Ecommerce Business Models
ECommerce business models is the topic that we are going to talk about today. Hi, and welcome. My name is Harold F. Rich, and today I want to talk about ECommerce business models. We are going to talk about two models. One model would be just a regular model where you have your own warehouse, and you fulfill your own products, and the other model would be a drop shipping kind of model. We can also talk about the Amazon Fulfilment a little because this is somehow a mix of both models.
Let’s start with a regular model. If you have an online store if you have your ECommerce store, and you are buying the product from your suppliers. You’re buying it maybe on pallets, or you’re buying big chunks of products, and you’re getting it shipped to your warehouse of if you’re just getting started, maybe you store it in your garage or in your apartment or whatever.
This is one way, and the thing is, it has got a lot of advantages but also a lot of disadvantages. If you buy it, then most of the time you have to buy a lot of products, so a huge quantity to get a good price. If you buy it, you have to store it. You need the space for it but then you have the control. You have to spend the money on it but then you have the products. It really depends if you just sell like one product that is always the same. This is a good idea thing to do because then if it’s always the same it’s very easy to scale, and you don’t have to spend too much money on it.
If it’s a lot of other things where you have different sizes, different color, or you sell a lot of different stuff, that can be quite challenging and quite difficult actually to get it all shipped to you because you have to spend a lot of money to have it in stock. This is one part that you have to spend a lot of money to have it in your warehouse or your flat, in your garage or whatever, but the good part about it is you have it under control. You have it in your hands. You can package it; you can ship it out. You will exactly know what is going on. You have the shipping time under control. You have the tracking code and all this stuff.
It’s very easy for you also if it comes to support questions if people are going to chat with you or call you and ask you where is my package or can we change the order, you are very flexible. This is a big advantage of that business model. Of course, it also has a lot of disadvantages. I want to talk first about the drop shipping part. You could also do drop shipping, that means that you’re not having the products actually in the store. You have a supplier which is shipping that for you.
On your website, there will be no difference. On your website, people will just see the products, but in the backend, somebody else will do the fulfillment for you. It depends on how you can structure, how you want to structure it. There would be the way that you have a fulfillment partner, so a regular company like we have. I have a fulfillment partner in the States, which is just shipping out every order that comes in will automatically go into a software, and they will fulfill it for me. They will do the packaging, they will do the shipping, and I will just get the tracking codes into the software. The customers will get that automatically in the backend and so on. I just have to sell it on the website, and they will basically do all the rest of the work and they will charge me for every product.
Normally, how it works in the warehouses is you have like picking fees, and you have inbound fees, and outbound fees. In my fulfillment center, I just have a picking fee. I pay a certain amount of dollars for one product that they pick. They go to the shelve and pick the product and package it for me. This picking fee includes all the packaging. It doesn’t include the shipping, but basically, it works like that that they package it for me. If it’s two packets, I also have a picking fee on the second package, but it’s not that high.
Basically, for me, it’s hand free. I just have to sell it, and I also have to order it, of course. It’s a kind of hybrid model. It’s not a drop shipper who buys the products from me. I buy the products wherever, in Germany, in the UK, all over the world basically and ship them over to this fulfillment partner in California. This fulfillment partner will do the rest.
There’s also, of course, other options that you just get a drop shipper that does everything for you. You don’t even have to buy the product. That would also be an opportunity. You have the products on your website, but as soon the order comes out you just get a share. You get 20%, 25%, or whatever from this product you sold but this drop shipper will do all the rest.
We also offer a business model like that for our clients. We give them a ready made Shopify store where they actually can pull in products from our inventory. If they sell it, we do everything in the background for them, and they just earn like 20% of it depending on how much they sell, so from 10 to 25. Basically, they don’t have to do anything. They just have to sell it. We do all the stuff in the background. This is a different model, and there would also be a model that you do … you have a plugin inside of Shopify that is a making sure to pull in product from AliExpress.
Then what you can do is if the people order it from your website, the tool, the plugin will automatically go to AliExpress and fill out all the forms and use your credit card. You charge the client, and AliExpress is charging you, and they send it out for you directly to the client. This is also a business model. The problem with that is that you can’t control it and you have long, long shipping times most of the time. It’s possible that people wait up to one, one-and-a-half, two months for the product if you don’t have a reliable partner there.
There’s something called like ePackage, which should be there in 12 to 20 days almost around the world and it’s not expensive. It will start from I think $1.20 or whatever. You could order like let’s say you’re selling a bracelet, you’re selling whatever, you could buy that very cheap around $1 or $2, and then you have like another $1.5 for the ePackage. You buy the products from three, to five, or to $10, and you sell it for double the price or 10 times the price or whatever. If the people order it, then it will be automatically get shipped most of the time from China to your clients. It’s hands free, but there will be a lot of complaints because people wait so long. You never know in what condition it arrives and so on.
One more option would be you let Amazon fulfill all that stuff. That’s quite the same model as I have like with my fulfillment partner in California. The advantage of Amazon would be you are listed also on the Amazon marketplace. Of course, you could also if you have a different fulfillment partner be listed on Amazon Marketplace. You’re automatically in the Prime program. If you have your products stored in the Amazon Warehouse, they will include you in Prime, and that will give you some additional advantages. Amazon is very fast in shipping out the stuff, and it’s also a good opportunity. They have got a lot of warehouses in a lot of countries so you could split it up very well. The people will trust Amazon more, and it’s a lot of benefits in the background.
You have to decide for yourself what business model. This is you could say like a drop shipping business model and the other things are like a hybrid. If you order it to your own house if you order it to your garage or to your apartment, then basically you can control everything, but you have a lot of hassle. If you package yourself, you have to bring it to the post office. You have to handle all that stuff. As soon it gets more and more, you’re selling more and more, you can’t handle that anymore. Then you would have to employ somebody and probably you don’t want people in your home place so you would have to rent an office and then it’s getting very expensive.
I hope that was helpful. I could show you what business models there are out and how you could go after selling your products. If you’re interested in scaling your business to the next level, I just finished my new book, Scale Up. You can get it on Amazon, or if you leave a review below, I’m picking one review, the best review for a week and I send out the free book. Leave a review below, subscribe to my YouTube channel. If you watched that on our blog, subscribe to our newsletter, and I see you tomorrow. Bye bye.