How do e-commerce sites make money?

Written by admin

Sep 1, 2020

September 1, 2020

The e-commerce industry has shown very rapid growth to date. The technological advancements are behind this growth. There are speculations on the prospect future of the e-commerce industry.  Huge sites like Amazon and Alibaba or even a startup eCommerce site must have business models that drive them.

You need to understand that most successful e-commerce websites, commenced by solving an existing problem to its consumers. Although profit-making is still a goal to achieve, providing solutions to customer based problems should always be the first intention of an e-commerce website. It still remains a mystery to many people on how these sites make money. Explained below are some channels on how you will earn from your e-commerce site.

1. Selling their products. Some manufacturing companies have developed their e-commerce website where they have their products listed in the store. Customers place orders at any time and the company ships these orders to them inconvenient time. The company makes a good profit due to better margins felt from the website.

2. They earn by helping someone else sell a product. A seller who has no enough capital to start up his own e-commerce website finds it hard in making sales due to stiff competition. This is not a reason to make you quit. Approach a well-performing site. On an agreement, they will allow you to use their online platform. Their website now earns profit from the commissions they get, advertisements, and promotions.

3. They earn by selling somebody else’s products. Your E-commerce sites would seek to maximize their profits. Hence the idea of investing deeply in warehouse and delivery chains comes in. You now purchase the fast-moving products in bulk at reasonable discounts from the suppliers.  The sales you get on making sales on the products give you a good profit for your e-commerce website.

 4. Linking people. The e-commerce website also connects sellers and buyers. The site helps the seller post the product page online so that the buyer can view the product too. If he is satisfied; he then places an order. The website gets a commission out of the sold product. Examples of such e-commerce sites are eBay and OLX.  

5. They earn by solving problems for customers and companies. It’s the main task of every e-commerce site to help in solving problems encountered by their prospective customers. For instance, in the online business, there was a huge problem in the mode of payment. This problem led to the birth of online platforms to enhance cash transfer. An example of such sites is PayPal (product) and earns by imposing some charges on the transactions made. 
7. Help people find the services they need. This is a very common problem for customers since they don’t have information on where or how to find different services. Almost all e-commerce companies help by providing perfect solutions to this problem It could be the tourist and hospitality services, transport (ticket), and entertainment (movie) tickets booking. They make profits via commissions of direct sales or via advertising and promotions.

You should note that there are also many more ways by which e-commerce websites get money.

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