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Types of Ecommerce Revenue Models

Types of Ecommerce Revenue Models

We had been talking about the three most common participants in e-commerce - businesses, administrations and consumers. The various combinations of these participants create remarkably different business models and their related challenges. So, what are the major Types of Ecommerce based on the combinations, which again can be divided into categorization based on -

 business model
 revenue model, and
 the type of ecommerce website.

We have already spoken of Types of Ecommerce based on business models in our earlier the post. Here, we will now see the Types based on Revenue Model, how can they actually make money and handle inventory management and sourcing products efficiently.
 
Drop Shipping
Drop shipping is a streamlined form of retail business wherein the seller accepts customer orders but does not keep goods sold in stock - Wikipedia. He purchases the item from a third party and gets it shipped directly to the customer without having to stock or maintain his own inventory.eg AliExpress, Oberlo, Doba.
Dropshipping involves low costs of start up, inventory and order fulfillment. For more about Drop Shipping, Read our post on the same.
 
Subscription
Subscription revenue model focuses on retaining customers for a longer run than just hoping to sell them a product or service once or twice. The customer is required to sign-up to get access to a product or service continuously and is charged the same amount either monthly or annually , eg, tatasky or Netflix, Amazon Kindle. There are book club subscriptions, cafe subscriptions, health and beauty subscriptions, vacation clubs subscriptions etc.
This can prove to be beneficial as it offers scope for Business Consistency, Higher Customer Retention, Opportunities for Marketing and Better Cash Flow Management.
For more about this model, Read our post on the same.
 
Private labeling and manufacturing
This model refers to the companies that are making, packaging and then selling the goods directly to the end customer. The product is manufactured by a contract or third-party manufacturer and sold under a retailer's brand name. The retailer will specify everything about the product – the material in it, how it should be packaged, what the label looks like – and pay to have it produced and delivered to his store.eg, Heinz baked beans, Stop, Life, ETC by Ebony are private label brands. Another eg could be a relay blackbox being built by a company, packaged, labeled by the name of the retailer company that is paying for the entire process, and once ready it will be sold in the retailer company's outlet as their product.
 
White labeling
A white-label product is a product or service produced by one company that other companies rebrand to make it appear as if they had made it - Wikipedia. For example, if you go to a grocery store such as Wal-Mart, you can see there are all sorts of products that are sold under the Great Value brand. Wal-Mart has many companies that provide those products and are willing to put the product in 'Great Value' packaging instead of their own on Wal-Mart’s behalf. So there is even a chance the same product is seen on different shelves with different labels and different prices.
 
Wholesaling and warehousing
Wholesaling and warehousing ecommerce model demands a lot of investment, especially at the start, inventory and stock management, keeping track of customer orders and shipping information, hiring and maintaining staff etc. Cloud based CRM software development comes to the rescue of the owner and the managing team to handle all this efficiently and keep them free from problems of doing everything manually and issues that might creep up due to human negligence.
Wholesaler maintains huge stock in bulk in advance and retailers can pick their choice of item in the quantity of their choice for their outlets. This is indeed a tough balancing act and equally challenging at the wholesaler front.
 
Rent and loan
In this revenue model, the customer is only paying for use of the product or service, rather than to buy it outright. for eg, Airbnb, Bridal dresses on rent, Furlenco offering furniture on rent and many more in different industries.
 
Freemium
This ecommerce revenue model enables you to sign up to a free version of the product, which has reduced functionality, for eg Spotify, Gaana. On these music apps user can listen to music from the limited available songs, although even that is a huge number, but interrupted by advertisements. And once you are used to this app and in case of serious music lovers or learners, in no time they choose to buy a paid subscription with better functionalities. Inclusive of two words "free" and "premium", these models will give you something interesting for free and keep offering better lucrative products within that as paid.

Speaking of ecommerce website development in India, we have understood ecommerce based on types business model in our earlier post and revenue models here. Our next post will speak of Types of ecommerce websites. Till then, happy reading!

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