Home Business & Finance 3 Business Models That Are Thriving in the Digital Era

3 Business Models That Are Thriving in the Digital Era

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By Krista Krumina Source: Allbusiness.com

It seems like today, thanks to the digital nature of the modern age, all that’s needed is a few mouse clicks and you could be building a new online emporium in the blink of an eye. Or, as 50 Cent so eloquently put it, ”You could die tryin’,” considering the fact that over 44% of small businesses fail in the first four years.

One thing remains the same, though–you still need a good business model to ensure the longevity of your company. In other words, without a good business model, your company will not be making any money.

The question is, how have the rapid technological and digital advances, including the ever-growing influence of the internet and social media, altered business models of yesteryear? And which business models actually work in this time and age?

Model #1: Drop-shipping

Say you wanted to sell something back in the 1950s. You’d probably have to acquire a specific set of skills to be able to make a product with your own bare hands, open a shop, and start selling to people directly.

Without a doubt, you can still do that today, too.

However, under the impact of technological advancements, a lot of businesses have moved online, marking the advent of e-commerce and transforming the logistics of entrepreneurship as well. Thanks to drop-shipping, you can build a storefront without needing to focus on the practical side of things—like creating the inventory, building a warehouse, or even processing orders.

So, is drop-shipping one of the business models du jour? It’s definitely one of the viable options. Giants like Wayfair and Amazon apply drop-shipping in their business strategies.

Still not convinced? Just take a look at the statistics. If only two decades ago drop-shipping was considered a revolutionary business model, it is now the go-to business model of nearly 33% of all online stores. Moreover, with e-commerce sales in the United States increasing nearly 17% from the third quarter of 2018 to the same period in 2019, it’s estimated that the popularity of drop-shipping will only continue to increase alongside the industry.

Model #2: Profit-sharing

When we hear “profit-sharing,” we usually think employees earning bonuses around Christmas time based on how well their company is performing.

That’s one way to think of it. However, there is hard evidence that it’s possible to create a completely unique business model consisting of profit-sharing and—wait for it—digital gift cards.

Francesca Roveda, CEO and co-founder of SixthContinent, created an e-commerce platform that converts the advertising budget of global brands into points and credits for users, which they can use to pay for their online shopping at over 1,500 major brands including Amazon, Walmart, IKEA, Macy’s, and iTunes. The company implemented an innovative profit-sharing business model in which instead of keeping 100% of the profits, 70% are shared among its community of shoppers in the form of credits and points.

This business model has helped the company become one of the fastest-growing e-commerce businesses in Europe, and the company is growing in the United States, too.

Now, what makes this model succeed? The fact that gift card sales in the United States were projected to be $160 billion last year, and 55% of consumers are interested in giving or receiving digital gift cards definitely helps, too.

More important, however, this model wouldn’t have worked without the internet and e-commerce dramatically changing the way people shop. More and more people make purchases online, and the number of online shoppers is expected to exceed 2 billion in 2020. This goes to show that there is still enough room for potential businesses to tap into the pool of online shopping with their own version of profit-sharing.

Model #3: Subscriptions

The New York Times, Netflix, Spotify, meal-kit company Blue Apron, lifestyle box FabFitFun, and many more … besides feeding the mind and body, what do these successful companies and startups have in common? Charging the customer a subscription fee to get access to a service or a product—aka, the subscription business model.

The time when the subscription-based business model was associated with magazines and newspapers is long gone, but it’s now seeing tremendous growth in software, online services, and even service and retail industries.

Let the data speak for itself. A Hitwise study confirmed that visits to subscription box websites grew from 4.7 million in April 2014 to 41.7 million in April 2018. Now is the time to tap into that market. Paul Chambers, president and co-founder of Subscription Trade Association, confirms: “This [growth] is in response to a continued shift in our buying habits. Convenience is a big factor.”

We love not having to go to the store to get groceries, just as much as we love having easy access to hundreds of Netflix shows for a low monthly subscription fee. It’s no wonder the subscription economy is booming.

Besides, the success of the subscription business model can be directly linked to our social media habits. Not only is it easier than ever to reach the perfect target audience through Facebook, Instagram, and Twitter (which, by the way, is the main social channel for discussing subscription boxes), but social media is also a powerful driver of traffic for subscription box sites: 9.3% of referred visits to subscription box sites in the United States came from social media, whereas the typical retail site received only 7.5%.

Key takeaway

Adapting to the changing technological landscape takes time. Finding a business model that works in this digital era requires even more effort—however, it’s doable. Consider any one of these business models, and your company could be on the road to success.

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