somehow simple and a direct process. Here you buy your products direct from a middleman supplier or a manufacturer at a wholesale discounted rate and in turn you resell at a bit higher price. This process has lower risk associated when compared with manufacturing your own products. Reasons are these;
You are dealing on a brand that is already validated and established. You don’t need to take the risk of wasting your money and time producing your own products that may not be in demand.
You don’t need to purchase as such high quantity compared when manufacturing your own product and your chances of loss are slim.
Dropship as a process used here is simply selling products that actually do not belong to you. Engaging with dropship partners may not only be seen as a product acquisition model, it also include fulfillment of products.
Here you take orders from your ecommerce business and delivers them to your dropship partners or suppliers. These partners with the order convey the products to your customers in place of your company. The basic factor to making money in the dropship process is the price difference between what you charge the company and what the dropship partners charge you. This difference is your profit. You must be a good negotiator.
- Another thing is, how do you want to Compete?
Making a choice how you want to compete is a great decision and importantly holds the future of your business and commands your business decisions.
There are different ways to compete in a crowded marketplace. We will examine them below:
Compete with Price.
Competing on price consistently will never favor the small retailers. The reason for this is anyone bigger than you in the larger marketplace will always have a better chance and their prices will always go lower cutting you off.
Compete with Selection.
This is another great way of creating your own space in the larger market but it comes with the risk of increased record and keeping the record if you engage in any other method than dropshiping.
Compete with Quality.
This counts on having a better or superior quality (a better made product). This is far the best way to compete and there are already signals the market is drifting very fast towards well-made long lasting products.
Compete with Value Ads.
This is far one of the best ways to distinguish yourself from the larger market. Providing an additional added value to your customers will persuade them to purchase more from you and even keep them repeating purchases. Including contents such as product description, installation guides or learning centers is what value ads speaks more of.
Compete with Service.
As a new and small business, competing with service may be a bit difficult yet also a winning strategy. With consideration, the word-of-mouth marketing is the most powerful form of marketing and it makes a great deal to compete and deliver wonderful customer service/experience that people will live to never forget.
Now what is the right E-commerce business model for you?
When companies are developing their ecommerce strategy, there is in any means no historical data on which to develop their models. In simplified term, there is not a lot of concrete data available on how ecommerce business is trending. Specifically in the terms of profitability as the data might be embedded in just larger numbers and not very suitable for financial planning purposes. Also there is not a lot of talent, experience to go with. While setting up an ecommerce business, the focus should be focused on these aspects;
Categorizing eCommerce business models
On previous discussions with a colleague, he told me with a smile and boldly that there only two ecommerce models. I ask what the models are and all she could say was Amazon and what else… I can’t really say. I couldn’t quiet agree with her because from my analysis, I could give nine different ecommerce models and we will look at them below:
1st The Single Brand. This ecommerce model specifies a brand which decides to develop its own ecommerce page or site.
2nd Marketplace: An electronic shopping mall with multiple product categories and brands. Examples could be LeBoncoin, Price Minister, eBay. Many ecommerce sites have outsource their models to shape the amazon page but that does not mean they operate entirely on Amazon model.
3rd Community marketplace: a community marketplace involved organizing shared mindset and built around a lifestyle.
4th Vertical marketplace: this is an Electronic shopping mall on particular aspect dealing on specific products.
5th Flash Sell marketplace: The idea here is developing a pent up demand to be purchased at particular time slots and sometimes in limited production. Most of the flash sell ideas seem to be centered on fashion.
6th Personalization: the networking nature of this pages permits easy personalization. There are different categories on this aspect. In the technology world, you can place an order for a computer that is customized in your name. You can also order for your phones customization in your name.
7th Crossover: this is a combination of Brick and Click stores. A list of major distribution channels with their individual ecommerce sites but having a link.
8th immaterial going physical: Also put, making an electronic or digital version into something concrete or real. You can turn your digital photos into photo albums and personal calendars; you can print your own book or convert YouTube videos into an actual flip book and also invent your personalized recipe books.
9th Facebook or Social trading: Creating a Facebook or social commerce page is another choice. Though this still need proof and still on discussion. But for the time you have seen some companies creating social offers on Facebook. Example of note is Victoria Secrets which uses their fans pages to offer Gift airtimes/vouchers.
Rounding this up, there are hundreds if not thousands of options. Having known it is difficult to sail through easily making your own brand without scaling, the majority are in the market place. The success of an ecommerce plan will greatly depend on a great product, wonderful customer service, a good ecommerce model and on the top, taking a great care to give the value of the electronic trading/commerce in a different aspect that it offers.