Most Suitable Business Models to Follow for eCommerce Marketplaces [Updated]

The eCommerce and online marketplace business is booming and has multiplied significantly in the last decade. Stats suggest that by 2026, 24% of retail purchases will occur online. Every day, more and more people are becoming interested in launching their marketplace.

However, getting too excited about this rising eCommerce business trend without a proper idea of its business model may backfire greatly.

The good news is that when planning your startup for an eCommerce business, you will get plenty of business models in front of you — all you need to identify the best-suited model for your eCommerce business.

This blog shows you different business models for eCommerce and how they work.

Importance of Choosing the Right Business Model for Success

Choose a business model that provides the best experience level regarding your budget, risk & time management.

You might have a skillful team that has a solid marketing strategy for your eCommerce business. But a team without the right business model will always fall behind and have every chance of failing sooner or later. This will also act as a hindering force in the future growth of your eCommerce business.

By the end of this post, you will know how to establish a profitable business model for your eCommerce store.

Let's start by discussing the business model classification commonly used nowadays in all eCommerce businesses.

Classification of Available Business Models for eCommerce

As you plan to set up your eCommerce business, there is this common question that you need to ask yourself.

Who are your clients that you are selling to?

For your eCommerce site, you are considered a “Business”. And the people you sell to would be termed “Customers”.

All eCommerce sites operate as a Business to Customer (B2C) or Business to Business (B2B) model.

This means your consumers are either general customers or other business organizations. But these are not the only business models for eCommerce that get used nowadays.

The other more commonly used eCommerce business models are:

• Business-to-Business (B2B)
• Business-to-Consumer (B2C)
• Consumer-to-Business (C2B)
• Consumer-to-Consumer (C2C)

Moreover, there are also other well-known business classification models like Business to Government (B2G) and Customer to Government (C2G).

Now, let's quickly take an overview of the advantages and disadvantages of the above business models for eCommerce.

Types of Products to Sell Online

The best part of establishing an online store is that you can sell virtually anything you want. If you are new at this, it is better to start selling with a small range of products.

But are you sure about the types of products you are looking to sell from your eCommerce site?

To sell online effectively, you need to know the types of products you can sell from your online store or marketplace. Let's know a little better about that below.

1. Physical Products

Any goods you can physically touch or feel, such as clothing items, electronic devices, merchandise, etc., that anyone finds online or in a brick-and-mortar store is known as a physical product.

Moreover, selling this type of product from your online store requires at least one shipping method to be implemented. To produce a physical product, you should have a warehouse and factories or hire several employees.

Some common examples of physical products include Apparel, Ornaments, Mobile Phones, Beauty Products, Artwork, etc.

2. Digital Products

This product type is easy to distribute compared to physical products and others. It is also significantly more sustainable, making replicating or creating simpler. No material, staff, or manufacturing warehouse is required.

Anyone with just a few devices can generate a digital product and get it up for sale. Some of the most popular forms of digital products include Software & web-based applications, Music & Audio, Videos, e-books, Photographs/Images, Courses, Digital Artwork, Tickets, etc.

Check this list of 20 Exclusive Digital Products To Sell in 2024.

3. Service-Based

If you have a group of people who specialize in providing various types of services, then you can easily offer those services from your eCommerce site. This means you can provide services to customers online or by visiting them at home. These services are known as service-based sellable items.

These types of services include services provided by Drivers, Carpenters, Home Cleaners, Home Appliance repair services, etc.

Trending eCommerce Marketplace Business Models

Several eCommerce marketplace business models have been trending, and these trends may continue or evolve further. Here are some notable ones:

1. Dropshipping
2. Wholesaling
3. White Label
4. Private Labeling
5. Print-on-demand
6. Subscription-based service

1. Dropshipping

For beginners in eCommerce, the dropshipping business has become quite a developed retail fulfillment form of trade. With zero or minimal capital, this model enables companies to sell and market their products online without stocking inventory.

Once the consumers place the orders, it then ships the products directly to consumers right after they have bought them from the suppliers.

Moreover, the benefits of dropshipping include:

• There is no need to rent any space for a warehouse or pay for stock management, packing & shipping products, inventory tracking, or return handling.
•  Anyone can start with a minimum budget and scale up later once stable and out of financial risk.
•  There is no need to shed sweat thinking about inventory, manufacturing, and fulfillment management.
•  One can easily invest resources into customer service, marketing, sales tactics, site design, etc.

2. Wholesaling

This form of the business model allows the eCommerce business owner to buy products in large quantities and at a discounted or wholesale rate.

In the beginning, this mode of business was more suitable for B2B. But thanks to the immense growth of the internet, now even C2C and B2C types of traders also practice this way of trading.

The popularity of wholesale business processes in an eCommerce store is rising faster than expected. Modern sales channels like telemarketing, advertising agencies, trade shows, or influencer marketing for wholesale eCommerce require enormous efforts to secure business partners.

3. White Label

White-label trading has become quite a common form of business nowadays. This type of business means one company is responsible for manufacturing the products, and another companies get to promote and distribute them. Nowadays, many influencers do such business by selling off white-labeled items through their popular social networking channels.

The major benefit of this trade is that the business person is not required to look after the product's manufacturing and quality as the production house handles these. But they had to face immense competition in the market.

Moreover, the white-label traders are only responsible for the design of the package, not the specification or its quality. So, it all depends on their marketing plan and distributing method, which differentiates them from their competitors regarding their USP.

However, one difficulty that most white-label vendors face is the management of their inventory. As a reselling business agent, predicting the demand for those white-label products becomes easier if they know the manufacturing company's demand and supply stats.

Also, many dealers set an order limit to achieve their overall production goal. And misjudging the inventory for white-label business owners leaves them with a large pile of unsold products.

4. Private Labeling

Many eCommerce or online marketplace business owners have innovative ideas about introducing new items. However, they need help manufacturing those products or using their relevant resources.

So, for those types of traders, the private labeling model works as an ideal form of business. Here, they can place certain orders to a manufacturing company and then label them privately.

Mostly, the products with a privately labeled badge stay separated from their competitors and are developed, marketed, or sold by the same company. It also holds the right to sell them under any private brand.

Moreover, it decides the specifications, production quantity, design, etc. And since they are the sole seller of these unique products, they have the potential to create quite a demand hype among the new customers.

More precisely, they even set their prices based on market research & demand. The brand company controls the operation and production cost; hence, they can keep the cost of goods sold under check. This is why private-label commercial products can enjoy a huge profit margin, being the only seller in the market.

5. Print-on-demand

This business model is comparable to dropshipping and deals with customers looking for custom-made stuff. Mostly, customer-designed items like t-shirts, hoodies, mugs, photo frames, phone covers, canvases, etc, are the main selling goods that fall in its categories.

So when someone orders these products, this third-party printing manufacturer nicely prints the chosen design by the customer and then packs it professionally with brand logos to deliver to them.

Moreover, its benefits are quite relatable to dropshipping, like no upfront fund is required, including minimal risk in business. As orders are shipped, the print-on-demand business only pays the third-party vendor. Moreover, the inventory and the order are also managed and automated by these third-party vendors. It is quite a risk-free business model.

6. Subscription-based service

This business model allows the customer to subscribe to a service for a certain period, more precisely through some Monthly or Annual plan. Once the subscription plan expires, the user can either renew the plan as per the company policy to continue further or cancel it completely if they find it unuseful to their business cause.

This business model has several advantages, making it alluring for eCommerce setups. Its benefits include reduced cart abandonment with improved customer satisfaction and loyalty rates. Moreover, the delivery and inventor planning can also be done in advance in this business mode. This gives the business owner a high profit margin, lowering the risk of inventory misjudgment.

WP ERP is a good example of a subscription-based plugin seller website. The site sells a yearly subscription plan for its complete business management solution for small to medium-sized businesses.

What's Next?

Picking the right business model is essential for sustainable eCommerce business growth & success. Now you have a clear idea about all the favorable business models for eCommerce/online marketplace sites.

It becomes extremely imperative for you to find out the type of business model that would best suit your business setups based on the kind of business you are currently doing.

Hopefully, the business models discussed above will help you realize the model you want to implement in your eCommerce/marketplace settings. So, best of luck with that.

Moreover, nowadays many eCommerce business owners are looking to turn their single-seller site into a multi-vendor marketplace.

For them, it is also quite important to pick the right online marketplace business model, and even more important is to choose a reliable and compact multi-vendor marketplace solution to achieve their desired success in this field.

Pick the Right Business Model & Marketplace Platform for Your eCommerce Success

Choosing the best business model for your eCommerce or online marketplace can take time and effort. Especially when you are new in eCommerce, your strongest chance of success always depends on how well your business model fits your business process.

Moreover, in case you have already picked the perfect business model but are using a marketplace platform that doesn't meet most of your business demands. So choosing your business model is as important as choosing the right marketplace solution.

Suppose you are relatively new in eCommerce and looking to set up an easy-to-use multi-vendor marketplace site. In that case, you can use the Dokan Multi-vendor Marketplace plugin. It is one of the highly rated top-selling multi-seller marketplace solutions.

Dokan Marketplace for WooCommerce enables its users to allow multiple vendors to sell their products seamlessly from the same site. As the marketplace owner, you can manage your vendors from the backend and earn a commission set by you for each product sold by your registered vendors on your marketplace site.