How Can eCommerce Businesses Earn Profits?

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How Ecommerce business Earns profit

The eCommerce sector is flourishing across the globe, with new businesses emerging every day.  But what most eCommerce business owners forget is that it’s easy to set up an eCommerce business in this digital era. The tricky part is to make good amount of profit. On top of that, the cut-throat competition has saturated the standard profit generation ways. That’s the reason why businesses are now looking to find new ways of profit generation.

If you’re also looking to enter this competitive market, you must be aware of the different profit generation streams. Keep reading this article; here, we’ll discuss the top ten ways you can earn profits from your eCommerce business. But before that, let’s have a look at different types of eCommerce revenue models.

Types of eCommerce Revenue Models 

 Dropshipping

It is perhaps the simplest form of eCommerce. Dropshipping lets you set up a storefront and receive payments from customers. You can receive payments via PayPal or credit cards. With this revenue model, you can get rid of warehousing stock, managing inventory, and handling packaging. Yet, if your supplier is slow or if the quality of the product is low, then customers will hold you responsible for it. They may also leave bad reviews that may tarnish your store’s reputation.

The majority of dropshippers use Oberlo or Shopify as it’s less expensive and quick to set up. Many dropshippers also set up a quick store and leverage Facebook Ads to drive traffic for thin margins. But gaining even something out of it will work wonders for your eCommerce business.

Wholesaling and Warehousing

eCommerce business following wholesaling and warehousing needs a large amount of investment. It’s because they have to manage inventory, keep track of customer orders, and invest in their warehouse space.

You can also buy and curate products and sell them through online stores to earn profits. Here, you have complete authority over your products to sell. But, first, you have to buy them upfront. 

Private Labelling and Manufacturing

This business model is perfect if you have an idea for products but don’t have enough capital or even desire to invest in the factory. In this model, the companies send the prototypes and design ideas to a contracted manufacturer. The manufacturer then produces the product that meets the specifications. When the customer buys that product online, the manufacturing company ships it to their place.

White Labeling

White labeling is like the above type. Here you select a product that is already sold by another company that also offers white-label services. So, this company designs, labels, and packages the product as per your branding. This model is prevalent in the beauty industry.

Top 10 ways by which eCommerce Business can Earn Profits 

Commissions

Commissions are one of the most trusted revenue-generating models for eCommerce businesses. This model is pretty simple. The seller sells the product, and the buyer buys it. And you make money with each transaction.

eCommerce companies predefine a commission percentage for each product. Companies can also set and change the commission percentage. But, this is subject to their business goals and market scenarios.

Subscriptions

Like the subscriptions of fitness clubs and magazines, eCommerce companies can also use this model to earn more profits. Let’s have a look at the graph below. The graph shows that firms with below $25 average transaction value have 1.78 times higher customer lifetime values for subscriptions than non-subscription customers. 

 

Source

This model makes it easy for you to determine the value of each customer. It helps you to understand which customers are worth spending more, compared to the others. 

Featured Listing

To beat the immense competition, vendors are ready to pay some extra bucks to list their products or services at the top. It’s applicable for P2P marketplaces. Here, your eCommerce platform acts as a connecting bridge between sellers and buyers. Integrating a feature listing functionality is a win-win. It enables your suppliers to beat the competition and helps you to earn a massive amount of extra earning for your business.

Affiliate Partnership

Your eCommerce website can partner with third-party websites to serve as an affiliate partner. As an affiliate partner, you can put up ads of various services or products on your website. With every customer clicking that ad and making a purchase, you’ll earn a share of the profit made by the third-party merchant. It is a common and hassle-free way of earning extra revenue. Here, you don’t have to worry about any storage, shipping, or any other factor. Google AdSense and Click bank are some popular affiliate marketing programs that can help you get started.

Offer Multiple Payment Options

Payment is the final step before a customer ends his buying journey. Thus, it’s vital to offer a top-notch payment experience. If you fail to do this, then it might cost you the deal. According to a report by Baymard Institute, 28% of users abandon carts because they found the checkout process too complicated. So, you can focus on making checkout fast and easy. You can do this by integrating smart and multiple payment options like:

  • Credit card
  • Debit card
  • Mobile Wallet
  • Internet banking

You can hire eCommerce app developer to integrate these payment options. You can also consider adding local payment options if you plan to expand your audience reach across the globe

Sponsored Emails

eCommerce business owners often overlook email marketing. It’s an important marketing channel that offers high returns. According to a report, investing $1 on email marketing can drive an average return of $42. It means that email marketing offers a much higher return compared to PPC. 

 Advertising

As an eCommerce site owner, you can also earn profits by displaying ads on your website. You can do this in two ways:

PPC Advertising

PPC stands for pay-per-click, and it’s also known as cost per click. PPC advertising is an internet advertising model that brings direct traffic to websites. In this model, you have to sign up with a network and paste some code snippets on your site. The network will then add the relevant ads to your website, and you’ll earn money for every click made. The amount of profit you make via PPC depends on various factors like click-through rate (CTR), website traffic, and cost per click (CPC). 

Create Omnichannel Experience

Today the use of mobile phones and tablets has increased, which calls for the need for cross-device marketing. Furthermore, customers demand consistency across all the devices. They want consistent content alignment and design across channels. Many of them even start their buying journey on one device and end it on the other. According to a study, 73% of online shoppers use many channels while buying online.

Direct Banner Advertising

Direct banner advertising is one of the easiest ways to earn extra profit. Here, you can sell space on your website to advertisers for money. The typical banner formats of ads are:

  • 125×125 button ads
  • 300×250 rectangle ads
  • 728×90 leaderboard ads

Omnichannel eCommerce also enables you to collect customer data and insights. This crucial data helps you to understand your customers’ interests and behavior. You can leverage this information to provide personalized offerings to boost your profits.

 Leverage Mobile Marketing

Mobile marketing is booming. And the reason behind this is the increase in the usage of mobiles. According to Statista, mobile devices contributed 56% of all organic search engine visits in the first quarter of 2020. Thus, it becomes imperative for eCommerce businesses to focus on mobile SEO.

When it comes to opening emails, people are more likely to use smartphones. According to Campaign Monitor Research, 68% of email campaigns get opened on a mobile device. These stats prove how important mobile marketing has become if you want to earn extra profits for your eCommerce business.

You can make your mobile marketing game stronger by:

  • Leveraging SMS marketing
  • Utilizing digital marketing for localization
  • Optimizing your eCommerce business for voice search
  • Using push notifications for mobile

To ensure proper implementation of these strategies and to reap their benefits, you can hire ecommerce mobile app developer for your eCommerce mobile app.

Strategic Partnerships

You shouldn’t always see profits in monetary terms. Other factors like credibility, brand value, and goodwill also matter a lot. These factors are crucial for driving profits. You can establish strategic partnerships with different brands to build your brand value. For example, in 2016, Amazon entered into an exclusive partnership with Motorola. Here, Motorola’s then launched G4 phones were only available on Amazon. Amazon employed the same method with Xiaomi and Redmi phones too. These decisions can create a buzz around the customers and help you to get ahead of the competition.

Conclusion

To sustain your eCommerce business, you can’t rely on a single revenue source. In today’s time, you must have many profit generation streams to grow your business. Furthermore, deciding on revenue generation streams before setting up an eCommerce site is crucial. It’s because it can prove to yield better results and productivity. I hope this article helped you to know about vital profit generation revenues. You can integrate these revenue models to take your eCommerce business to sky highs.

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