Pros And Cons Of Different Business Models
When you think about starting your e-commerce store, one of the first things you need to do is to pick a business model.
But if you’re new to online selling (or just opening a business in general), it’d definitely be hard to know which one is the most suitable. If you don’t have the time or resources to try all models, here is what I’ve learned about them in the past few years:
Dropshipping / Print on Demand
These models are adopted by many e-commerce store owners for a reason. They’re less time-consuming and generally the cheapest to start. You don’t have to manufacture, store or ship the products.
But in order to create a large profit margin, you’re required to have very good marketing skills. There are also fulfillment issues since you won’t be the one handling the product. This leads to a greater likelihood of poor customer experiences.
Wholesale / Retail
This can help you improve customer experience by cutting down on shipping time and allowing the opportunity to make a more personal connection with buyers.
However, you need space and upfront investment to buy and store products. Then you’ll also have to figure out how to differentiate yourself from every other retailer in the industry you are in.
This requires heavy upfront investment and research since you’ll be working on the manufacturing of the product yourself. There is significantly more risk involved with it as well, as other people can steal your product ideas and make them themselves.
However, the rewards can be much greater if you are selling unique items with limited direct competition.