10 Best Ecommerce Revenue Models for Business Growth
The E-commerce business is growing at a rapid pace, and the Covid 19 crisis has accelerated it further. The e-commerce revenue generated in the US market alone is likely to cross $ 875.2 billion (Statista) in 2022.
For every business, the main goal is to make money. Companies are also increasingly committed to the welfare of society, and they show their concern through various charitable efforts. However, if an ecommerce business does not follow a well-thought-out and sustainable revenue model, it will ultimately fail.
For a sustainable e-commerce business, a good understanding of the market, a workable plan, and comprehensive research of the e-commerce business and revenue models is crucial. Out of which, a revenue model is a way a business plans to earn revenue.
If you are running an ecommerce business or planning to build one, you should choose a suitable revenue model.
To make your task easy, we will provide you with multiple e-commerce revenue models and help you choose one for your business.
So, let’s start.
10 Ecommerce Revenue Models That Work
There are various e-commerce revenue models. Here is the list of some of the most popular ones amongst them.
1. Sales Revenue Model
Entrepreneurs worldwide use this model for sustainable growth. The fundamentals of this model are very simple. You earn profits by selling products and services through your e-commerce venture.
Any business that sells its products and services via the Internet (regardless of its business model) falls under the sales revenue model. alAmongst all the e-commerce revenue models, this model so far is the most popular.
2. One-off Sale
The one-off sale follows the traditional approach and relies on a win-lose revenue model. In this model, the businesses are not focused on building relationships with customers.
It is often called retail selling, and you have to regularly invest something unique into every sale. To give an example of this model, if you want to sell a product on a popular eBay site, you have to pay a fixed amount.
Every time any transaction happens (buying your products or watching any video related to your products or services) due to an eBay promotion, you have to pay a fee.
3. Advertising Model
This is a well-established revenue model also called the online advertising revenue model. In this model, advertising space by big e-commerce companies is sold to other businesses. The huge traffic that the e-commerce sites generate can easily be leveraged to advertise products that are available on third-party sites. When a viewer clicks on any of the products or services advertised there, they are redirected to the original site.
You can buy advertising space on popular sites to convey any information through graphics, text, or both. You have to pay the businesses for giving you the space for advertisement, pay per view, pay per click, or any other schemes you have agreed to.
4. Subscription Revenue Model
Many prominent e-commerce businesses like Amazon Prime, YouTube Premium, and Netflix have adopted the subscription revenue model successfully for a steady revenue stream. These mega e-commerce businesses charge their subscribers (either daily, monthly or annually) for availing their services.
These businesses generally offer services like videos, music, magazines, TV channels, etc. The subscribers pay a fixed amount to watch or listen to the latest content.
5. Affiliate Referral Model
If your e-commerce website has a big customer base, you can endorse third-party products and services. In simple terms, you can ask your customers to try out some niche products or services of third-party providers. For this, you embed a link to direct your followers to the third-party marketplace or website. When someone clicks on your link to go to the third-party site, it would be recorded as leads or generated sales for which you would be paid.
Different types of affiliate
- PPI (Pay per Impression): The affiliate gets paid when someone goes to the merchant site by clicking on the link provided on the affiliate’s web page.
- PPC (Pay per Click): Whenever the link provided by the affiliate is clicked, he/she is paid a fixed amount.
- PPS (Pay per Sale): The affiliate receives a percentage of the cost of the sale, which is made by clicking on the affiliate link.
- PPL (Pay per Lead): Anytime someone clicks on the affiliate link and then takes some action like completing a form, the affiliate is paid a fixed amount for generating a new lead.
6. Transaction Fee Revenue Model
The next on the list is the transaction fee revenue model. In this model, a fee is paid whenever a transaction is done through a platform. For example, a platform is provided for the e-commerce marketplace. Any transaction made by the seller through this platform will attract a fixed transaction fee.
While the transaction fee is minimal, the volume of the transactions that take place makes sure that the revenues generated through this model are substantial. Amazon is a prime example that works as per the transaction fee revenue model for its global operations.
7. Sales Commission Model
Online wholesalers and retailers use the sales commission model. The basis of this model is that incentives can change behaviors. You list your products on multiple sites, such as Etsy.
The sites on which you list your products will charge you an annual fee. This fee can vary significantly based on products/services you provide. Amazon is an excellent example of this revenue model in which it charges an annual fee from sellers to list their products on its site.
8. Sponsorship Model
It is a fixed promotion by companies. One example of such a model is when a business puts a logo on a third-party website to improve its brand recognition.
You can sell sponsorship to various businesses. This type of advertisement is focused on a specific demographic or geographic group. The sponsorship model leverages mass broadcasting to improve the visibility of a brand.
9. Freemium Model
Many web services have adopted this revenue model. In this model, websites provide free applications or services with limited features to as many customers as possible.
To get all the premium features, the users have to pay. However, for this e-commerce revenue model to become successful, there is a need for enough paying customers. One of the big names that follow this revenue model is Spotify.
10. Markup Model
It is another popular revenue model, which is widely used by wholesalers, retailers, and many e-commerce websites. In this model, the retailers buy a product in bulk at a lower price from the producers and then markup the price (increase the price) and sell it to the buyers at a profit.
To choose the suitable revenue model for your e-commerce business, you have to first know about your customers and understand their expectations. Then, you have to assess your resources and your budget needs to choose a realistic and sustainable revenue model.
There is no best revenue model among the ones listed here. Your choice of finding the right revenue model for your e-commerce business would finally be based on what products or services you sell.
If you find it challenging to choose a suitable revenue model for your eCommerce business, reach out to us.
Guru TechnoLabs is a professional eCommerce app development company. We have assisted many businesses worldwide in choosing suitable business and revenue models. Moreover, we have created some of the best eCommerce apps. Hence, we can understand your business and help you choose a suitable eCommerce revenue model.