TYPES OF E-COMMERCE (ONLINE) STORES

The internet has exploded in its reach across the globe, and with it the variations of e-commerce business (online store) models.

Within recent years, we are increasingly accessing websites and making purchases on the go from the convenience of our mobile phones.

Consumers desire the luxury online shopping presents; they want the store to come to them.

Types of E-commerce (Online) Stores - The Bread & Butter Hub

This is contributing to the creation of a new generation of entrepreneurs, which is addressing these demands through the creation of online stores.

We’re all familiar with names like Ebay, Amazon, and Etsy; niche online stores target markets with a specific set of demands.

When you look at things from the outset, the market seems ripe. More people with spending power are entering the online market on a daily basis.

The rest is simple economics – fulfill a demand, make a profit, and grow your business!

Types of Stores

Before you dive in to set up your niche online store, it’s good to find a model that suits your budget and convenience.

1. Affiliate Marketing 

The simplest type of store is called the affiliate marketing store, where your website or blog will provide consumers seeking products or services to a vendor providing them.

This will entail building a network of vendors catering to your consumers’ needs and having agreements on the commission you charge off any sales through your website.

While the ease of setup is highest, the profit margins are on the lower spectrum. You will therefore, need to account for a high volume of sales for a healthy revenue stream.

 

  2. Drop Shipping 

The most common type of store is known as the drop shipping model. Here, a consumer comes to your website and places an order for an item.
You relay the order to the appropriate vendor, who delivers the product or service under your company’s name to the consumer.

As the business operator, you don’t have to worry about inventory costs and shipping, the business is easy to scale up if you are getting high demands, and profit margins range between 10 and 30 percent.

3. Branded Products & Inventory

The third option is to sell and carry someone else’s products. This is generally considered the typical store. You are technically responsible here for storing and shipping of the inventory, but can obtain a third party to handle inventory.

The profit margins here are higher at 50%.

4.  White Label Products

Another online store model is to sell inventory that you have created or branded with your business name (white label products).

White label products are non-branded goods created by a company for use by businesses, to brand as their own.

These products can range from electronics, health products, home accessories, beauty products, food, home decor and supplies and the list goes on.

For instance, if you decide on a business in leather work tools, you get in touch with a small developer willing to sell under your brand name.

While this brings up inventory costs, it is also the most lucrative from a profitability perspective, with operators taking home up to 90 percent of the revenues.

What are Startup Costs?

Many people are put off from starting their own business because of the assumed cost involved, but an online business is cheaper and simpler than you would imagine!

When you think about it, you only need hosting services (website) and…that’s it! Inventory requirements go out the window if you opt for the Dropshipping or the affiliate marketing model. You can also recruit 3rd party fulfillment services to handle delivery services.

There are websites such as Shopify, the top e-commerce platform which allows you to develop a customized, secure online store for your business at very low cost. You don’t even need any prior programming experience!

Budgetary constraints, therefore, become very subjective. You can take a website from development to launch with about USD $30 dollars, with any additional marketing expense and inventory cost being an individual call.

If you wish to hold on to inventory, keep a marginal stock of about USD $300 dollars (depending on your product). This way, your overheads stay low and even if the sales come to a grinding halt, your monthly expense at maintaining inventory doesn’t let it die.

Potential Earnings

Earnings can vary immensely and are dependent on the type of online store, volume, and pricing of your products. In the beginning, you want to make a higher revenue on a single sale than split it across a larger volume.

Once your business grows enough to be sustainable, you can reduce your sale price because the returns will be evened out by volume.

Low operational cost compounded with wide market reach and increasing e-commerce growth facilitates the potential for substantially high profits.

However, it is certainly possible to make a 4 figure monthly income, and even a 6 figure annual if you diligently follow a strategy that keeps your consumers happy and your operational costs low.

The Pros and Cons:

While the idea of the online store is extremely attractive, it is best to do a quick comparison of the pros and cons of getting into the business yourself.

This is always a good idea because it allows you to assess whether you have the right skills, motivation, and understanding to make your venture a thriving, successful one!

  • One of the biggest advantages to owning an online store is the amount of control it gives you.
  • People will advise you to opt for Etsy or Amazon or Ebay – recognized industry giants – as the platform to launch your venture.

While these companies do provide you with immense exposure, it also comes at a great cost to your revenue. Companies can charge you up to 13 percent of your revenue per sale, making it difficult to bring back the big bucks.

  • We’ve already talked about the low cost of entering the market – a website, some inventory, some marketing techniques and cost, and you’re set – but it merits another mention because it is a significantly lower-risk environment than the prevailing myths will have you believe.

If you play your cards right, it can be the source of a full-time income or allow you to quit your day job!

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There are some caveats though.

  • In the initial stages of your business, you will need to invest a lot of your time to ensure that it is attracting customers and growing at the right pace.
  • Building the website is an easy task, but putting your map on the business requires you to understand search engine optimization and how to work with services like Google to drive traffic over to your website.
  • Another thing to be mindful of is security. Consumers need to know that the credit card details they are providing to you for their purchase will be secure from any abuse.

You will have to keep a close eye on operations for any vulnerabilities and proactively clamp down on them. A simple breach could bring your website down and impact your sales and your brand’s reputation!

Right, how do I begin?

You’ve made it this far and you are interested in starting your own business…except you aren’t sure where to begin. Here is the basic step-wise guide to kick off.

So if you’re interested in more information and wish to get started on a solid footing – guides and resources are available from Shopify. They are the premier e-commerce platform which provides information, resources, hosting, payment gateways, themes, 24/7hr support, apps and tools for a Basic Plan of $29 monthly.

Also provided is a 14 days free trial for you to determine if this the path for you.

To Your Success!

Be Informed. Be Inspired. Be Motivated.