8 Essential Tips to Build a Successful E-Commerce Business Model
Whether you are a business owner looking for ideas to revamp your business, Or, a marketer revising the existing business model of your company ~ Worry NOT!!!
This blog will guide you to achieve your objectives by focussing on the 8 Key elements that are core to any eCommerce Business model. Let’s explore these factors by examining the business model of the internet’s massive online furniture store, Wayfair.
Wayfair has grown to be one of the major online retailer of home goods in the globe. As of Q2 2020, online sales surged 83.7% year over year for home furnishings giant Wayfair Inc. to reach $4.30 billion in online sales. Interestingly, they have turned profitable in many years. The company has found the online marketplace business model to be the most profitable for them.
Offer a Value Proposition
To develop a value proposition for your business, ask the question, “Why will a consumer chose you?” Often times the answer might include because your business offers personalization, better product offerings, better prices, faster and cheaper deliveries, enhanced website or mobile UX, etc.
For instance, Wayfair’s value proposition includes offering a vast selection of products while holding minimum inventory, fair prices, excellent customer service. Their business practices hold these values at their core and aim to get better at it each year.
Define a revenue model for your business
In addition to creating value for consumers, your business needs to generate profits. Ask the question, “How will you make money?” Most firms will have one or some combination of these major revenue models: advertising, subscription, transaction fee, sales, and affiliate.
Wayfair is based on the sales revenue model where the company derives revenue by selling goods to its customers.
The sudden outbreak of the COVID-19 leading to the closure of offline retail channels has exponentially induced the demand for e-commerce platforms. Rapid urbanization, rising internet penetration, and the high adoption of smart devices to access e-commerce portals are augmenting the e-commerce market.
Identify your Marketspace
It is very important to explore the market opportunity for your company, by answering the question, “What marketspace do you intend to serve & what is its size?” The idea here is to identify the market niche where you hope to compete.
Going back to our example of Wayfair, overall the furniture & home decor market is really huge. However, Wayfair identified their opportunity in the online market and designed its business model around it.
Analyze your Competitive Landscape
Don’t forget to research your direct and indirect competitors. Analyzing your business’s competitive environment can help you analyze if the market is saturated or there is an untapped market niche. It can inspire you to explore new opportunities and further thrive in a competitive business environment.
Competing with IKEA’s AR furniture app, Wayfair launched its updated mobile app in November 2019, which features an augmented reality (AR) tool, a central hub for camera-based features, and a 3D room planner. The features are designed to inspire users by helping them visualize how furniture will fit in their spaces.
Develop a Marketing Strategy
Once you have a product or service to sell, have identified your market niche, how do you plan to promote your product or service to attract your target audience?
At this step, focus on your short-term and long-term marketing objectives and business goals, target audience. Explore the right channels to reach your target with the right messages at right time. Closely monitor how consumers are responding to the ongoing campaigns, product reviews, etc. Measure your efforts and make changes to your marketing plan to match the changing demands of your target consumers.
Establish an Organizational Structure and facilitate its development
For your company to grow and thrive, you need to have a plan for organizational development that describes how your company will organize the work that needs to be accomplished. You might want to answer — “What types of organizational structures within the firm are necessary to carry out your business plan?”
For example, Wayfair has dedicated teams to handle inventories, customer service, technology & operations, marketing, etc. In addition to their well-coordinated team, they have well-defined company values in place.
Form an efficient Management team
Once you have a business model in place, you need to have a strong management team to make it work. They can help gain instant credibility to outside investors and experience in implementing business plans. Ask yourself, “What kinds of experiences and background are should your company’s leaders essentially possess?”
Once you understand these key elements for building a successful business model and how to get started with each of them, your next step might be to focus on how to scale your business.