There is no uncertainty about the significance of e-commerce revenue models considering the remarkable increase in demand. The Covid-19 onslaught has further stirred the already rising traction for e-commerce and m-commerce.
However, most of the startups fail to go beyond the first year of business. As per 2016 statistics, only 47% of the online retail businesses managed to survive more than four years.
The primary reason for alarming failure rate is the absence of an appropriate business model. Most of the unsuccessful startup owners are unsure about what they are going to offer. Besides, they fail to identify the target audience. Consequently, the model is too vague for potential customers.
Second most critical challenge is the marketing of the nascent business. An inefficient approach toward marketing may lead to failure regardless of the business model effectiveness. This article shares the most in-demand business revenue models of e-commerce. The text also briefly unveils some of the effective marketing and growth strategies specific to e-commerce.
Types of Revenue Models in e-Commerce
Although there is a wide range of models falling in e-commerce domains, yet three of them are most productive ones.
1. Marketplace Platform
Marketplace is a company which provides a platform for third-party individuals to sell and purchase products and services. This platform, commonly referred to as C2C e-commerce, is the best bet for cash strapped entrepreneurs. They do not need to have initial capital to replenish stores. Instead, independent buyers and sellers connect to each other while marketplace offers a gateway.
However, this model is not limited to financially challenged individuals. Some giant companies also provide C2C services. For instance, telecom prodigy Ericsson started a marketplace last year for technical gadgets. While people usually use it for purchasing used products, the company also encourages manufacturers to sell new devices.
OLX is one of the pioneers and most successful marketplace companies. Currently, it is operating in 45 countries. Unlike Ericsson, OLX does not confine users to sell objects from specific domains. YouTube provides another instance of the marketplace with some features of subscription model. It enables users to subscribe to other users for accessing videos. However, it is notable that subscribers do NOT pay for a subscription.
The revenue streams in C2C e-commerce depends on the advertisement. The more the traffic on the site, the greater will be the chances of attracting advertisement. Besides, some companies also keep a commission from every deal. For example, a company offering a platform for selling used cars may grab a small share of money from every deal with the consent of primary stakeholders.
2. Online Retail Store
This B2C e-commerce platform requires the owners to sell manufactured products at retail. Online retail is around since the initial years of the web. In fact, first ever recorded e-commerce deal between university students was also online retail. It works for the aspirants who are able to invest a considerable initial capital.
Moreover, most number of e-commerce business and revenue models belong to this domain. It is not that other types are less effective. The primary reason for this model to be more widespread is the transformation of traditional stores into on-demand parallels.
The clarity in business model is most crucial in online retail. Some companies fail to live longer because they try to sell a wide range of products. The diversity of products is a decent choice only when the company is up and running. Initially, the owners have to begin in a specific domain. They need to make an online presence by offering some trademark products from a limited set of industries. With time, they may also add products from other industries.
Amazon is an example of diversity in retail products. The retail giant offers almost every household and enterprise product available on earth. Consequently, Amazon e-commerce revenue is over $250 billion. The current coronavirus pandemic has boosted the revenue by 29% in Q1 of 2020. This e-commerce giant had to hire 175,000 people in March and April 2020 to cater the increased demand. However, it was not the case in the past since the company started with a selection of products.
3. Subscription Revenue Model
This model emerged after the introduction and implementation of cloud computing. Cloud-based platforms allow users to run services remotely instead of downloading them on one’s personal computer or mobile. This mainly B2B e-commerce model requires online hosted services. Although most of them are trademark cloud-based services, yet some of them are licensed too.
For instance, a company may offer Microsoft’s Office 365 to users. These users can access the services through service provider’s website and do not require downloading Office 365 package. The reason of success is the substantial reduction in costs. Many enterprises require a software system temporarily. Purchasing the license and installing it on every user’s machine is an inefficient approach. Many of these companies offer B2C services too.
The rise of on-demand economy also owes to cloud-based subscription platform. Uber is one of the most pertinent examples when considering B2C cloud platforms. Amazon is one of those companies which have successfully implemented each of these three e-commerce revenue streams.
E-Commerce Marketing and Growth
The process of attracting potential customers to website (or mobile app in case of m-commerce) requires a combination of marketing approaches that fit It also relates to the strategies which push customers to use the platform for selling or purchasing. The owners can spread the word by inbound marketing. Under such publicity campaigns, the owners need to make an effective social media presence. Moreover, they should ensure to create search engine optimized content.
Once the website traffic reaches the order of tens of thousands, the company can launch business intelligence campaign. This campaign models the users and determines the sources which are driving the traffic onto the site. If the company offers B2B business, connection building is essential. Pay-per-click (PPC) campaigns are highly effective in B2C business model.
The fact that biggest e-commerce companies by revenue and by volume use robust marketing strategies is precedence for startups. Selecting an appropriate model followed by a comprehensive marketing campaign increases the probability of success.
You can be the next big prodigy in the e-commerce universe. Contact us today and share the business model that you want us to build for you. Leave the rest upon us because Mob Inspire loves to assist startups.