The Merchant Business Model

A merchant business model is probably the most well-known online model, and is demonstrated by businesses such as Amazon.com and play.com. Although Amazon started out selling just a few books (well 1 million actually) they soon grew once they started to offer more than books. Selling DVDs, CDs, electronics and more was the key to their success and they are now the world’s biggest online retailer in addition to being a well-known brokerage and subscription model business.

Based around either a retailer or a wholesaler of goods and services. The website of the merchant provides a way to purchase merchandise in addition to product information.

Web visitors will select which products they want to buy, and then place an order for them. This model is best suited to physical goods and services.

A blended version of both products and services is the ‘buy to order’ computer vendor. He will receive an order and need to create the product – this is both product and service.

Advantages – there is no middle man to pay, this can make it possible for you to keep all the profits, and for the buyer to also enjoy a lower price. You could also decide to operate in a drop-shipping method which will mean that you won’t have to package and post your products, the manufacturer will in response to receiving the order from you. You can miss out on a messy returns process.

Disadvantages - you will need to do all your own advertising without a third party involved. There is an overhead in terms of posting and packing. You own the product and therefore, will have to do extra work. You will have to deliver good customer service in addition to ensuring that your clients receive their purchases within good time. There is a high investment needed to run an online store when it comes to stock.

Tips: consider your company name carefully as it will need to be used as part of the URL. The web address is an important component of your marketing and branding.

Use an ecommerce web package that will not only host your business but will also take care of secure transactions, shopping carts etc.

You may wish to work with a professional designer to get your website just right. It needs to not only offer easy to use navigation but to be so appealing to the eye that people love spending time there.

Examples: Marks and Spencer, Next, Tesco, WH Smith, Apple, ToysRus.com, Dominos Pizza.

Summary: Using the online merchant business model can be made easier by involving drop-shipping, in particular if you are new and you don’t have a line of products to offer. However, it can have a lot of potential. If you already have a physical store in operation, it will bring your products to millions of other buyers.