The following two video’s are part of the UnderstandingE project I have been working on & I’m sharing them here for any feedback you may have.
This hasn’t been clearly defined before (that I know of) and will be an immense help if you are considering an eCommerce product business for eBay, Amazon, transactional websites, the other channels etc… Or as I’ve found, to help realise that you’re actually using one or more of these and why you’re actually using more than one of them.
Four Standard Product Business Models
There are four standard product models that a business can use when it comes to physical based products which are intended for resale, this applies to almost all incarnations of an eCommerce product based business.
This is like a retail shop, where the items are pre-purchased, then used as the inventory to drive data for the online channels and to fulfil orders. I cover the advantages in the video, however this has one major disadvantage, the outlay of cash to fund it.
This doesn’t have to be as hardcore as making glass, where you take sand (silica) and add other additives such as lime (calcium oxide) and then adding immense heat & other processes, it can be the combination of two or more products to make a unique third product. In the second video I use the example of the lighting in my office, taking stands, plugins, blurbs & softboxes and combining them into a kit, which is a unique product offering.
- Virtual / Just-in-Time
I personally hate the phrase “drop shipping”, a more apt description would be “virtual” or “just in time”.
This is typically where stock is made available virtually and then put on offer by the business, when an order is taken, the stock items are ordered and then fulfilled. This may be directed to the customer, but also to the business for sorting and then sending out (as I learned two days ago, the correct term for the latter part is called “Cross Match”).
- Asset Recovery
We can also include refurbished products under this model, as essentially they have gone through the asset recovery process and been re-manufactured. This model can enable the highest returns, but also some major downsides, such as availability and quality.
In their Purest Form
In the video below I cover each of them in the purest forms, you’ll need to watch this one before moving to the second as without the explanation of them in this form, the hybrid models won’t make sense.
Hybrid Business Models
However, in reality, there are very few business that use only one of these, instead in this video, I explain how and why you would want to use a hybrid of these standard models for your business.
I also cover a model that I have not included in the four standard models called “Flipping”, as I explain in the video, this is not a scalable model and if you do find a product base that you can scale with, then I would suspect that it falls under the asset recovery hat.
Documenting these have been exceptionally useful for me & I’m sure for you also.
I’ve found when talking with business owners about these, this has helped them realise why they’re doing what they are with their businesses. It also makes it a pick & mix exercise, however you can now see why you would want some elements of each, but to limit as much as the negatives as you can by combining them together.
Which models are you using?