E-Commerce: Retail or Wholesale
Commonly known as online stores, these websites sell products (physical and online) directly to the consumer (retail or wholesale). This is a traditional business model where in addition to everyday operations, the store owner is responsible for finding and sourcing the product, managing the inventory, fulfilling the orders, and providing consistent customer service.
E-Commerce: Drop Ship and FBA
Also known as online stores, these websites also sell products directly to the consumer, however, the inventory is held by a third party. The third party either pays a commission or referral fee for generating customer sales; or offers a wholesale pricing agreement to the website manager who resells products at a markup. In either case, the products are shipped directly from the third party to the consumer. An example of this is Amazon’s FBA (fulfilled by Amazon) program. Amazon receives products from a supplier and warehouses those products for the store owner. Once a sale is made, Amazon sends out the product on behalf of the store owner to the consumer.
These are websites built to showcase products that are available for sale elsewhere. Again, Amazon is a great example as they have perfected the affiliate model. Individuals can build an online store that merely presents goods that are already for sale on Amazon and then drive buyer traffic to the Amazon platform. The site operator is then paid a commission on every sale that is initiated on their site. All inventory management, shipping, and customer service is handled by Amazon, and they pay 4%-10% commission on gross sales. There are examples of other affiliate stores where the suppliers pay anywhere from 10%-70% of the retail price in commissions to the site operator. Additionally, some affiliate stores refer sales to a service provider such as DirecTV or a web hosting company; and if the service is subscription based, the operator can earn residual income.
Content: Blog, Newsletter or Content Aggregator
Websites are informational only and traffic is generated by constantly posting new content that is relevant to the audience. Most of the revenue is generated by advertising sales and pay-per-click (PPC) activity. These sites take as much or as little time as the operator is willing to invest to build visitor traffic and keep their viewers engaged. Sites with high traffic and low monetization could benefit from selling additional ad placements or possibly adding a drop ship element that is related to the site content (e.g., a photography blog could sell cameras and accessories, or printers, etc.). Content sites can also earn from building and monetizing a subscriber base where subscribers can be targeted with cross-sell, up-sell and other affiliate offers.
There are a wide variety of services that can be sold business-to-business (B2B) including financial services, marketing, advertising, public relations, design, legal, travel and more. Some operate on a one-time purchase model while others are subscription based. Most offer opportunities to cross-sell and up-sell related services to the customer base.
Software as a Service (SaaS) and Apps
Typically with monthly or yearly payments, SaaS and other web based software applications can be a great way to build a subscriber base and generate recurring income. The software/app can be designed for entertainment, but most are solving for a specific problem or a repetitive task in the marketplace. One of the most successful examples of this is Salesforce, which is an application that provides customers a better way to manage their contacts. Instead of using a rolodex or Microsoft Excel, users can pay a monthly fee to easily manage their contacts and interactions.
Ultimately, there are many ways to make money online and each has their own benefit. Therefore, make sure to choose the model that is best for you. That said, you also can combine models as they may play off each other. For instance, an E-Commerce store that sells shoes as and a content site that reviews different types of shoes.
If you are still not sure which business model is right for you, schedule a FREE 1 on 1 consultation with one of our online business experts!