The online business models explained in this article cut across several industries like medicine, IT, Engineering, Construction and many more.
Yes, no single attribute is responsible to make an ecommerce business successful. Success in business is a product of effective use of soft and technological skill to create a winning edge.
Yet, I am lying if I tell you, you will become successful in ecommerce business without the use of these online business models types.
By looking at online business models, I can tell how a business creates and delivers value to its customers or clients.
These Online business models answer correctly the 4 WH questions of a successful ecommerce business.
- What is your business about? (Your Aim)
- Why are you doing this business? (Your Purpose)
- Who does your business serve? (Your Customers)
- How do you serve your customers? (Your Process)
It’s possible you feel relaxed with your current business model since it is paying the bill.
I want to remind you the companies who refuse changes yesterday are no longer existing today.
In one word, you need innovate without changing the core principle of your business.
My aim with this article is to show proven online business models that work and how you can apply them to your business.
I will guide you through processes to help you be creative and generate ideas for new online business models.
What are Online Business Models?
Online business models define who are your customers, what value (products or services) you provide, how you serve them and why you do what you do.
Who your customers are and the value you provide is external. How you serve them and why you do what you do is internal.
Do you know how once upon a time successful companies suddenly became a failure? How they lost their competitive advantage?
These companies had great products and wonderful services. What could be the problem?
The answer to these questions is simple.
These big companies failed to embrace online business models to fit in the new era. They rejected innovations, and so their customers also reject their businesses.
If you were alive in the 90s, you will mostly argue it is impossible for billions of the human population to converge in one place.
Facebook, Twitter and other social networks made it happen later.
Perhaps it was impossible to watch and talk with people in a different continent from yours.
Skype, Zoom and other video calls software made it happen.
Would you have believed Software as a Service (SaaS) company would be far richer than most products companies?
Google, Salesforce, and others made it happen.
Last, would you have believed you could order groceries and get them delivered to you the same day?
Amazon, Jumia and others made it possible.
Today, the mindset, “This is how we have been doing it” no longer works. Change in methods and medium has become of necessity.
Your chance of being in the ecommerce business for the next 10 years depends on your ability to maximise these online business models.
Factors Influencing New Online Business Models
The usage of social media platforms has been on a top side and will ever be increasing.
Research shows that people on average now spend one third (8 hours) of their day on social networks – Facebook, Twitter, WhatsApp, Instagram and TikTok.
Facebook on its own covers over 10% of the world’s population (over a billion users).
Over 500 Million users currently use the direct messaging app, WhatsApp, to connect with others.
LinkedIn, a professional networking site, has over 400 million users on its platform.
Today’s generation sees social media as part of their lives. And so, they are fully engaged on the platforms.
The internet has spoilt users of today. People now find it difficult to pay for content and expect it to be free.
With a lot of websites, giving out free contents, users want the entire internet to be free.
- Wikipedia with free information
- YouTube with free videos
- Facebook with free chats
- Spotify with free musics
- Blogs with free news
Data analytics has helped in generating new online business models that no one would have thought of.
When you have access to millions of existing data, it’s easy to notice similarities in users’ usage and create a new online business model with that.
The data you gained from your existing customers of today will do you good someday.
Over 70% internet users browse on smart phones. People feel comfortable going about with phones than carry a laptop or even tablet around.
The increase of these phones has also led to more developers building more apps.
The number of mobile apps download rose with an increase of 1750% in 4 years.
Even Google requires you to make your ecommerce website responsive – make it look good on all screen sizes.
Using mobile phones will continue to be on a top side and downloads of apps on an ever-increasing speed.
What are Qualities Needed to Adapt to these Online Business Models?
Be open to learn and make changes. If your current business model is dominant, you will not be reading this.
Like a friend will say, just because I don’t do what you do does not mean I am wrong.
And I am saying to you also:
In ecommerce business, just because you don’t feel good about the online business models does not mean they are not the right one for you.
What else will you need to face your fear and launch into the unknown? It’s courage.
Even when it seems you are failing, you kept on moving.
Courage will help you take the risk of accepting these new online business models, even when you are not sure they will work for you.
All that is good can be great. All that is best can be better. Making today better than yesterday is the new pursuit.
As you need to adapt these new online business models, you need to be ready to make continuous improvements on it.
You recognize the need for a change; you do it immediately without hesitation.
Doing this sooner than you get the results you have always wanted.
I tell my business partners that the best team is better than the best products.
Get a mixture of skills, mindset and personalities on your team. You need them all.
As you renovate your business to adapt to a new online business model, you will have questions to ask? You will need clarity on some matter.
This call for need of one who is master of these online business models to help with strategy and innovations.
You need someone with an eagle eye to see far beyond the ordinary.
Get an ecommerce specialist to increase your output in a quick time.
Don’t wait to get it right before you start so you don’t become victim to paralysis analysis.
You will do much better if you assess your chosen online business model qualitatively:
You do that by answering questions like:
What is our targeted market?
How can we get quick feedback from our customers?
What are the opportunities and risk in this business model?
Which percentage of customers would prefer these online business models?
I don’t want you to waste time writing business plan on assumptions when you can use same time to launch prototype test and learn fast.
What you do is more important than what you think.
What are the Online Business Models Types?
Addon Online Business Models
In the addon business model, you give the basic product or service at a lower price. And then offer extra addons for higher prices.
You end up making more money than you could have selling the package as a complete whole.
Also, your customers will prefer these since they can choose the package they want without buying all.
Have you been to the airport?
You most likely will buy the ticket for a cheap price, but end up paying more for extra services – food, beverages, travel insurance, luggage charges and even credit card fee.
The addon online business model type is perfect for ecommerce businesses where the core cannot do without the parts.
In my ecommerce web design, I offer my services at a cheap price and sell more on extra packages like SEO, Content marketing, Custom design and more.
Having an ecommerce website is not enough, you need my other services like SEO, marketing and more.
My clients get to choose if they want my extras or settle with the basic.
If you want to choose these online business models types , I advise you do more marketing on your basic offering and offer it for a cheap price.
Affiliate Online Business Models
In the affiliate online business model, the individual or company focus on making a third-party product to sell to receive part of the payment.
The actual owner of the products sells enough products with no marketing efforts.
To operate in the affiliate business model, you give your affiliates unique link to track every customers coming through them.
You may choose to pay either by click or views (also known as impressions).
Supposing you sell many products, you can pay your affiliates by percentage of the total products sold or by a fixed price irrespective of the amount of products sold.
Also, you pay an affiliate on total products his customers buy at a time or only on the single product link he/she clicks on?
The Google Adsense operates the affiliate business models.
Companies pay Google to list their ads (banners, text, or videos) across its platforms.
Google then pays affiliates a certain percentage of the commission to place the ads on their blogs.
If you want to operate in the affiliate business models, you need to ensure your website is online 24/7 else they leave you for your competitors.
Auction Business Models
The auction online business model is a decentralized type of business model where no single buyer determines the price of a product.
The owner may start with an initial offering price, but the buyers end up deciding what price it will sell for.
When the price (war) is over, the highest bidder commits to buying the products.
The auction business model favours the two parties in business: the owner and the buyer.
The owner will most time sell the products faster than if he had used the fixed price method.
Also, the owner determines the minimum acceptable price for his product so he doesn’t run at a loss.
For the buyer, it favours him because he doesn’t have to spend beyond what he can afford.
Auctions has been around since ages. In the old, they auction women off to their husbands.
The evolution of the internet made this business model more promising and acceptable in the ecommerce industry.
eBay today is the largest website operating the auction business model with over a billion transactions.
There is another reverse type of auctioning where the sellers bid rather than the buyers.
Example is when a traveler mentions the amount he has to pay for travelling. Airline companies have to bid for this price to have the customers.
Also, you can use the auction online business models if you run a service marketplace.
A customer comes to your ecommerce website and state the services he wants. The customer may choose to make known his price or hide it.
Service providers then bid for this service till the customer picks one.
Trade by Barter Online Business Models
You would wonder why I included this among online business models in the ecommerce industry.
This is a business model in which individuals or organizations exchange products or services in kind.
The transaction relies on the products or services without the use of money.
The major benefit of the barter online business model in ecommerce is the publicity it promises.
So, if you own a brand fashion ecommerce store, you can offer influencers your clothes for exchange of them announcing you to their followers.
You have seen companies give award to prominent person in the country for a photograph.
When the Innoson Motors started in Nigeria. They offer the then presidency fleet of cars to win the government supports.
If you write, you can lock your content or downloaded books behind a share button.
Users have to share your website on your chosen social platforms to their followers before they gain access to the content.
The more users share your website to get your content, the more your recognition.
Rent Online Business Models
We are in a generation where people prefer access to assets. A time where people prefer usage over ownership.
The rent online business model is an old business models where a customer rents a products or services for a certain period of time.
Buyers love this model because they don’t have to pay for the entire price of the products.
It frees the customers of getting hooked up in paying for a products and helps them achieve financial freedom.
As an ecommerce business owner, the rent business models will profit you. You can set up an ecommerce website where customers rent cars or tools and return at a particular time.
Airbnb is one company that has applied rent the online business model in the real estate industry.
And Uber used the same business model in the car industry.
So what products or services can you put on an ecommerce website where people can come to rent instead of buying the whole.
Mostly the rent business model is best for products with high costs like building a house, owning a car or a sophisticated machine.
Marketplace Online Business Models
The marketplace business model is a two-sided online business models where buyers meet with sellers or employees with employers.
This means the increasing number of one group (buyers) attracts the other group of sellers.
To excel in the marketplace online business model, you must create a balance between the two groups of people using the ecommerce website.
You make money from the marketplace by making it free for one and paid to the other.
Searchers use Google for free while advertisers pay to have their ads on the search engine.
The initial launch of a marketplace is always the hardest. As most sellers would upload their products excepts there is a large buyers base.
Also, if you running this business model, you should allow for the interaction between buyer and seller.
Examples of companies operating the marketplace online business model are Jumia, Amazon, eBay, Andtab and more.
Subscription Online Business Models
This is an online business model that very few people know about in Nigeria. Those that know are yet to implement as a business strategy and innovations.
Most of the internet-based eCommerce businesses as of today monetize their platform using the advertising model.
They allow users to use the platform for free and then filled the site with ads. The site, therefore, looks clumsy and distracted. News websites are bad about this.
My hate for seeing news websites cluttered with ads led me to start one that offers a clean and smooth experience to the users.
Subscription online business models work on the idea of selling a product or service to receive recurring revenue.
It allows a single customer to pay every month or year for a product or service until he or she cancels.
Founders of WhatsApp, Jan Koum and Brian Acton, built WhatsApp with a subscription online business model in mind with a charge of $1 per year.
$1 per year may mean nothing to you, as it seems like small money. But if you consider collecting $1 from over 500 million users, you will marvel.
Freemium Online Business Models
What is the freemium online business model? Why study this model?
The Freemium business model is most common among businesses delivering services online. I regard it as one of the business models of Web 2.0.
The abundance of information on the internet has taught us there are alternatives to what we already have.
Free news blogging, free listing, free software, free tutorial, free music, and video.
So, people search the internet for hours to find products for a cheaper price or even for free.
The surprising thing is we realise later that the difference in price does not worth the time spent in searching.
A freemium business model works by asking users to sign up on your website. In return, you offered them the basic version of your service.
The basic must not be too limited else they walk away. And it must not be too complete that they see no need to upgrade. Balance is the key here.
Your duty is to persuade enough users of the free version to convert to the premium package.
These Online business models are here to stay.