Chart of The Best Online Business Models

The Best Online Business Models

The growth of ecommerce cannot be denied. As internet shopping grows in popularity and continues to boost online sales, more and more people are also looking to start their own ecommerce businesses.

But with so many online retailing business models available to choose from, how do you know which model is best?

Top online retailing business models

According to a recent report studying hundreds of seven- and eight-figure businesses, manufacturing is currently the most popular online business model among ecommerce merchants. 

As it stands, more than four in ten (40.5 percent) online businesses are selling products that they manufacture themselves. The popularity of this online business model has been increasing over the past few years. The latest figure is nearly double the 21.8 percent that was recorded in 2017. 

Analysts suggest that the dominance and growing popularity of the manufacturing model stems from businesses being able to easily differentiate themselves through branding or storytelling. 

The second and third best online retailing business models are hybrid (19.7 percent) and private label (18 percent). Together, these three online retailing business models make up more than three-quarters (78.2 percent) of the market share. 

Reselling comes in fourth on the list of the best business online models with 10.7 percent. Dropshipping rounds up the top five at 9.3 percent. 

Online Retailing Business Models’ Margins, Income Growth, Revenue Growth, and Conversion Rate

Manufacturing businesses outperform all the other business models in key ecommerce metrics. For instance, they experienced a 53.4 percent increase in revenue growth, compared to 45 percent for hybrid, 43.9 percent for private label, 34.4 percent for reselling, and 33 percent for dropshipping businesses.

Income and revenue growth for manufacturing businesses are also significantly higher than other business types. The average manufacturer’s income and revenues have grown 18.2 percent and 43.2 percent, respectively. In comparison, the second-most popular online business model, the hybrid model, saw income increase by just 14.3 percent, while revenue growth grew 27 percent.

In terms of the conversion rates of companies running on these popular online retailing business models, manufacturing also ranks top. The average conversion rate of manufacturing businesses is 2.91 percent. The model with the second-highest conversion rate is private label at 2.45 percent. Businesses running on a hybrid model are in third place with 2.39%, followed by reselling and dropshipping, with 2.35 percent and 1.98 percent, respectively.

Want to Learn More?