International E-Commerce

Every day I get “brilliant� ecommerce tips on twitter. The problem is that few “5 tips to increase your conversion rate� lists really add value to me. The thing is that e-commerce tips often works for one etailer, but not for the next, because we all have different e-commerce business models. So here are the different business models I see in e-commerce.

Drop shipping
Critical to success: Reliable suppliers.
Disadvantage/risk: same suppliers as your competitors, low margins.
Example: Bygghemma.se
Main traffic source: Varies a lot
Value creation: Marketing of a product

High margin products based
Critical to success: Efficient sourcing from e.g. China. Own brands. Also the ability to use the 80/20 rule, and cut out products generating less profit.
Disadvantage/risk: To Keep focus and to get returning customers, when you sell unrelated products
Main traffic source: campaigns
Example: Coolstuff.se
Value creation: Importing

Product Brand based
Critical to success: Having the right brands, which generate the traffic to your store
Disadvantage/risk: low margins, high supplier power
Example: Uppercut.se
Main traffic source: varies
Value creation: Marketing

Price dumping
Critical to success: To be listed in prices search engines, like kelkoo, prisjakt and more. Also very high volumes are needed to do this in a profitable way. And of cause lower prices
Disadvantage/risk: To make a high enough margin to run you business
Example: Tretti.se
Main traffic source: Price search engines
Value creation: offering lower prices

Multichannel
Critical to success: Taking advantage of the physical presence/brand.
disadvantage/risk: People want to select a pair of “red pants” from all brands, not only Jack and Jones. To be competitive against the pure players
Example: Jackjones
Main traffic source: Direct
Value creation: making the product available online

Financed growth based
Critical to success: to reach sustainable size and turn into a cash cow before the investors run out of cash.
Disadvantage/risk: keeping focus on developing a profitable company might be hard when investors is putting ridicules amount of money into the company. Why then make profit.
Example: Amazon.com
Main traffic source: bought traffic
Value creation: varies

Media based
Critical to success: Access to cheap quality branding marketing
Disadvantage/risk: one day the media company realize it have to focus on their core business, and sell off the e-commerce company, which then have to make it on its own.
Example: CDON.se, that used to be part of MTG. They have/had access to cheap branding, why they did run a lot of commercials on TV.
Main traffic source: Direct traffic from media marketing
Value creation: marketing

Long tail based
Critical to success: Large unique assortment, and large market (e,g, us) to reach profitable level.
Disadvantage/risk: expensive to keep large assortment on storage
Main traffic source: Search
Example: Electrokit.se
Value creation: offering more relevant products

Niche based
Critical to success: Need to be market leader in its category. This also implies that they need all products in this nice, not only the profitable ones
Disadvantage/risk: to be in a too small niche, that won’t turn profitable
Main traffic source: Forums, broad search on the niche, traffic from related products
Example: Tonerlagret.se
Value creation: product expertise

Subscriber based
Critical to success: Returning customers, assortment that customers needs on a regularly basics.
Disadvantage/risk: expensive to gain new loyal customers,
Example: Postmeshave.dk
Main traffic source: email marketing
Value creation: convenience

Returning customer based
Critical to success: Customer service, collecting relevant information about the customer, and offering relevant offers
Disadvantage/risk: hard to get that loyal customers, and most customers will cheat a lot on you.
Example: matfrid.se
Main traffic source: direct, remarketing
Value creation: safety – Customer know what he gets

Unique products based
Critical to success: PR and buzz around the product
Disadvantage/risk: few returning customers
Example: fluffbabes.se (was selling a pink coffin), bikebyme.se
Main traffic source: Media Buzz, happenings in the real world. Product placements
Value creation: offering unique products

Point is, that in E-commerce there are many different business models, and a good advice for one of those categories, will often be bad advice in another.

Remember many shops will be in more than one category. E.g. it will be likely to have a “retuning customer” setup together with a “brand based” setup