Gennaro Cuofano's Blog, page 191

Dropshipping Business Model In A Nutshell

Dropshipping is a retail business model where the dropshipper externalizes the manufacturing and logistics and focuses only on distribution and customer acquisition. Therefore, the dropshipper collects final customers’ sales orders, sending them over to third-party suppliers, who ship directly to those customers. In this way, through dropshipping, it is possible to run a business without operational costs and logistics management.

Understanding the Concept of Dropshipping

Dropshipping in simple terms is getting supplies from a third party, listing the products on your website without keeping products in stock. When you get the order from a customer, the sale is passed to the third-party supplier, who then ships the order to the customer.

Dropshipping appears for many as an easy way to make money because you aren’t faced with the problem of manufacturing and warehousing. However, in reality, dropshipping is not a way to make easy money; when you factor in all the problems, obstacles, difficulty in quality control, and the potential negative ratings it could give your website, it’s far from easy.

Benefits of Dropshipping

Dropshipping has a few benefits, which makes it ideal for consideration in certain situations

Reduces startup risks: Your market survey as a startup may not be accurate, so actively spending on manufacturing these products, which customers do not really fancy, will make it difficult to recoup capital and profit early enough, which can be frustrating. Dropshipping will absolve you from the costs of production, so if customers do not like it, you may decide against selling it in the future.Lowers production costs: Since you aren’t involved in manufacturing, your costs are very minimal. Eliminates warehousing and logistics costs: The third party supplier usually handles warehousing and may deliver to you for shipping or handle shipping as well. But generally, the storage cost is reduced.Flexibility: The low risk involved in product selection offers fresh E-commerce businesses flexibility in product selection.Protection from overselling: The market and demand may fluctuate in ways that you don’t even envisage. Rather than overstocking to meet demands that aren’t likely to come, having a dropshipping supplier as a backup saves you money without losing those uncertain sales.Reducing Costs Even When Expanding Business Scope: One unavoidable effect of an expanded business is expensive shipping. The farther out you get from your region, the more shipping fees you’ll incur. Exorbitant shipping fee is a turn off for consumers. Dropshipping can be the perfect solution for some problematic locations that fall outside your profitable regions. Especially when you think that the storage costs in setting up a new warehouse isn’t financially viable. You can also use dropshipping to determine the market demand in a particular region, and if it’s high enough, you could set up a warehouse there.Better Handling Of High-maintenance products: Some products cost more money and facilities to stock and ship than others. It is usually better to Dropship these products than to store them yourself, to save cost.

Examples of High maintenance products are large products that take a lot of space, heavy products that are difficult to move from place to place, Fragile products that must not be broken or destroyed, valuable products that their loss could lead to a huge debt, and products with special conditions (i.e., some food items that must be kept frozen)

Important Factors for Dropshipping



Research what products would fit well with your strategy, market, and customer base.Research how your competitors are selling the product, namely pricing.Find the best supplierFinalize a fulfillment process that works for both of you and incorporate it into your system. Depending on your sales management software, this could be easy or require ironing out some wrinkles.List and promote your new product. Be sure to specify any special conditions, such as changes in shipping times or locations.

Read Also: Amazon Business Model, Etsy Business Model, eBay Business Model, E-commerce Business Models, Platform Business Model, How to Start an E-commerce Business, E-commerce Marketing, Amazon SEO.

Read More:

Business ModelsCompetitor AnalysisDigital Business ModelsDistribution ChannelsBusiness StrategyValue PropositionMarketing StrategyBrand BuildingSWOT Analysis

The post Dropshipping Business Model In A Nutshell appeared first on FourWeekMBA.

A Complete Guide To E-commerce SEO

SEO stands for search engine optimization. That is the process of aligning the website content to the signals used by search engines to understand whether the underlying content is of good quality. From there, it’s possible through e-commerce SEO to build a digital funnel that leads from the store’s editorial content toward navigational pages (search page, category pages) and transactional pages (products) to build a solid online business.

Understanding Search Engine Optimization (SEO)

Out of the entire digital marketing channels and strategies, search engine optimization is one of the most effective (even though among the least appreciated). Indeed, Search Engine Optimization is one of the biggest channels in digital marketing because people do trillions of searches yearly, often with the intent to find information about products and services they want to purchase. Search is often the primary source of digital traffic, and almost all other marketing channels are one way or the other dependent on it. Higher ranking in search results than competitors in your niche will make you more visible. It will definitely have a direct impact on your generated traffic, and SEO is tailored to do just that.

Search engine has been proven by many surveys and studies to be the biggest traffic driver to websites, even more than social media. It is also cheaper than social media because after you make the first set of payment for tools (some tools can even be gotten for free), you do not pay recurring fees; you just need to put in the effort to ensure that you remain high at the ranks. That’s the summary, cheap digital marketing with high conversion rates.

Optimizing your website means that you want to create the best possible result for your major keyword. Google and other search engines’ goal is to rank search results in a hierarchy of results that answer all of the searcher’s questions so well that they don’t need to do another search for further answers.

How to effectively utilize search engine optimization for the growth of your online business

There are a few but important steps to take, which you need to pay utmost attention to in effective utilization of SEO for boosting an e-commerce business. They are:

Keyword researchOptimizing your website architectureOn-Page Search Engine Optimization 



Keyword Research

Keyword research is one of the most vital parts of SEO to ensure you target keywords that are quite easy to rank for, have a reasonable search volume, and likely have a high conversion rate.

However, choosing keywords is more than just considering how easy it is to rank or how well it is being searched. But to choose the best keywords possible, buyer intent should be factored in.

Buyer intent in simple terms is how decided an internet user is in their decision to buy. For example, internet users who search for “beautiful kicks” are probably most likely in a debate within themselves or with others; they most likely aren’t ready to buy. They could be comparing products, checking reviews, etc. Well, I’ll say you should leave those for the critic pages. But if a user searches for “Nike air vapor max plus,” they are most likely shopping around for that particular pair of shoes looking for the best prices they can get, which indicates an intention of purchase.

There are three ways to go about E-commerce keyword research to identify search volume and buyer intent. They are;

Using Amazon for keyword researchUsing Competitors for keyword researchUsing paid SEO tools for Keyword research



Using Amazon for keyword research

Amazon is probably the largest E-commerce business in the world, visited by hundreds of millions of people daily, and also makes hundreds of billions in dollars yearly. Which shows that it is a website having high buyer intent. People do not just go there for sightseeing, they visit to buy. 

Amazon Keyword Tool helps you to generate useful keywords using the Amazon search suggest function. When you input a “seed keyword” (any product you can think of in your selected niche) in the Amazon search box, you will start seeing search suggestions predicting the best matches for the entered words. Then, Keyword Tool pulls all the keyword suggestions generated by Amazon and presents it to you in a concise manner, mark all the keywords and add them to your list, then save that list of keywords for your personal use or even download into .CSV or .txt files. One drawback of this method is that Amazon doesn’t provide search volume for keywords, which is very important in our keyword selection. However, you can use other paid SEO tools to get finer details, which we will examine shortly.

Using Competitors for keyword research

Looking at high ranking competitors in search results can be a good idea as you can use them to get keyword ideas. It goes in two directions, however. You could;

Steal your competitor’s keywords to compete for rankings in the same search results.Find and begin targeting keywords that have not yet been targeted by competitors.

Although a competitor outranking you doesn’t necessarily mean that they have better keywords. They may have a higher domain authority than you, giving them priority in searches. 

Before looking for competitor keywords, you should know what keywords you are already ranking for. A free SEO tool, e.g., Google AdWords, will help you to see what kind of pages are generating the most attention for your website. Then you can proceed to analyze competitors. Your competitors aren’t every business that sells a similar product or renders similar service to you. Instead, you’re going to be focusing on the businesses that already have a good rank in the keywords and phrases that you want to rank for. 

Your research will hopefully give you a list of five to ten competitors in your industry that is ranking for the kind of terms that you want people to use when they’re searching for you. Now that you have that list, the next step is to look for keywords that those competitors are ranking for that you’re not. SEO tools like Ahrefs or SEMrush can help you discover important areas that your content does not cover. This will enable you to develop proper contents to fill up this gap with your next digital content. There’s usually a lot of keywords related to you, so there is a good chance that you won’t be able to rank very high in all, so develop a list of keywords in order of importance to create preference.

Using paid SEO tools for Keyword research

Using Pro SEO tools can help you speed up and even automate your keyword researching, making it easy for you to target keywords for your e-commerce SEO. Although you can use free SEO tools like Google keyword planner, Ubersuggest, Google search console to aid your keyword research, there are additional features you will get from pro tools. And the great deal is that majority offer free trials, so if you feel they aren’t advanced enough, you can easily opt-out.

A few examples are Keyword tool pro, SEMrush, Ahrefs, KWFinder, Jaaxy, and many more.

SEO

Some of the special functions you can get from pro SEO tools is the Quoted Search Result (QSR) tool, a function that highlights how many websites are trying to rank for a particular keyword you searched. If competition were too high, it would be advisable to use other keywords, as extremely high competition will favor the best sellers. Jaaxy offers this special function.

Keyword difficulty (KD) is another function most pro SEO tools offer. KWFinder and Ahrefs keyword research tool are some of the pro tools that offer this function. KWFinder, by default, shows a Keyword Difficulty score next to every keyword, so it absolves you of the need to click on each keyword to see the difficulty score. Although this style can be vague and not specific enough. Ahrefs, on the other hand, tells you the exact amount of backlinks you will need to rank among searches on Google’s first page.

Search Volume helps to know how many people are searching for a particular keyword; too low searches probably mean there is no market, while extremely high searches mean that the market is already oversaturated. Pro SEO tools like Jaaxy, Keyword tool pro gives data on search volume to ensure that you pick a keyword with an optimal amount of searches for good click rates.

Competitor Analysis is a very special function that can be gotten from pro SEO tools; Keyword Tool Pro especially offers you this. You basically just need to input a competitor’s website, the tool will generate a list of keywords based on the website content, and you can see what makes your competitor rank higher than you. 

SEMrush also shows you keywords that top businesses related to your search already rank for, not just showing you keyword ideas; this will give you a path to focus and help you streamline the keywords to work with. You only need to enter your competitor’s domain name, and you’ll get the top 5 keywords that your competitors are ranking for; you have the option to see more, and you’ll get a list of all of the keywords that the site or URL ranks for in their order of ranking.

Some pro tools are relatively cheaper than others, and SEO at this point may seem to not be your thing, but you can always hire SEO experts to tailor your needs according to what you want. Surely, this book has opened your mind.

Optimizing your website architecture (Why modern SEO is about UX)

Site architecture represents how your website is sorted into categories and sub-pages. An optimized website is very important for search engines. A good site structure makes it easy for search engine bots and crawling spiders to navigate each page on your website.

If pages aren’t properly linked together, these bots may not index them, or if they are hidden, they may not find them, which is contrary to the ideal nature of making every single page on your website readable by search engines. If your structure is very good, in fact, your site links will regularly appear in search results.

Apart from search engines, visitors to your website will also likely stay on your page if your website has a good structure because of the ease of navigation it offers them. All pages are interlinked such that users can reach each page with the least possible amount of without having to keep going back over and over again; better user experience (UX) translates to more sales.

Website architecture is vital for e-commerce businesses due to the high number of pages on your website, ranging from hundreds to thousands, especially upon expansion – adding new products and categories; your site structure gets even complicated.

Restructuring a website can be very messy even for professionals if it doesn’t have a standard architecture from the start.

When working on your site architecture, it is important to note that:

Your structure is kept simple and scalableNo page takes more than 3 clicks away from the homepageHave short URLs that humans can easily understand.Use high quality and attractive images; your product photos can appear in Google image search, essentially doubling your exposure.



Website Speed

Your website speed plays a huge role in SEO because it contributes greatly to the user experience on your website. Nearly half of internet users expect a page to load in 2 seconds at most, and if it takes longer, they tend to close the page or just open a new browser tab. One of Google’s ranking metric is User experience (UX), which is your website speed is a major part of your SEO.

To optimize website speed, you need to know your current site speed. Google’s PageSpeed Insights is a good tool to see how fast your site is.

Several reasons could cause a slow website ranging from slow hosts and poor server response time to very large images, crawlers, redirect issues, and many others. You should watch out for these and ensure they aren’t affecting your website.

Mobile-Friendly Websites

Google also uses mobile-first indexing, meaning your site rankings will depend on mobile performance because more than half of all internet traffic goes through mobile devices as more sophisticated mobile devices are being manufactured. So it is important to see that users enjoy the best mobile experience to maintain a high ranking in Google searches.

On-Page Search Engine Optimization

On-page SEO refers to all the measures you can take within your website to ensure that it ranks high enough and generates higher traffic in search engines. Some of the things to watch out for on-page SEO are;

Breadcrumbs

Breadcrumbs are small text-arrow paths, usually at the top of a page; they serve as secondary navigation. It allows users to know the exact location where they are while navigating your website. Knowing where you are on a website, plus the added ability to go to a previous page or category enables a better User experience (UX). Google also loves breadcrumbs because it helps to figure out how your website is structured. Breadcrumbs can also appear in the search result.

Secure Connection

Having a secure (HTTPS) connection is very important for ranking your e-commerce site. Your site security is important to Google before directing users to ensure encrypted browsing and safe navigation, preventing hackers from stealing personal information like passwords and credit card details.

Run a full SEO audit

E-commerce websites usually suffer from technical SEO issues due to many pages on a website. These issues can hamper performance and, in the process, give a poor user experience.

Things you should check out for when running an SEO Audit



Avoid duplicate content as Google might not index such pages.Make sure you implement redirects properly to avoid slow performancePoor redirects can also cause indexing issues as they lead to orphaned pages (pages with no links pointing to them), making it difficult for bots and crawlers to access them for indexing. Avoid broken links, as Google will lower your rank if you usually have “error 404” because of your unreliability for searchers and the poor user experience it brings about.



Last but not least: Work on Link building

One of the strongest pointers to how well your website is optimized is the number of external links that point to it (backlinks). Without backlinks, it’s really hard to rank in a competitive niche. Backlinks are the most difficult part of your whole strategy as they drive traffic to your website. Although many business owners just buy backlinks from sellers to rank well in search results, it is important to try and make them organically, to save cost, and because it usually lasts longer than when you buy from sellers. Also, bought links can be bad, which will harm your website instead of ranking them higher.

Read Also: Amazon Business Model, Etsy Business Model, eBay Business Model, E-commerce Business Models, Platform Business Model, How to Start an E-commerce Business, E-commerce Marketing, Amazon SEO.

Read More:

Business ModelsCompetitor AnalysisDigital Business ModelsDistribution ChannelsBusiness StrategyValue PropositionMarketing StrategyBrand BuildingSWOT Analysis

The post A Complete Guide To E-commerce SEO appeared first on FourWeekMBA.

E-commerce Marketing Channels To Grow Your Store

E-commerce marketing is part of the digital marketing landscape, and beyond, where e-commerce businesses can enhance their sales, distribution, and branding through targeted campaigns toward their desired audience, convert it into loyal customers which can potentially refer the brand to others. Usually, e-commerce businesses can kick off their digital marketing strategy by mastering a single channel then expand for a more integrated digital marketing strategy.

Digital Marketing as a Tool for Business Growth



[image error]Digital marketing is a sub-set of marketing which uses the Internet, and online platforms to drive a marketing strategy. Digital marketing channels offer opportunities to reach small audiences with a high degree of personalization, thus growing businesses even with lower budgets and a better understanding of those audiences.

Digital marketing uses the internet and other online-based digital technologies, mainly with computers, mobile phones, and other digital media and platforms to promote products and services for better reach.

The importance of digital marketing in modern-day businesses cannot be overemphasized as it g helps your business make use of contemporary techniques and strategies that will attract quality traffic to your business for better engagement and conversion from interaction to purchase. Digital marketing also makes it possible not to fly blind into the world of advertisement. It helps to measure every click with analytic tools, which will assist you as an e-commerce business owner in drawing up patterns that consumers exhibit, which may influence buying. It also helps to give detailed insights about the best way to reach your target audience so that you can channel your energy in a particular direction due to the amount of data that you can gather with the help of Digital Marketing.

[image error]Venture capitalist, Dave McClure, coined the acronym AARRR which is a simplified model that enables to understand what metrics and channels to look at, at each stage for the users’ path toward becoming customers and referrers of a brand.

There are many channels of digital marketing, some of which include:

Paid search marketingPay per click (PPC) marketing Social media marketingContent marketingSearch engine optimization (SEO)Affiliate marketingEmail marketing



Paid Search Marketing

The paid search digital marketing is an advertisement method that generates traffic from paid adverts on various search engines.  It may also be called search engine marketing (SEM). Paid search campaigns can be run on Popular search engine platforms Google Ads, Yahoo Ads, and Bing Ads.

Pay Per Click (PPC) marketing

Pay per click (PPC) digital marketing is a type of advertisement where you pay for every user who clicks on an ad, or per thousand Ads. Facebook Advertising and Twitter promotions are examples of this.

Social media marketing

This type of digital marketing encompasses all advertisement you run on social media, such as Facebook, YouTube, Instagram, LinkedIn, Snapchat, and Twitter. It is one of the best ways to gain exposure for your business and engage with your customer base on your business’ social media account; marketing your business on social media without promotions takes a lot more time and effort, but if you hop on proper trends and discussions, in the long run, it can deliver good results.

Content marketing



[image error]Content marketing is one of the most powerful commercial activities which focuses on leveraging content production (text, audio, video, or other formats) to attract a targeted audience. Content marketing focuses on building a strong brand, but also to convert part of that targeted audience into potential customers.

Content marketing involves any digital marketing activity that uses content assets like eBooks, blog posts, images, infographics, videos, etc. to engage customers’ awareness, which will eventually lead to a higher amount of clicks, and eventually sales. Your content should be one that encourages feedback, interaction oriented, and a source of solution to capture adequate attention.

Search Engine Optimization (SEO)



[image error]Amazon SEO represents the set of marketing tactics that sellers on Amazon can employ to better rank their products’ pages organically (without paying for placement), thus building a continuous stream of customers on the store. In short, Amazon SEO leverages Amazon search capability to rank e-commerce pages and make more sales.

This digital marketing technique involves the effective arrangement of content and keywords on a website as well as the structure of your website to improve rankings in search engines, as customers are unlikely to go to page two after a search, so you need to rank as high as possible, even on the first page. SEO can be applied with a couple of more non paid marketing strategies, as its aim is to ensure that your content surfaces as many times as possible to ensure a higher ranking. This strategy will be discussed more with more details in chapters to come.

Affiliate Marketing



[image error]Affiliate marketing describes the process whereby an affiliate earns a commission for selling the products of another person or company. Here, the affiliate is simply an individual who is motivated to promote a particular product through incentivization. The business whose product is being promoted will gain in terms of sales and marketing from affiliates.

Affiliate marketing basically is paying a third party (a person or a business) to promote your products and services on their website. Rather than pay for clicks, you pay a commission to that third party for traffic or sales that have been referred by that website.

Email Marketing

Email marketing is a much underrated part of digital marketing because it is one of the oldest forms of digital marketing; however, it is still one of the most effective digital marketing methods. Virtually everybody checks their emails daily, even when they don’t have enough time to actively go on their social media applications. Sending email updates, promos, freebies, and special offers, etc. to a list of subscribers can be a great way to keep up contact with your existing customer base and also give skeptical potential customers reasons to make a purchase.

Other digital marketing types



[image error]Influencer marketing involves the marketing of products or services that leverages the popularity, expertise, or reputation of an individual. Influencer marketing is often associated with those who have large social media followings, but popularity should not be confused with influence. Influence has the power to change consumer perceptions or get their audience to do something different.



[image error]Inbound marketing is a marketing strategy designed to attract customers to a brand with content and experiences that they derive value from. Inbound marketing utilizes blogs, events, SEO, and social media to create brand awareness and attract targeted consumers. By attracting or “drawing in” a targeted audience, inbound marketing differs from outbound marketing which actively pushes a brand onto consumers who may have no interest in what is being offered.



[image error]Guerrilla marketing is an advertising strategy that seeks to utilize low-cost and sometimes unconventional tactics that are high impact. First coined by Jay Conrad Levinson in his 1984 book of the same title, guerrilla marketing works best on existing customers who are familiar with a brand or product and its particular characteristics.



[image error]Multi-level marketing (MLM), otherwise known as network or referral marketing, is a strategy in which businesses sell their products through person-to-person sales. When consumers join MLM programs, they act as distributors. Distributors make money by selling the product directly to other consumers. They earn a small percentage of sales from those that they recruit to do the same – often referred to as their “downline”.



Challenges of digital marketing



Keeping Up with Web Trends might be difficult because it will require a huge amount of online presence to know what people are talking about. As a new business, you may not have the capacity to employ a full-time social media manager.In a highly competitive digital space, content creation professionals will be needed to create content that will Generate Traffic and Leads, and not just generating them. Still, it must be able to have a high conversion rate. You may decide to contract out your content creation, but it cannot be as effective as having a content creator who knows the nooks and crannies of your business and the content to create in that regard. But funding for an increased salary structure may be a barrier.Sometimes getting a new set of customers via marketing overwhelms E-commerce businesses that they tend to neglect the old ones, which should not be so because your customers are your greatest assets.Budgeting the amount you want to use for marketing may be difficult, especially when you use pay per click channels; as much as it is advisable to be prudent with spending, slashing your marketing budget may not allow it to yield proper results. The budgeting decision sometimes becomes a herculean task.Determining the returns made from marketing will require a lot of communication with your customers; you need to know what marketing channel is making enough conversion from clicks to know where to focus your energy. It is easy to determine the number of clicks you get, but if you are using more than one marketing channel, it becomes difficult to know which clicks gets the most conversion. Organizing surveys for new customers to ask how they heard about your platform may help you handle this challenge.

In this age, Prospective customers are typically almost on their smartphones, surfing the internet, devoting a ton of attention to it, so effective digital marketing must mean that it can grab the attention of internet users by communicating things that are in sync with your target audience. However, Keeping in mind that different marketing channels take different times for results is usually nice to merge various channels to properly target your audience.

Read Also: Amazon Business Model, Etsy Business Model, eBay Business Model, E-commerce Business Models, Platform Business Models.

Read More:

Business ModelsCompetitor AnalysisDigital Business ModelsDistribution ChannelsBusiness StrategyValue PropositionMarketing StrategyBrand BuildingSWOT Analysis

The post E-commerce Marketing Channels To Grow Your Store appeared first on FourWeekMBA.

How to Start an E-commerce Business

An e-commerce business is a company that sells online. E-commerce isn’t just about marketing, but it pertains to sourcing, logistics, and distribution. Therefore, building an e-commerce business model implies understanding digital business and how to integrate physical parts, like sourcing and logistics, to digital elements, like distribution and digital marketing.

Understanding the Basics of E-Commerce

E-commerce, which is a short form for Electronic commerce, may be defined as a business model that involves buying and selling physical products, services, and digital products between several firms and individuals over the internet, without the distance posing a barrier. It also involves the electronic transfer of money to execute these transactions, without buyers meeting sellers. E-commerce, usually conducted over mobile devices and computers, tablets, is also referred to as an online version of catalog shopping, like you go through the Mallmor stores, pick a product you want, pay for it and check out with your credit or debit card.

Nearly every product and service you can imagine is available through e-commerce platforms, including books, plane tickets, perishable items like food, digital goods like online courses, and even financial services such as stock trading and investing.

E-commerce has helped many businesses establish a more prominent market presence. Since the internet isn’t limited to physical buildings, someone in Toronto can render a service to a customer in California without meeting the person. A seller in Asia can sell to a buyer in Europe. Due to the limitless nature of the internet, it enables efficient distribution channels for products or services.

American-owned Amazon and Asian-owned Alibaba are examples of the largest e-commerce businesses, and their rise has inevitably reduced the importance of physical stores.

Advantages of E-Commerce Businesses over Physical Stores

E-commerce businesses reducing the importance of physical stores is inevitable because of the great convenience experienced in online shopping. Physical stores need customers to leave their homes, go to a store, searching catalogs and departments, and even deal with the possibility of not finding the item in the said store and having to settle for another product or going to another store.  But since the massive adoption of e-commerce, customers sit in the comfort of their homes, use a search box to search for items they want, pay securely online with debit or credit cards, and can even compare prices with other online stores, pay a small fee for shipping and get it at their doorstep. Convenience has been a crucial part of human evolution, as seen from our devices, and applications; they consider the convenience of the user.

E-commerce business runs 24 hours a day and 7 days a week, unlike many physical stores that run for about 12 hours daily and 5 to 6 days a week. Online stores also typically offer a wider range of products on their platforms because they can have products from third-party sellers.

The growth of E-commerce has also increased employment in customer service, digital marketing, website developers, logistics and courier services, freelancers, and so on, and the continual rise of E-commerce will only mean more employment opportunities.

Because of these reasons and many more, starting an online business nowadays seems like an attractive idea for many young entrepreneurs. Before anyone explores the e-commerce industry, they need to understand the technicalities behind it and what it takes to run a successful e-commerce business.

E-Commerce Business Models



[image error]We can classify e-commerce businesses in several ways. General classifications look at three primary categories:
– B2B or business-to-business, where therefore a business sells to another company.
– B2C or business-to-consumer, where a business sells to a final consumer.
– C2C or consumer-to-consume, or more peer-to-peer where consumers sell to each other.

There are 4 main significant models of e-commerce businesses, classified based on the participants of the trade. They are:

Business to Business Model (B-2-B): This is a case where businesses sell to other businesses, like wholesalers selling bulk products to other businesses that will sell in bits or businesses offering business optimization tools as a service to other businesses.Business to Consumer Model (B-2-C): This is the most common type of model in E-commerce; as the name implies, it involves a direct transaction between the business and sometimes a third-party retailer with an online customer. Examples of this business model are Nike store, Alibaba, Amazon.Consumer to Consumer Model (C-2-C): This is a model of business where consumers meet directly with other consumers to trade with one another, while the owner of the website makes profits from commissions, adverts, traffics, etc. eBay and Offer Up are (Restricted to the US) are examples of this business model.Consumer to Business Model (C-2-B): This is a business model where individuals offer services or gigs to businesses, especially between remote workers and employers, usually on a contract basis, platforms like Fiverr, Freelancer, Upwork enables this business model.



Selecting a Microniche



[image error]A microniche is a subset of potential customers within a niche. In the era of dominating digital super-platforms, identifying a microniche can kick off the strategy of digital businesses to prevent competition against large platforms. As the microniche becomes a niche, then a market, scale becomes an option.

A niche is a specific area of a much broader range known to you or one you can handle well. For something to be called your niche, you need to know a great deal about it (with the increased digital competition, to start successfully, a microniche is even more effective).

A lot of E-commerce startups fill up their websites with a lot of products in so many categories, without anything specific; this epitomizes a lack of identity and focus. As an E-commerce business owner, you have to be known for something; it makes no sense to be a “jack of all trades, and master of none.” Unless you have a very huge budget, you can’t stuff up your platform with thousands of products like Alibaba or Amazon. You need to scale down to a well-known Niche to efficiently run an E-commerce business.

Selecting a niche is a key step in opening your online business. It could be wise to approach this process by identifying established companies that already work in your preferred space. At this point, you might be shrugging within you asking yourself why you have to look for competition when you can just look for a space with little competition for a business; the simple truth is that, as lovely as monopoly sounds, for an online marketplace where there are no limits, competition is key; if there is little of no competition, then it is a pointer that such niche lacks people who are willing to purchase the product or service. Although as much as we want competition, we do not want to pick an overly crowded niche because it might seem herculean breaking in into an already saturated market dominated by huge brands.

You need to have an identity. Know who you are and what your brand is, what you represent, and quite importantly who your target customers are, you need to know who you are selling to to effectively make sales.

[image error]The minimum viable audience (MVA) represents the smallest possible audience that can sustain your business as you get it started from a microniche (the smallest subset of a market). The main aspect of the MVA is to zoom into existing markets to find those people which needs are unmet by existing players.



Choosing and Sourcing for profitable Products to Sell Online

In choosing a Niche, there are certain things to consider to ensure the best possible market for you, and in the end, make a profit – which is the end game of any business.

Make A Keyword Search

The concept behind Keywords – which will still be adequately discussed in further chapters could play a vital part in selecting a Niche, as we want to select a product category that people want; it’s not just about what you want to sell, it’s also about what people want to buy.

From the niche ideas that come into your head, identify the keywords, and do a search. If the items related to your search have much traffic, then it is likely an idea with a good market for a niche. Bear in mind that we do not want too much traffic as well, so avoid overcrowded keywords.

[image error]Above an example of keyword research for a microniche bookstore focused on historic fiction for the renaissance, where you, perhaps, can look for the search volume and related trends for influent authors in that microniche (data: SEMRush).



Solve A Problem Or Meet A Demand

As an entrepreneur that wants to delve into a particular niche and grow rapidly, you should sell products that meet a particular need or solve a problem. One of the ways to do this is to examine your chosen niche. Since it is a category that isn’t alien to you, check for products or services that were already available but leaves a loophole with a particular problem you have personally experienced. Remember that good user experience and convenience is a significant determinant of how well a product will move in the market. An excellent example of this is when mobile phone cameras became a crucial factor in buying phones. Still, the initial releases were quite expensive, if you can offer relatively cheaper phones for sale with an excellent mobile camera, you will get a lot of customers wanting to try it out, and if you can adequately solve the problem, the first set of people to buy may leave reviews, even encouraging more people to try out such product.

Make a Market Survey

Remember, it isn’t about you. It’s about potential customers. Therefore, one of the best ways to see if an idea will be lucrative is to simply ask people for their opinions about it. Of course, you can’t just start asking a random set of people questions, and you don’t want to rely too much on the opinion of people close to you because they may attach emotions to their opinions, which will give you a skewed view of things. Objectivity is vital, so it is best to do a survey with an organized set of people interested in the product. They might even be your first set of customers. 

What you need to do first is to identify people who might have an interest in the product; you can meet them on social media networking platforms like MeetUp or Smacktive. These people could become potential customers; therefore, they are the people you should network with to get constructive criticism since you’ll be in the same business environment as the people who might find a use for your idea. When talking to people, get an adequate sample space, and talk to 20 people about an idea. 14 people should be able to see the good in it, and it is a sign that you can proceed.

Engage in Prototype Survey (sell before you build)



[image error]A leaner MVP is the evolution of the MPV approach.

When you are sure that you have a niche and products you want to sell, and more importantly, you have made connections with a couple of people who you think will be interested in buying your product, then go out with samples, your sample is meant to be a yardstick to judge quality, to see if it matches the product description, and also to judge packaging. Don’t be afraid of getting bad reviews since you haven’t been properly launched. The reviews from the prototype will give you a pointer to what you should look to fix before hitting the market, especially if it is something mentioned by a lot of people. Even if you have no problems with certain things, the potential users do, and their opinions matter more than yours.

Select A Brand Name

Having an identity is very important for product selection, and this is the bedrock for branding. Your brand isn’t just limited to your name and logo, it also comprises of how your products are packaged, your customer care relation, and every other thing your business offers that make you stand out from others. Your target customer base will unconsciously know you for certain things, and if they can’t get those things elsewhere, they will always come back. It doesn’t have to be exceptional; it just has to be unique. 

When selecting a brand name, it is important to select a domain name to go with it. Since it is the address for your website, a domain name will help buyers find your business easily. It is advisable to use the same name for the business as your domain name so that visitors who can remember can just type in the website address at any time without having to do a Google search. “Amazon.com” is a website – here, “amazon” is the domain name, and “.com” is the domain suffix; there are other domain suffixes like “.co,” “.org,” etc. But it is usually advisable to go with “.com” as it is usually what comes to the mind of people first, and even in computer auto-fills, “.com” is more likely to appear.

All these things exclusive to your business make up your brand.

Trends

Often, certain products hit the market, and people love them, even you as a consumer and not a business owner love the product, but sometimes they don’t catch people’s fancy for a very long time, these products are called trends. Trends are not advisable for a fresh business, but when you are established, you can hop on trends – since it satisfies consumer cravings. This will make you benefit from a product in massive sales for the time the product is trendy. Be mindful though, jumping on trends when the demand is starting to wear out may just leave you with overstocked items with little sales volume.

We have discussed criteria for choosing a product to offer the market, but another thing to consider is how to source them. As an e-commerce business owner, you are most likely not going to manufacture your products by yourself. You will need a manufacturer.

There are two types of manufacturers where you can source for products, which are: Local and International. As a business owner, you should weigh them side by side to determine what is best for your business and fits your financial constraints.

Cost

Local manufacturers are usually more expensive than international manufacturers because of the higher cost of manufacturing and even higher cost of labor in European or American countries. Many Global manufacturers produce for cheap. But they generally demand that you order many units, which could be a challenge for new e-commerce stores.

Communication

The majority of the top global manufacturers are in Asia; the language barrier might be a problem to effectively communicating what you want in your prototype, you may also be in different time zones, and when you are free to efficiently communicate, your manufacturer is at his busiest period. Local manufacturers are much easier to communicate with, make corrections in the prototypes, and have to do way less remodeling.

Quality Control

If your business requires a lot of quality control, then local manufacturing is probably the way for you, as you can ensure consistency in the quality of your product because of the proximity between you and your manufacturer. It is usually more difficult to manage quality, especially for the first few times with an international manufacturer.

Time Factor

Local manufacturers will likely take more time to complete manufacturing due to the relatively smaller scale of production. In contrast, international manufacturers will complete manufacturing faster but will definitely take a couple of weeks longer to get your items shipped to you due to the distance involved.

Production Scale and Capacity

International suppliers can usually produce on a large scale, unlike many local manufacturers. If you want many units of products, for efficient production, it is advisable to consider international manufacturers.

Resourcing

Getting raw materials for production may be more difficult for local manufacturers. If your projected product will be one with scarce raw materials, it is advisable to go for international manufacturers to ensure the best materials used for your products.

Ease Of Finding a Manufacturer

It is quite easy to find a global manufacturer for almost all products, but local manufacturers may be scarce for a particular product. Even at times, geographical conditions may prohibit the manufacture of some products in certain climes. Generally, you’d find it easier to get a manufacturer for your product on the global market than the local market.

Importation

Importation can sometimes be unpredictable, as there may be regulations for international shipping, causing constant hassles and delays. It is vital to be abreast of the relationship between your country and your manufacturers to know its effect on bringing in goods to the country. If you are unsure, it is safer to go to a local manufacturer.

In all, there is no better one between local and international sourcing. Still, as a business owner, you should understand your products and adequately decide the better method of sourcing for a manufacturer. Although it is important to note that as a startup, local sourcing is usually more efficient, and eventually, you may be ready to move from local to global manufacturing to get a higher volume of products at a more affordable rate.

Searching for a Manufacturer

You can use search Google and Bing to find a manufacturer. You can also try specific business search engines like ThomasNet, also on Alibaba, you can find manufacturers. 

Once you find several manufacturers you might want to work with, it’s time to research them to know their track records and see reviews other businesses have about them. Check also who they manufacture for, if they manufacture for a well-known company, it may be a pointer that they will guarantee quality.

Packaging

As earlier mentioned, your packaging is part of your identity and your brand. No matter how great the product manufactured is, packaging usually gives it aesthetics, making it more appealing. The packaging doesn’t necessarily have to be crazy. It only needs to be specific to your brand, appealing and neat. The packaging is the very first part of the customer experience because it is the first thing customers will notice when they get your product, so it’s important you get thinking about it, put yourself in the position of the buyer, and look to impress yourself while being very critical. As I have reiterated, consumer experience goes a very long way in determining the success of any business – online or offline.

To help inform your packaging decisions, it would be helpful to spy on other sellers in your niche; you can order products from your competitors to allow you see exactly how they package their products, see what they are doing right, and take it as a pointer, critique what you think they are doing wrong, and improve on it.

Search online for packaging ideas; Google and Pinterest are good avenues to do this. Just search with your “product type” and packaging as the keywords, and you have a barrage of results to choose from.

Things you need to know to effectively sell online

There are a couple of things you should bear in mind before you begin your journey as a new E-commerce business owner. These little details sometimes draw the lines between a business that sells effectively and one that doesn’t

Don’t Focus Too Much On Premium Price Commodities

As a startup, you should have a relatively low retail price range in mind as you search for products. You should also not set your prices too cheap or too expensive, to get good attention from the public. However, you should not only consider manufacturing costs, but you should also consider other running costs like an advertisement, logistics, and so on. Although you want to go cheap, do not engage in too cheap products as you may find it difficult to get reasonable profit margins to make a profit or even break even. You can set your minimum retail price at around $20, duly putting your costs into consideration.

Sell Products with Good sales volume

During your market survey, you should consider dealing with commodities that many people want; note that products with high sales volume are not usually expensive or luxury items. Sales volume is very important If you are selling a product at the cost of $20 with an estimated profit of $5. You sell 500 in a month, then only one product has made you $2,500, unlike if you sell a product worth $100 with an estimated profit of $15, and you can only sell 100 in a month, that product will make you less money than the first product, despite having a far greater profit. That is the impact of sales volume.

Consider Products With Low seasonality

It makes sense to sell products that will sell all around the calendar year, unlike products that will sell in particular periods or seasons or holidays. Very seasonal selling products will leave your business in a weak position. 

Judge Market saturation With Reviews

When selecting a product, consider the number of reviews the top sellers get on global marketplaces like Amazon. This will give you an idea of how much competition you are likely to face. 100 to 200 reviews are good enough to get a customer base, but above 200 reviews might indicate that you are going into a very competitive market, which may not be good for a new business.

Sell Products That Can Be Improved

You most likely will not be the first person to think of a particular set of products. Many people would have done the same; in fact, many people will create a successful product, but you will only stand out among others if you create a superior product achieved by regular modifications tailored to meet consumers’ demands. Therefore allow your customers to be the judge, encourage them to leave a review. This will give you a hint on what they want you to improve.

Sell Small and Lightweight Products

Huge and heavy products will attract more shipping and storage; this is why going for small and light products will keep your shipping costs and warehouse storage fees at the barest minimum. And our most basic mathematics tells us that fewer fees will give us more profits.

Complexity In Manufacturing

You should avoid materials that you sense will pose a couple of manufacturing challenges, resulting in great customer dissatisfaction and more need for modifications, taking the focus of your business from you. Keep it as simple as possible.

As I have previously mentioned, your customers are the most important; as much as you want to sell something you love, you need to sell what will sell. And in going into a competitive market, one thing that will attract customers to you is your Unique Value proposition.

The Unique Value Proposition (UVP) is a sentence or phrase that explicitly tells your potential customers what they stand to gain from shopping with you rather than your competitors. How well your products can meet their needs and solve their problems.

To efficiently satisfy end users, you need to think like them, put yourself in their position, and make yourself see reasons why they should purchase from you and not your competitors. If you cannot indubitably convince yourself, then you cannot convince a customer. 

You need to ask yourself, what benefits do the end-user find important? What benefits can you give, but your competitors cannot? What benefits will the target consumers easily understand? Is there something in your selected niche you would like to buy online but can’t find?

Your answers to this question will determine what unique value you need to propose.

Your Unique Value Proposition should be your watchword that even registers in their subconscious. For example, Amazon’s UVP is “Low price, wide selection with added convenience anytime, anywhere.”

This watchword of Amazon is what they follow, and it’s what their customers usually expect from them.

If you notice that statement, it is only a short sentence that passes a “this is what you should expect” message to customers. That is how a UVP should be. Precise, short, and concise.

In your market survey, you should note what holds a lot of importance to your customers and make sure you offer them that exclusivity, and in no time, you will be the benchmark in your selected niche.

Usually this UVP should be on your website and other newsletters you publish. In constructing this short but powerful sentence, you need to be unique such that you are difficult to copy and capture readers’ attention, so you should be careful not to use words difficult to understand. 

Scaling

After doing all these and you have started seeing progress in your business as you wish to, you will begin to have more demands than when you just started out. To avoid being overwhelmed by these demands, you will need to expand your business operations to meet the increased demand. This is what scaling is all about.

You will discover that at certain points, your business becomes more stressful, and you have started taking on too many tasks than you can handle, and barely have time for yourself. It is imperative to widen your operations and bring on more personnel.

Even if you cannot fully employ staff, as you may feel it’s too costly, you can still outsource many things on a contract basis. Some tasks can be safely outsourced to freelancers, especially things like a few administrative tasks such as data collation and analysis, graphic design, marketing, copywriting, and social media publicity. Although, as much as you want to outsource roles and delegate responsibilities, you should take up roles that will directly affect your business. It may not be wise to put control of your website in the hands of some random person you met online. Instead, you can employ them on a contract basis, build trust, and when you feel they can handle things on their own, you may lend more backroom control to them.

Automation

Automation, which uses devices and software to reduce human intervention in tasks, is another way to ease the burden of overloading yourself as a business owner. Certain tasks you do manually can be automated to give you more time to handle other things that need human intervention, to a good extent, and even eliminating human errors.

Customer Service

Customer service is an important element for any business online or offline, but it is key for E-commerce. Buying things online and the ease that comes with it is very appealing, but there is always a concern about getting substandard products or not getting what was paid for or even being scammed. Giving reassuring and prompt assistance to customers will help eliminate these concerns.

Your customer service is part of your brand as a business owner; the way customers report your customer service to non-users of your platform and potential customers is part of who you are. If customers complain about poor service about your newly growing brand, it could be a killer and a major setback in your journey. Your accessibility to engage them and soothe their grievances will go a long way.

Prioritizing your customers, for the umpteenth time, cannot be overemphasized, they literally trust you with their money without knowing you, and they deserve to be treated with utmost regard because they are a business’s greatest asset.

Things You Can Do To Improve Customer Service



Set up a Customer Support Email that contains your company name, e.g., support@ecommercebusiness.comReply to Emails QuicklyWrite Email Templates to aid quick responseCreate a Chatbox on Your Website for live chat and a bot to handle some part of it.Give Free Product to Unhappy CustomersSave Repetitive Questions and Create Frequently Answered Questions (FAQs)



Analyzing Competition in your Preferred Niche

It is important to identify your competition to understand their position and how you can relatively place yourself to be at a vantage position, noting what makes you similar to your competitors and what can make you stand out. Analyzing competition also helps you discover a few strategies your competitors use to make their website rank well.

Steps Involved In Competitive Analysis



Identify your competitors

To do a good competitive analysis, you need to first know who you’re up against. A keyword search is a good way to do this. Identify websites doing well in this niche; competitors focused on more than one niche but doing well in your selected niche are not your biggest rivals. Rather, your strongest competitors are those in just your niche. In searching keywords, as a fresh company, it is better to use low competition keywords at first. When you have successfully launched and have a rank, you can go for higher competition keywords to make your rank even better.

You can also extract your competitor’s keywords with tools like “Ahrefs” or “Ubersuggest” or many other tools online.

Watch Their Social Media

It is also a great idea to see how your competitors are doing on social media, how their promotion and Ads go, across several social media platforms, Twitter, Instagram, and Facebook. You should see a pattern, which will help you identify their objectives. You should duly note the kinds of content they upload on these platforms and content people engage more. This will give you a hint on where to channel your energy. Checking from several companies and combining results for yourself will help you move faster.

On your social media, you need to get high traffic, and users of different social media apps respond differently to different content. To identify the content that engages twitter users, differentiate it from Facebook, and eventually apply properly in your case.

Note their Unique Value Proposition



[image error]A value proposition is about how you create value for customers. While many entrepreneurial theories draw from customers’ problems and pain points, value can also be created via demand generation, which is about enabling people to identify with your brand, thus generating demand for your products and services.

You need to know what exclusive thing your competition offers, and you should offer something catchier.

Analyze Competitors Websites

Visiting your competitor’s website will help you understand how well they have optimized their web page to please customers. Design themes used, content management, customer engagements, frequency of posts, and many more things are worthy of note. In essence, combine your strategy with some of your competitor’s best strategy and apply it to your own website to stay ahead from the perspective of the customers.

Analyze Content

It is important to note the type of content your competitors are generating, their visual content (i.e., Images and Videos), how they use it to breakdown their content, whether they choose to give more information or seek to regularly dialogue with their customers, discover what is not good enough and improve on it. Note how deep their content is; you should give better-detailed content, more information, and value your customers get from you will make them rank you better.

How To Effectively Handle Third-party Suppliers and Quality Control

Third-Party suppliers are the most integral factor in the success of dropshipping. They can ease your business or become a burden and cost you resources in money, administration, and performance.

To avoid scenarios like these, quality control and assurance is vital in ensuring that your business is eased and not worsened, and you should consider these steps in selecting a third party supplier.

Develop A supplier list

Every e-commerce business should have an approved supplier list sorted hierarchically by metrics of performance concerning cost, quality produced, and efficiency of delivery. Sorting your suppliers will give you a first choice and subsequent choices for different products at a time and add varying levels of importance to individual suppliers.

Quality Audits

Supplier quality audits are very important in ensuring that the products from these third-party suppliers to be dropshipped meet the pre-agreed quality specifications. Since you have a list, you should audit for importance, scrutinize those suppliers that you know are more critical to the product’s availability and quality, and ensure more frequent on-site audits to ensure that they have adequate quality controls and measures. Also, ensure audits are an avenue to let the supplier know what you have learned from the market survey and what you feel should be scrapped, added, or improved.

Keep Suppliers To a Minimum for Better Quality Control

The popular phrase “the more, the merrier” doesn’t apply in this case, as it makes a lot of sense to keep dropshipped products at a minimum. More products to be drop-shipped will mean more suppliers are needed, which will amount to a more challenging and costly avenue to monitor quality. Like mentioned earlier, Dropshipping should be a means to aid your business, do not enter your business around dropshipping.  This process of supplier rationalization enables you to develop a better supplier list.

Estimate Supplier Performance

You can easily measure supplier performance with a couple of Key Performance Indicators (KPIs) such as Delivery time, Response time, Defect rate, Inspection results, and audit results

Managing your third-party supplier quality is not just about avoiding costly customer backlash, bad reviews, or poor website rankings. When quality control is adequately ensured, it generates great value for your business due to overall standard product quality, boosting your company’s reputation, and bolstering high-quality business performance.

Essential Pages To Have On Your Website



Shop: There should be a separate link to your store, even if you have products for sale on the home page. You should have a store where you will further sort products into categories.Shipping/returns: Provide necessary information on the way to go on shipping, your return policy, and your money back policy all next to each other in a quite obvious position on the website. Contact/help: There should be clear customer support emails and social media handles.Frequently Asked Questions: As you engage customers with their issues, you’ll start getting a certain set of questions several times. Instead of just emailing the same several times, you should compile them on a “Frequently Asked Questions” FAQ page.



Becoming Profitable



Create A Landing Page

A landing page is usually created weeks before the official opening of your store. You drop your website link on your ads, and potential customers go there, and to everyone that visits, the landing page comes up with a lead magnet (freebies you offer potential customers in exchange for their details). You can offer them free shipping on the first order, or a 10% discount on all items or something else you think can be enticing enough to make the potential customer drop their email address. The submitted email addresses are collated into an email list, where you can send a reminder newsletter upon your launch.

Maintain Social media Presence

You should be on social media well before and even after your store launches. You can use influencers on Twitter or Instagram to push campaigns that will make you on every mobile phone, before, during, and after your launch – you want to stay fresh in memories.

Learn To Maintain Good Customer Relations

One way to grow your e-commerce store is to make your few regular customers. This is even easier than finding new customers altogether. Because of some level of trust already built, you are more likely to easily sell to an old customer than to a fresh customer. Offer discounts for returning customers, or for cheap items a “buy one, get one free” coupon. You could also give customers another item related to the first item they bought at a cheaper rate. 

For example, “you just bought a new Apple Macbook pro, would you like to buy a new laptop bag at a 10% discount”. This will, of course, seem appealing to the buyer, and even if he didn’t have it in mind before, he would definitely consider it.

Communication

As this book has mentioned several times, your customers are your biggest assets. Communicate with them as you care, and they will return the favor. And vice-versa.

Keep Tabs On Data

Tracking key statistics and data for your store can help you maintain organization, save money, and help you avoid mistakes. Pay attention to performance indicators, and you will run a business that will yield optimal profit.

Be Ready To Face Challenges

You are your own biggest challenge; the moment you can overcome the pessimism within yourself, despite understanding how challenging E-commerce can be, you should be ready to face many challenges at the beginning, and even after you are off and running. As you grow, you will become stronger against challenges.

Mistakes are a Part Of The Business

You definitely cannot have it all figured out initially. You have to be fine with making mistakes and learning from those mistakes to build experience so that you won’t repeat a similar mistake. When you take a wrong step, return to the drawing board, analyze your failures, re-evaluate, and form a new strategy, to make progress.

Read Also: Amazon Business Model, Etsy Business Model, eBay Business Model, E-commerce Business Models, Platform Business Models.

Read More:

Business ModelsCompetitor AnalysisDigital Business ModelsDistribution ChannelsBusiness StrategyValue PropositionMarketing StrategyBrand BuildingSWOT Analysis

The post How to Start an E-commerce Business appeared first on FourWeekMBA.

Competitor Analysis

It’s possible to identify the key players that overlap with a company’s business model with a competitor analysis. This overlapping can be analyzed in terms of key customers, technologies, distribution, and financial models. When all those elements are analyzed, it is possible to map all the facets of competition for a tech business model to understand better where a business stands in the marketplace and its possible future developments.

Why competition in the business tech world looks slightly different

There are several way to look at competition. However, in a digital world, the concept itself (for now) has become more fluid. Indeed, when you look at companies like Amazon, Tesla or perhaps Google, where would you start? True, each of those companies have a main market/industry (Tesla = electric cars, Amazon = e-commerce, Google = search) and yet when we have a closer look at what those companies do we realize there is more to it.

Indeed, as those companies operate at the edge of business and technological innovation, often times they place bets on new markets and industires that if prove to develop, can become whole new industries.

So where do we start?

Understanding competition in the business tech world



[image error]A tech business model is made of four main components: value model (value propositions, mission, vision), technological model (R&D management), distribution model (sales and marketing organizational structure), and financial model (revenue modeling, cost structure, profitability and cash generation/management). Those elements coming together can serve as the basis to build a solid tech business model.

In the VTDF framework, I broke down tech companies business models in four main parts:

Value. Technology. Distribution And Financial model.

Each of those parts is essential to build a viable long-term tech business model.

Thus, we can leverage on this same model to also analyze competition in the business tech world.

Breaking down competition in the business tech world

When it comes to competition in the business tech world, we’ll analyze it from a few perspectives:

Current Customer Overlap: who are the key customers that are currently getting value and sustaining the business? Current Technology Overlap: what is the key technological advantage that sustains the value proposition of the business? Current Distribution Overlap: what is the key distribution channel the company is using to enhance the use of the technology that enhances the value proposition? Current Financial Model Overlap: is the company using equity/capital, debt/financing to grow or perhaps is it bootstrapping?

Once looked at the four components above, we can look at a fifth one:

Future Technology Development: what technologies is the company developing that can help develop a whole new market?

Let’s see each of those elements in details.

Current Customer Overlap

Who are the key customers that are currently getting value and sustaining the business?

Current Technology Overlap

What is the key technological advantage that sustains the value proposition of the business?

Current Distribution Overlap

What is the key distribution channel the company is using to enhance the use of the technology that enhances the value proposition?

Current Financial Model Overlap

Is the company using equity/capital, debt/financing to grow or perhaps is it bootstrapping?

Future Technology Development

What technologies is the company developing that can help develop a whole new market?

Case Study: Tesla



[image error]As an electric automaker and builder of sports cars and now trucks, Tesla’s competitors comprise companies like Ford, Mercedes-Benz, Porsche, Lamborghini, Audi, Rivian Lucid Motors, Toyota, and more. At the same time, Tesla is an electric energy production and storage company (SolarCity); it competes with Sunrun, SunPower, and Vivint Solar. And as an autonomous driving company, it competes with companies like Zoox, Waymo, and Baidu with the self-driving software.

Tesla isn’t just an automaker. Its business model spans across the electric-only car industry (a once blue ocean market that Tesla helped open up).

Tesla is also an electric generation and storage company, with SolarCity’s acquisition, which is an essential element of the Tesla business model‘s future success. It is enabling the ecosystem that will make Tesla sustainable as a company in the long-term.

In addition, Tesla is also investing on autonomous driving player. For that, we’ll have to analyze Tesla from these three perspectives.

Automaking

Within the automaking segment, Tesla has over the years diversified its products‘ lines, to cover different segments of the market. When Tesla entered the market, as a go-to-market strategy it had to enter it (nonetheless Elon Musk’s long-term vision to make the electric car available to the masses) with the Roadster model.

Sport & Performance

The primary models covering this segments are:

Roadster: here some of the competitors are Dodge Challenger, Porsche Chiron, and BugattiModel S: in this segment, Tesla competes with players like Mercedes S-Class, BMW 7 Series, Porsche Panamera, Audi A7 & A8 and more.



Suv

The primary models covering this segments are:

Model X: here some of the competitors are BMW X5, Mercedes-Benz GLS-Class, Volvo XC90, Porsche Cayenne.Model Y (compact SUV): in this segment, Tesla competes with Renault Zoe, Nissan LEAF, Volksvagen e-Golf, Audi e-tron and more.



Truck

In this segment, Tesla just launched the Cybertruck:

[image error]

Cybertruck’s competitors comprise Rivian, Ford, Bollinger.

City Car

Tesla has finally its mass-market product, the Model 3. This model competes with models such as BMW Series 2,3,4,5 Mercedes Class C, CLA, CLS, Audi A3, A4, A5, Lexus, ES, GS, and many others.

Energy Generation & Storage

Tesla acquired SolarCity back in 2016, for $2.6 billion, and with that, it competes in the electric production and storage industry with players like SunRun, SunPower, Vivint Sonar, Trinity Solar, and SolarWorld to mention a few.

Autonomous driving

Tesla’s Autopilot is one of the key ingredients of its technology and one of the most interesting future developments for the company. In this segment, Tesla competes with other autonomous driving companies like Zoox (bought by Amazon), Waymo (an Alphabet bet), and Baidu.

Read Also: Tesla Competitors, Amazon Competitors.

Read More:

Business ModelsPlatform Business ModelsDigital Business ModelsDistribution ChannelsBusiness StrategyValue PropositionMarketing StrategyBrand BuildingSWOT Analysis

The post Competitor Analysis appeared first on FourWeekMBA.

Tesla Competitors

As an electric automaker and builder of sports cars and now trucks, Tesla’s competitors comprise companies like Ford, Mercedes-Benz, Porsche, Lamborghini, Audi, Rivian Lucid Motors, Toyota, and more. At the same time, Tesla is an electric energy production and storage company (SolarCity); it competes with Sunrun, SunPower, and Vivint Solar. And as an autonomous driving company, it competes with companies like Zoox, Waymo, and Baidu with the self-driving software.

Breaking down Tesla competitors

Tesla isn’t just an automaker; it is an electric-only car automaker, an electric storage company, and an autonomous driving player. For that, we’ll have to analyze Tesla from these three perspectives.

Automaking

Within the automaking segment, Tesla has over the years diversified its products‘ lines, to cover different segments of the market. When Tesla entered the market, as a go-to-market strategy it had to enter it (nonetheless Elon Musk’s long-term vision to make the electric car available to the masses) with the Roadster model.

[image error]

While this model is still available, this is the highest-priced model and the product Tesla used to bootstrap its operations. Indeed, at the time, Tesla couldn’t produce a lower-cost electric car (Model 3 will finally achieve this goal), and that is how Tesla made its business model viable as it entered the new market for electric cars. This is what I call a transitional business model:

[image error]A transitional business model is used by companies to enter a market (usually a niche) to gain initial traction and prove the idea is sound. The transitional business model helps the company secure the needed capital while having a reality check. It helps shape the long-term vision and a scalable business model.

Over the years, as the market matures, Tesla grew, an electric ecosystem was born, and the technology to enhance battery performance improved, Tesla also expanded its products‘ lines to cover the various segments.

Sport & Performance

The primary models covering this segments are:

Roadster: here some of the competitors are Dodge Challenger, Porsche Chiron, and BugattiModel S: in this segment, Tesla competes with players like Mercedes S-Class, BMW 7 Series, Porsche Panamera, Audi A7 & A8 and more.



Suv

The primary models covering this segments are:

Model X: here some of the competitors are BMW X5, Mercedes-Benz GLS-Class, Volvo XC90, Porsche Cayenne.Model Y (compact SUV): in this segment, Tesla competes with Renault Zoe, Nissan LEAF, Volksvagen e-Golf, Audi e-tron and more.



Truck

In this segment, Tesla just launched the Cybertruck:

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Cybertruck’s competitors comprise Rivian, Ford, Bollinger.

City Car

Tesla has finally its mass-market product, the Model 3. This model competes with models such as BMW Series 2,3,4,5 Mercedes Class C, CLA, CLS, Audi A3, A4, A5, Lexus, ES, GS, and many others.

Energy Storage

Tesla acquired SolarCity back in 2016, for $2.6 billion, and with that, it competes in the electric production and storage industry with players like SunRun, SunPower, Vivint Sonar, Trinity Solar, and SolarWorld to mention a few.

Autonomous driving

Tesla’s Autopilot is one of the key ingredients of its technology and one of the most interesting future developments for the company. In this segment, Tesla competes with other autonomous driving companies like Zoox (bought by Amazon), Waymo (an Alphabet bet), and Baidu.

More on Tesla



[image error]Elon Musk, an early investor and CEO of Tesla, is the major shareholder with 21.7% of stocks. Other major shareholders comprise investment firms like Baillie Gifford & Co. (7.7%), FMR LLC (5.3%), Capital Ventures International (5.2%), T. Rowe Price Associates (5.2%), and Capital World Investors (5%). Another major individual shareholder is Larry Ellison (co-founder and CEO of Oracle), with a 1.7% stake.





[image error]Tesla’s vision is to “create the most compelling car company of the 21st century by driving the world’s transition to electric vehicles,” while its mission is “to accelerate the advent of sustainable transport by bringing compelling mass-market electric cars to market as soon as possible.” Tesla used a transitional business model as its ecosystem grows.



[image error]Tesla is vertically integrated. Therefore, the company runs and operates the Tesla’s plants where cars are manufactured and the Gigafactory which produces the battery packs and stationary storage systems for its electric vehicles, which are sold via direct channels like the Tesla online store and the Tesla physical stores.



[image error]Among the most recognized car manufacturers, Tesla is valued more than the combined market capitalization of GM and Ford. While the company’s direct distribution is a strength, its lack of financial viability is a weakness. Competition is a future threat. However, if Tesla defines a new market for car manufacturing its potential growth will be massive.



[image error]Tesla made over $24.5 billion in revenues, and it lost $69 million from operations, while its net losses were $862 million. In Q4 2019, Tesla turned a profit for the first time. And its main market is still the US.

Read Also: Tesla Business Model, Tesla SWOT Analysis, Transitional Business Models, Tesla Mission Statement.

Related: Who Owns Ferrari, Who Owns Volkswagen, Who Owns Bugatti.

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Who Owns Whole Foods?

Founded in 1980, in Austin, Texas, Whole Foods was born as a natural foods store. In 2017, Amazon acquired it for about 14 billion dollars. By 2017, Whole Foods already had over $16 billion in revenues. It is now integrated within Amazon‘s operations, thus enabling it to compete in the fresh food space, combined with Amazon Fresh (a grocery delivery service operating primarily in the US).

Amazon Subsidiaries



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Amazon is a consumer e-commerce platform with a diversified business model spanning across e-commerce, cloud, advertising, streaming, and more. Over the years Amazon acquired several companies. Among its 12 subsidiaries, Amazon has AbeBooks.com, Audible, CamiXology, Fabric.com, IMDb, PillPack, Shopbop, Souq.com, Twitch, Whole Foods Market, Woot! and Zappos.

Amazon Competitors

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Amazon is a consumer e-commerce platform with a diversified business model spanning across e-commerce, cloud, advertising, streaming, and more. Over the years, Amazon acquired several companies. As it operates across several industries, Amazon has a wide range of competitors across each of those industries. For instance, Amazon E-commerce competes with Shopify, Wix, Google, Etsy, eBay, BigCommerce.

[image error]Amazon has a diversified business model. Amazon‘s primary revenue streams comprise its e-commerce platform, made of Amazon labeled products and Amazon third-party stores. In addition to that, Amazon makes money via third-party seller services (like fulfilled by Amazon), advertising on its platform, AWS cloud platform, and Prime membership.



[image error]Amazon has a diversified business model. In 2019 Amazon posted over $280 billion in revenues and over $11.5 billion in net profits. Online stores contributed to over 50% of Amazon revenues, followed by Physical Stores, Amazon AWS, Subscription Services, Third-party Seller Services, and Advertising revenues.

More about Amazon:

Amazon Business ModelAmazon SWOT AnalysisAmazon SubsidiariesAmazon CompetitorsWho Owns AmazonWhat Is the Receivables Turnover Ratio?What Is Cash Conversion Cycle?Amazon FlywheelAmazon Value Propositions

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Who Owns Hulu?

In a $71 billion-dollar deal, Disney acquired 21st Century Fox, and with that, it also doubled its stake in Hulu, bringing it from 30% to 67%, thus giving The Walt Disney Company full control over Hulu. This move enabled Disney to strengthen its position in the streaming industry further, to take over Netflix. Therefore, Hulu is part of the Walt Disney Company media empire.

More about the Hulu business model

Hulu is a subscription-based streaming platform, aggregating original TV, entertainment, and series content formats, and it distributes it across its platform. Hulu also offers linear broadcasting and cable channels, with 29 million subscribers in 2019. Hulu licenses the content through several agreements with television studios and makes it mostly available on its subscription-based platform.

More about the Disney media empire





[image error]Disney is main shareholders include Robert A. Iger,  chairman and chief executive officer (CEO) of The Walt Disney Company, since 2005. Other significant individual shareholders, as of 2020, comprise Susan E. Arnold, Christine M. McCarthy, Alan N. Braverman. Significant institutional investors comprise Blackrock Inc. with 5.1% and The Vanguard Group with 5.9% respectively.



[image error]It would be hard to argue the case for a more recognizable entertainment brand than Disney. Disney is of course synonymous with Walt Disney, but it was Walt and his brother Roy who started the company in 1923 in Burbank, California. Disney content is now broadcast on over 100 channels in 34 different languages across the globe.

Read Also:

Who Owns DisneyDisney SWOT AnalysisNetflix Business ModelYouTube Business ModelSpotify Business ModelRead More:



Business ModelsPlatform Business ModelsDigital Business ModelsDistribution ChannelsBusiness StrategyValue PropositionMarketing StrategyBrand BuildingSWOT Analysis

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Who Owns Louis Vuitton?

Louis Vuitton is owned by LVMH, among the largest luxury goods companies in the world. With over $53 billion in revenues by 2019. It owns 75 brands in six different sectors. Some of these brands comprise Louis Vuitton, Bulgari, Christian Dior, Fendi, Loro Piana, Celine, Givenchy, Kenzo, Berluti, and Rimowa. LVMH is owned by the Arnault family (Bernard Arnault, the CEO, is among the wealthiest men on earth) with a 47.44% ownership stake and over 63.5% of the voting power. Thus asserting a tight control over the Luxury Empire.

Inside the French Luxury Empire



[image error]LVMH major shareholders (Source: LVMH financials).



[image error]LVMH is a global luxury empire with over €46 billion in revenues for 2018 spanning across several industries: wines and spirits, fashion and leather goods, perfumes and cosmetics, watched and jewelry, and selective retailing. It comprises brands like Louis Vuitton, Christian Dior Couture, Fendi, Loro Piana, and many others. 



Other luxury empires



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[image error]Kering Group follows a multi-brand business model strategy, where the central holding helps the brands and Houses part of its portfolio to leverage on economies of scale while creating synergies among them. At the same time, those brands are run independently. Kering is today a global luxury brand that made over €15 billion in 2017 based on this multi-brand strategy. Within the Kering group there are brands like Gucci, Bottega Veneta, Saint Laurent, and Puma. The two primary operating segments based on luxury and sport & lifestyle.



[image error]The family-owned Italian luxury brand, Prada generated over three billion euros in revenues for 2017. Europe represented almost forty percent of the total revenues. Among Prada brands, Prada made more than eighty percent of the company’s revenues, followed by Miu Miu, with more than fifteen percent, Church’s which generated two and a half percent of its total revenues. Instead, Marchesi 1824 (a luxury bakery) and Car Shoe (a shoe company) made about half a percent of the total revenues. Among its products line leather goods represented more than fifty-six percent of the total Prada revenues. Followed by Footwear and Clothing. More than eighty percent of Prada revenues got generated via its directly operated stores. Miuccia Prada owns sixty-five percent of Prada Holding, while Patrizio Bertelli owns thirty-five percent. Prada holding owns eighty-percent of Prada.  



[image error]With over $4.4 billion in net sales for 2018, Tiffany has brand awareness and a perceived sense of luxury and quality thanks also to strategic marketing, PR, and media relations activities. Many of these activities are focused around the iconic Flagship Store located at 727 Fifth Avenue.



[image error]Brunello Cucinelli is an Italian luxury and casual-chic brand, which built its success around cashmere clothing. Brunello Cucinelli built its business around the Humanistic Enterprise model, which revolves around Italian Craftsmanship, Sustainable Growth, and Exclusive Positioning and Distribution. More than 50% of the company revenues come from the retail mono-brand, directly managed by the company.

Read Also:

LVMH Business ModelKering Business ModelPrada Business ModelTiffany Business ModelBrunello Cucinelli Business model

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Who Owns LinkedIn?

Founded in 2002 by – among others – former PayPal member Reid Hoffman, LinkedIn was acquired by Microsoft, in 2016, for $26.2 billion. By 2020, LinkedIn generated over $8 billion in revenues. And it is now integrated within Microsoft. LinkedIn is a multi-sided platform where job seekers connect with HR professionals. At the same time, LinkedIn has become the most known and used professional network.

Understanding how LinkedIn works and make money



[image error]LinkedIn is a two-sided platform running on a freemium model, where to unlock unlimited search and other features, you need to switch to a paid account. Acquired by Microsoft for $27 billion in 2016, LinkedIn made $5.2 billion in revenues in 2018 and nearly 630M members by October 2019.



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Inside Microsoft Tech Empire



[image error]Microsoft has a diversified business model spanning across Office products, Windows, Gaming (Xbox), Search Advertising (Bing), Hardware, LinkedIn, Cloud and more. 




[image error]Microsoft’s mission is to empower every person and every organization on the planet to achieve more. With over $110 billion in revenues in 2018, Office Products and Windows are still the main products. Yet the company also operates in Gaming (Xbox), Search Advertising (Bing), Hardware, LinkedIn, Cloud, and more.



[image error]Social selling is a process of developing trust, rapport, and a relationship with a prospect to enhance the sales cycle. It usually happens through tech platforms (like LinkedIn, Twitter, Facebook, and more), which enable salespeople to engage with potential prospects before closing the sale, thus becoming more effective.



[image error]Blitzscaling is a business concept and a book written by Reid Hoffman (LinkedIn Co-founder) and Chris Yeh. At its core, the concept of Blitzscaling is about growing at a rate that is so much faster than your competitors, that make you feel uncomfortable. In short, Blitzscaling is prioritizing speed over efficiency in the face of uncertainty.

Read Also:

Microsoft Business ModelMicrosoft SWOT AnalysisMicrosoft Mission StatementWho Owns MicrosoftLinkedIn Business ModelLinkedIn Feed AlgorithmLinkedIn Knowledge GraphSocial Selling Blitzscaling

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