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?
According to the latest data, which only includes companies that have been around for over a year and with at least $30,000 store revenue, manufacturing is currently the most popular online business model among ecommerce merchants.
As it stands, more than three in ten (30.5 percent) online businesses are selling products that they manufacture themselves. That’s a year-over-year increase of about one third.
Analysts suggest that the dominance and growing popularity of the manufacturing business model is because of the relatively higher rewards and increased benefits of having a unique product.
The second and third best online retailing business models are hybrid (21.8 percent) and private label (21.3 percent). Together, these three models make up nearly three-quarters (73.6 percent) of the online business model market share. In other words, three out of every four ecommerce stores operate with manufacturing, hybrid, or private label.
Reselling comes in fourth on the list of the best business online models with 18.1 percent. Dropshipping rounds up the top five at eight percent, a 51 percent decrease from the previous year.
Online Retailing Business Models’ Revenue, Income, and Order Values
Despite the fall, revenue and income growth from dropshipping businesses have been nothing short of impressive.
In fact, of these five most popular online retailing business models, dropshipping registered the largest increase in revenue (44.8 percent) and income (44.2 percent).
In comparison, the most popular model, manufacturing, saw lower revenue growth at 38 percent and lower income growth at 30.2 percent.
In terms of the median order value of ecommerce companies running on these online retailing business models, dropshipping also comes in top. The average order value of dropshipping businesses comes in at $150—nearly double the average of $80 across these five most popular ecommerce models.
The model with the second-highest average order value is reselling at $127. Hybrid comes in third at $80, followed by manufacturing close behind at $77.
Ecommerce businesses that use a private label model have a median order value of $45 ‒ just 30 percent of that of dropshipping stores.