3 Most Common Online Business Models You Can Easily Startup
Have you ever wanted an online business? Or peradventure you have an existing business that you want to give an online presence for but you’re confuse what kind of business model you need to use.
Let’s say that you make the most amazing tomato sauce and your friends tell you that you should turn it into a business. What business model will you use? I’m pretty sure you will say something like “well, I’ll make a product and sell it” This is one option, but certainly not the only one.
Before you venture into online business, you need to understand the advantages and disadvantages of each of the model because the tools you’ll need for one is most likely to be different form the other one. You just need to stick to what is meant for your type of business.
What’s Your Business Model?
When it comes to online business, there are 3 types of online business models in which you can pick the one that suit your business idea or existing business.
- Sell a physical product
- Sell a digital product
- Sell a service
You can combine models in your business but mind you, each model has their merits and demerits.
Selling Physical Products Online
Often time this is the model that comes to mind. What is mean for you to sell a product online is that you will need to create a physical, shippable product and market it online. Selling your products can be via your own ecommerce storefront, via a third-party sites like e-bay, Ali-Express, Amazon or through an auction site. I’m pretty sure you have been to a website where you see shoes, bags, electronics etc. That’s is an ecommerce website or online store.
Merits of Selling Physical Products Online
- Why I love this idea so much compared to a physical location/store is the fact that customers can easily check out product offering without leaving their bedrooms or having to come to my physical store/location (if I even have one).
- Customers can easily see the reviews of others who have bought what they are about to buy from my store which means I won’t have to be there to tell them stories before buying. The reviews from other customers will do that automatically for me.
- Videos and photos of my product in use and frequently asked questions sections will all provide more information before buying compared to when the want to buy in a brick and mortar store.
Demerits of Selling Physical Products
- You definitely have to create something and warehouse it and ship it. This can be scary for many industrial age type of mindset/business owners and some people who do not like such.
- Physical products can spoil either when shipping or during inventory thereby causing returns of products from customers.
- Physical goods can be time-consuming
Although, there is another way you can start selling without the hassles of having to create products yourself. You can buy products from wholesalers and sell them as a retailer. Or you can simply go into dropshipping where both product creation, shipping etc. are already handled.
Selling Digital Information Products
Most internet marketers and lifestyle entrepreneurs love this model a lot. With this model, you can build a multi million dollar business with the hassles of traditional businesses like employees, being confined to a single location, inventory etc. In this model, products are delivered electronically and automatically.
Even when it comes to payments, it can be handle via many of the gateways we have such as PayPal, Stripe etc. and are done automatically. Which means, you can be at a beach and your products are being downloaded with you running up and down for shipping stuffs.
Meanwhile, information products can be broken down to 2 categories which are
- Downloadable Material: Is one is pretty popular on the web. This is the part where you have to pay money before you can download files in form of video (mp4), audio (mp3), worksheet and ebook (pdf). This information can be on anything like how to create and effective Facebook ad; how to lose weight; how make money online etc.
- Membership Sites: These are types of site you go to in order to read, listen or watch but you need to pay a fee before getting access. It can be a monthly or annual fee. The price will be determine by the quality of the information you are about to access.. Most of these sites are forums where interactive conversations are always popping on a particular thing like Gold etc. If you love investing in gold, you might want to consider joining a Gold membership site where you can get access to mind blowing training.
Merits of Selling Digital Information Products
- Requires little maintenance time, once the product is actually created since it’s scalable and easy to handle
- Sometimes you don’t need a large number of people to buy your product if it is a recurring billing model which mean people will be paying you either monthly or annual subscription.
- No inventory or out of stock scenario since it is a downloadable product that anybody can get on the devices. So there is no typical bottleneck that is common in product and service businesses.
Demerits of Digital Information Products
While digital information product might sound so good like every other businesses, it has its own shortcomings
- Might be difficult to convince someone to buy base on the fact that there are much free information that are available online. That doesn’t mean you can’t or won’t sell but whatever you are selling, make sure it’s solving current, pending problem. I always recommend the “how to” line like how to lose 10 pounds in 3 days. People won’t pay for information that looks like blog post. Make sure it’s comprehensive, easy to do and that it solves a real problem.
- One of the shortcomings of this model is that someone can copy and steal your product. So you need to protect your product from theft.
Selling Service Online
This is a very common one just as the product selling. Basically, services are sold online in two ways.
- Sales Tool: Companies use their websites as sales tool for services delivered offline. The site contains details of what they offer, that is, brochure than a storefront. You can find a qualified doctor, plumber, interior decorator, painter or electrician all through their online presence. The only thing is that, these services are rendered physically.
In order words, a customer reads through what you can do through your website and he or she orders for your services online and receives the service physically. Example, getting a plumber through his website to fix your toilet or bathroom pipe. This is not something that can be done digitally. The person needs to come to your home address you must have provided on his website.
- Storefront: Services are sold (and delivered) online like web marketing, travel etc. All these items are sold and delivered via the vendor’s server.
Merits of Selling Service Online
- Less expensive to capture lead compared to offline methods
- Customers get enough details about your service and don’t have to travel a thousand mile to check out their options
- It’s faster and easier to setup than selling physical goods
Demerits of Selling Service Online
- High levels of competition have rocked this model. You can find it difficult to rank on Google if you are a plumber in Nigeria. When you make a search for particular keywords like “Nigeria Plumber”, Google serves over 1.8 million results while “Lagos Plumber” will serve over 300k results. Though you don’t have to rely on Google to get visitors to your website. There are other ways to go about it.
Which of these Models Should You Choose?
From the introduction of this article, I made mention of amazing tomate sauce recipe before explaining the 3 model. So using that scenario, what business model should you choose?
Selling a Physical Product: Your tomate sauce could be produced in mass, package, warehoused and shipped worldwide in various size. Especially, if you live in Africa you might consider a sachet kind of product. Meanwhile, you will need to outsource the production (highly recommended for Africans where there are power issues) or you set up a factory. Also you will need to consider payment gateways, drop shippers, manufacturing and returns.
Selling Digital Information Products: This is the least complicated and least stressful. You can write an eBook explaining the process and ingredients. You can also make a video instead of ebook. Or make a membership site that contains the complete guide and you can add more guides as your members grow.
Selling a Service: Your special recipe can be turned into a brochure styled website you could market your catering services. Or you could simply offer in-house training to restaurants, personalized coaching to individuals who want to learn how to make a real tomate sauce.
And who says you can’t combine all of these models together by having a product, service and information empire? I’m not going to choose for you but I want you to decide.
You can as well leave a comment below to share your decision about these models.