Shopping in Cyberspace
These last few weeks I’ve been researching the various online business models and how they all work, and updating my knowledge about some, as I’ve looked at and used a number of them before.
So here are the models I’ve been considering, with some of the good points and the bad points from my perspective, and also, again from my viewpoint, my favourites (you may have differing opinions, everyone does).
The web shop business model
There are a zillion website shops on the internet and they come in various shapes and sizes, and there are plenty of variations on the theme of what exactly is an internet shop (after all Amazon is an internet shop, but so is Jon’s Guitar Strings Shop on eBay!). The web shop business model allows customers to browse and get whatever they want at the click of a button without leaving the comfort of their home (this is very convenient for the customers). There are some general shops on the net and these tend to promote a large range of goods often off the back of an already well-known brand name, such as Tescos or John Lewis.
You will also find web shops that cater to a specific market or specialized niche, these are generally a less difficult option for the internet entrepreneur to get started and run. This is especially true if he or she has a keen fascination and passion for what they are selling. Shop websites are generally a little more technical to start-up and maintain than another types of internet business sites, and usually the more items sold on the site will add to the complexity.
There are, however, ways to simplify opening a shop online, one of the easiest ways is to build your shop using an existing platform such as eBay (a bit like renting a shop unit within a large shopping centre). Even though eBay has been around for a long time, a lot of people still do very well from it, I have used it myself and managed to earn enough for flights to Italy for me and my family, so it does work. The issue, in my opinion, when running a shop from the net is stock and logistics. Despite your virtual shop taking up no physical space, your stock will, and you'll need more space the bulkier the items you sell. This is something to keep in mind, as once your spare room and garage become full, you might need to hire storage space and that costs money. If you then pass those costs onto your customer, your shop becomes less attractive to your customers – if you swallow the costs, it will negatively affect your profit margins.
There is also another issue to do with stock, despite the fact that you don’t have the normal overheads associated with a physical shop (utility bills, salaries, rent and so forth) you will still have to buy in stock to sell on at a profit. The difficulty comes if the stock you buy doesn’t sell quickly or worse still doesn't sell at all. Unsold stock lying around represents a significant risk to your business. There are, however, some ways around it, such as using a drop-shipping service, this is where you've own a shop website, but the company from which you are buying your stock fulfils the order, meaning you never have to physically store stock (your job is essentially to display their wares). This looks OK in principle, but it is very important to partner with a reliable drop-shipper , because so far as the customer is concerned you are their supplier and it will be your reputation that on the line even if it is the drop-shipper who as let you down. Basically you are sacrificing some control for convenience.
Overall I think the shop model generally is a good idea if you have an established physical shop or brand, in which case the storage, stock and logistics part of the equation are generally already in place.
The Adsense Model
Visit the majority of websites out there and you often see adverts, either as simple text or as banner ads (usually right at the top of the search results or to the right hand side of the Google results screen). These are advertisements intuitively placed by Google (AdSense) to match the content of the website. So you might see an advert offering cheap flights to Rome on a website about travelling in Italy, but you are unlikely to see one on exercise equipment. AdSense is Google’s programme allowing website owners to place relevant adverts on their websites and make commissions from them.
So how can you make money with AdSense? Well, it’s a relatively simple process, but you do need a website in place, ideally with a consistent and large influx of visitors. Sign up for a Google account with Google, then sign up for AdSense and you’ll then be able to place adverts on your site (by copying a little bit of code that Google provides).
Every time one of your website visitors either clicks on an advert, or clicks on an advert and then follows through to purchase something you get a small commission via Google (they get paid by the companies that place the adverts). It is a pretty straight forward model and you can make money with it, however there are a few drawbacks. Commissions will not knock your socks off, therefore you need either a good few sites getting good traffic or just a few sites getting great traffic.
Some people have gone a little crazy with these type of adverts, fashioning poor websites over-loaded with adverts, needless to say these sites are frowned upon by Google and so their page ranking tends to be very low (which translates to less visitors, and therefore less commissions). Another drawback is if you have a great website you are proud of, and you want as many visitors as possible coming back again and again, they could land on your page and immediately click on to an advert, which might earn you a small commission, but then they might never return to your site to become a long term visitor or long term customer.
Overall I think this model can be part of an overall internet business strategy, but I wouldn’t want to rely on it for breaking away from the day job forever.
If you are interested in other internet business models you will find more info in the second part of this article on InfoBarrel.