Choosing a Business Model for Your E-commerce Website

With the changing market trends and the support of national policies, independent stations have become a new choice for more and more cross-border merchants. However, to successfully layout an independent station, it is necessary to first understand the types of operation models for independent stations and find the most suitable operation model for oneself.

Divided by Products

From the perspective of independent station products, the operation model is mainly divided into distribution model, vertical model, and brand station model.

1. Distribution Model

The distribution model refers to the independent station model that does not limit itself to a single category but widely and in large quantities shelves products with good market response. This model is characterized by a large number of SKUs and lower prices.

The advantages of the distribution model lie in its simplicity, speed, extensive coverage, and flexibility, which once became popular in the industry's early stage. However, the distribution model also has some drawbacks. Firstly, there are multiple and messy product categories, lacking systematic and professional planning, which is not conducive to establishing store image and long-term development. Secondly, due to the continuous changes in market hotspots, merchants do not have a fixed target customer group, making it difficult to establish a loyal customer base.

In the stage of standardization in the cross-border e-commerce industry, the professional image of the store and the targeted customer base are the basic guarantee for the growth and strength of independent websites. The distribution model can only meet temporary needs and is weak in terms of long-term competitiveness.

2. Vertical Model

Different from the distribution model, the vertical model refers to the independent website model that focuses on a specific niche market, with unique brand positioning and a fixed target audience.

The advantage of the vertical model is that the store focuses on products in a specific vertical category, allowing for deep cultivation in related fields and surrounding areas. By operating with a vertical model, merchants can gain better understanding of products, marketing methods, supply chains, and consumer characteristics. Therefore, the vertical model takes a brand-oriented and specialized long-term approach, which is conducive to attracting target customers and increasing repeat purchase rate.

When choosing the vertical model, merchants need to select a suitable niche market based on the characteristics of their products and target audience. However, it is important to grasp the degree of segmentation, avoiding excessively narrow vertical categories and overly competitive product categories.

3. Brand Website Model

The store in vertical mode, with its professionalism and target customer base in a vertical field, can further develop into a brand-oriented model.

The brand-oriented model takes products as the core of brand building, requiring merchants to have product design and R&D capabilities, as well as brand building and corresponding marketing methods.

Divided by the supply chain

In addition to dividing by products, the operational model of independent stores can also be differentiated from the perspective of the supply chain. Common operational models include Dropshipping and DTC.

1. Dropshipping

Dropshipping, also known as one-to-one mode, independent merchants first list the products in the store. After the customer places an order, the merchant will place an order with the supplier based on the order, and the supplier will directly ship the goods to the customer.

The advantage of Dropshipping is that merchants face less operational pressure, do not need to worry about fund transfer and inventory issues, can start quickly, and can focus on store operation.

However, the Dropshipping model puts higher demands on supply chain control. Merchants cannot manage inventory and product costs depend on suppliers, making it difficult to adjust products and logistics, which may affect store reputation. Therefore, when choosing the Dropshipping operation model, merchants need to carefully select cooperative suppliers from the source.

2. DTC

DTC stands for Direct-to-Consumer, a model that changes the relationship between merchants and consumers.

DTC eliminates the middleman and gives merchants control over the production process through factories or a strong supply chain. Merchants can directly reach consumers through digital channels such as the internet, quickly provide feedback on their needs to upstream production processes, and make adjustments accordingly.

DTC has certain advantages in brand building and fostering customer loyalty, and has become a popular independent site operation model.

However, this model that controls the entire supply chain requires higher financial and operational capabilities, and has higher thresholds. Before choosing the DTC model, merchants need to plan and prepare well in terms of product selection and operations.

There are differences between different operating models, and merchants can choose the model that suits them according to their actual situation and development stage. However, it should be noted that different operating models are not completely disconnected from each other and can also be integrated or transformed under certain conditions.