After selecting your niche product, you will need to decide how to source the product, which depends on the eCommerce model you choose. The four main eCommerce models fit most products are: drop shipping, white labeling wholesale, manufacturing wholesale, and print on demand also. Although a hybrid model can be adapt, including a mix of the above models, this article will explore each model as a stand-alone. If you think your niche product requires a hybrid model, book a time with me and we can explore the different possibilities together.
1. Drop Shipping
The most accessible form of starting an eCommerce business is through drop shipping. This model allows you to set up an online store without the need to hold stock in storage. It works because you receive orders directly from your customers through an eCommerce channel, and automatically sent to your supplier. It is the responsibility of your supplier to fulfill these orders.
Although this sounds like an easy way of setting up a business, there are some drawbacks. As you do not have the supply chain visibility. You will have to bear the responsibility for any delays or problems in the orders. Which may affect the reputation of your business. As we all know, it is usually challenging to reimpress a customer once they have been put off. It can be a significant blow-off to your business. Low margins also accompany drop shipping as your supplier manages everything and gets a more substantial profit cut.
On the bright side, it is an excellent way to get start with your business by validating your product with the least possible costs. If you think that’s the model you would want to go with, Shopify, Google Ads, and Facebook Ads are valuable resources that will get you started.
2. White labelling Wholesale
White label wholesale is also one of the most challenging models as you must manage inventory and stock, handle customers’ requests and shipping. It is also considered the most expensive as you need to manage the supply chain of the products from start to finish. Which includes transportation, storage, and last-mile delivery.
White label wholesale is a model where the eCommerce business agrees with the supplier to manufacture and pack the products in your packaging. As a business, you are responsible for moving the goods from the factory to the end customer. This process requires a solid supply chain which should be tailor to the nature of the product, the location of the supplier, and much more. Once the products are store in your facility or a third party. You will need to manage the stock and inventory by topping it up frequently. And ensuring your eCommerce channels are up to date with the latest stock count. As the last thing you would want to do is inform a customer that we had to cancel your order as we ran out of stock.
This model requires significant capital. Therefore, it is advisable to validate your product and build traction through drop-shipping before stocking up in bulks.
3. Manufacturing Wholesale
Manufacturing wholesale follows a similar process to white labeling wholesale. And it requires you to handle the supply chain from the manufacturer to the end customer. The only difference is that you would be looking to sell a not already available product. Instead of building your factory, you would send your prototypes to manufacturers who produce these products for you.
On-demand manufacturing allows you to change suppliers if you encounter problems with product quality quickly. The startup costs are minimal. And if you’re interested in potentially opening your production facilities later. This is an excellent way to test a new product or concept. However, as the manufacturer may need to adapt their production line slightly and build tailored molds for your product. They may set a minimum order quantity which might result in an expensive investment initially.
As this model requires significant capital, it is advisable to validate your product and build traction by reaching out to potential clients before manufacturing bulks.
4. Print on Demand
Print-on-demand, or POD, is where you work with a third-party supplier and customize white-label products by adding your own designs to them. Print-on-demand services involve products sold on a per-item basis with your own brand name attached or customized design printed on the items you’ve sold through your website.
With print-on-demand sales, you won’t pay for a product until an order is place. The third-party supplier prints it up. After your customer places an order with you. Your print-on-demand supplier will handle everything from that point on, from printing services to shipping. The print on demand is an easy system to understand. With this type of fulfillment service, your store takes orders for specific products. Once the order is place with your store, such as a custom t-shirt. The job is give to a third-party provider that prints each product to order, packages the product. And then goes into shipping mode and into the hands of the customer.
In this type of fulfillment services setup selling print on demand. The eCommerce company handles the beginning of the transaction. Once the initial sale is complete, the print-on-demand business takes care of the rest.
Another eCommerce model which is less popular and is only applicable to specific industries is called Subscriptions, where the business delivers a box of products at regular, scheduled intervals. This model can have a reliable income stream as long as the customer is satisfy. It also can incentivize customers to purchase additional subscriptions or encourage their friends to join. Examples of this model include Vitamins, Recipe boxes and cosmetics.