A business model is the general plan of operation of the company within its market.
If you're not sure where to start, tools like the Business Model Canvas guide you through decisions by segmenting the model into key parts of operations, where the company conducts business, sources of revenue and cost structure, partners or external vendors, customer base, how the product or service reaches the end user, how much interaction your company has with the customer and more.
Types of business models
Because there are several types of business models, it is common for companies to have a mix of different models to acclimate to changing consumer patterns.
These are the most used business model strategies:
Examples: General Electric, Pepsi Company, Ford Motor Company
Simply put, manufacturing companies create products with raw materials or pre-made parts and components.
Manufacturing companies focus solely on finished products that are then sold to consumers or other companies that use the finished products, this model is common with large-scale production companies.
Examples: Wholefoods, Sysco, Sunflower
Products are created and sold in retail stores, but what happens in between?
Distribution companies often work as intermediaries to connect the manufactured product to retailers, or even directly to consumers, the supply chain and logistics are widely used in distribution companies, as there are numerous channels in which to products enter.
The ultimate goal for distributors is that the products are delivered to the correct end user.
Examples: 7-Eleven, Dunkin 'Donuts, Taco Bell
Franchise ownership is the licensed privilege of a franchisee to conduct business with an already established and registered company. Franchises provide benefits to franchisees, such as the use of trademarks, marketing materials, training, and other management resources. However, most franchises require between $ 50,000 and $ 200,000 to start, as well as ongoing royalties for the franchisor, 4% -8% of gross income.
4. Brick and concrete / Traditional retail
Examples: Albertsons Companies, The Kroger Company, Target
Retail is the sale of products to consumers, and the goods are used primarily for consumption, not for resale. Brick and mortar, or a physical building where a person can buy goods, is the traditional and more conventional retail strategy. The future of physical companies is hotly debated due to the rise of e-commerce.
5. E-commerce / Online Retail
Examples: Amazon, eBay, Etsy
Electronic commerce, also known as internet commerce or electronic commerce, is the commercial transaction of money for goods and services over the internet. In 2017, consumers spent a total of $ 453.46 billion for retail purchases made on the web. Some purchases cannot be made on the web, such as alcohol, gas, certain animals and certain types of food; however, US commerce grew 16% in 2017, and numerous business owners started an online business or modified their existing businesses. As a result of this growing trend.
Examples: Wal-Mart, Zara, Costco
Also known as "click and brick" and "click and mortar," the brick and click model was created to fill the holes in the e-commerce (click) and retail (brick) models. This model is more accessible to consumers because they have the option to instantly purchase a product online; If they need to make a return, customers can travel to the closest physical store at their convenience. With the brick and click model, larger and long-standing brand businesses have access to broader financial resources, which also help acquire new customers.
Note: Although this model is intended to transform shopping into a more convenient experience, companies face the challenges of both a physical retailer and an e-commerce business. Competitive pricing against manufacturers, logistics to distribute products and manage inventory, and the combination of overhead from both types of businesses are just a few of the conflicts brick and click owners face.
Examples: Spotify, MailChimp, Hootsuite
Have you ever used a free media streaming service with commercials and the music or video was stopped to give you a commercial-free experience for a monthly fee? This is a "freemium" business, a combination of "free" and "premium", a strategy that offers free versions of a product or service, but more advanced features at premium prices.
Examples: Netflix, Birchbox, Dollar Shave Club
In a subscription business, the business relies on recurring revenue on a constant schedule (weekly, monthly, yearly). Underwriting companies require a lot of attention to churn (the churn rate), acquiring new customers, and increasing the value of existing customers.
Examples: Supercuts, law firms, public relations firms
This model is the origin of the idea of "having regular customers": a high-contact company is based on the relationship and trust between a customer and the company. In a high-touch business, customers are more likely to interact with the same salesperson or consultant in the business. These types of companies also charge a higher amount for specialized services due to the quality determined by the client.
Examples: IKEA, Swirll yogurt
Also known as the "contactless conversion sales model," the low-contact model requires little or no customer interaction with employees. Consumers can enter the business, receive the products they need, and pay. In contrast to the high-touch model, prices tend to be lower as a result of smaller staff, less personalization of the service, a strong private label, and higher demand caused by social media. The logistics and location of the product are also commonly designed for easy access and easy portability.
Having multiple business models is common, especially for companies that realize the need to participate in a more profitable income stream. Amazon, originally an e-commerce platform for books, now practices e-commerce, subscription, and freemium due to its expansion of the market to streaming media and various articles. Wal-Mart also adapted, offering brick and click services with curbside pickup / drop-off. Some Wal-Mart items are e-commerce only, they don't even allow for in-store pickup.
In today's ever-changing environment, adaptability is crucial to keep up with emerging trends. However, having a vision, a purpose, and a business plan will help ensure that today's fad doesn't lose track of your true business goals and, more importantly, the success of your business.
Owl Jumpstart LLC