Since e-commerce is all about providing a product or service and making money, it’s important to understand different profit-making policies.
As you are setting up your new e-commerce business, you can choose one or more of these revenue streams. Here’s a quick rundown of various ways to make a profit:
1. Dropshipping – Dropshipping is where you sell a product on your website for a commission, but the brand handles all the shipping.
2. Affiliate Marketing – Affiliate sales are when you sell someone else’s product on your website in exchange for a commission.
3. Private Labeling – Private labeling is when the brand makes, labels, and packages the products themselves.
4. White Labeling – White labeling is when someone purchases a product from a manufacturer and rebrands and repackages it.
5. Subscription – A subscription is when you offer to continue sending a product or offering a service in return for a monthly payment.
There are other types of revenue models, but those five are among the most common for new retail brands.
The modern e-commerce business has eliminated the need for the physical “walk-in” location aspect. Consequently, there is an automatic requirement of much lower overhead than with traditional retail stores. The sourcing of the product also plays an important role in determining how e-commerce works out as compared to traditional dropshipping.
With e-commerce business, we have an inventory at our disposal and choice; otherwise, we see a neglected difference between the way, for example, online retail and traditional retail is found to be the opposite ends of the same spectrum. Also, with the e-commerce business, there is no traditional retail cost, and any payroll costs are almost zero as the businesses operate online without very little human resource in involvement with the customer or purchaser.
There is also a tremendous competitive edge as the online retail industry is open 24/7, and the pricing of products through paid marketing results in a greater margin of error to work with, resulting in greater efficiency for the whole system. Dropshipping works in intricate ways, and the best example of it is when we combine e-commerce and dropshipping. For instance, we have the idea to sell a coffee mug along with some coffee.
So we require the material to make the coffee mug and leave it up to dropshipping to do its part, while through the traditional use of e-commerce, we accurately source the required coffee beans to make the coffee. These two aspects can work in tandem to deliver us the required product. The brand aspect brings out the competition that is there between various e-commerce businesses, and the trust issue has become a significant factor.
Tech, logistics, and marketing are the very last factors representing the way the company works. Logistics helps us understand the need of a demographic of a particular region and how the growth can be forecasted to better prepare the future.
