Our second full week of B250 Web Business had us looking in more depth at the Broker, Manufacturer, Wholesaler, Affiliate and Drop Ship Business models.
Brokers vs. Manufacturers vs. Wholesalers
I had a lot of fun this week comparing the different types of business models with each other. The first thing that stuck out to me was merchandising was something that I could actually do. I know my sister-in-law ran her own scrap booking business of years. She gave my sister ten crates of left overs when she quit. She apparently made enough to do it full time. I could even try selling some of that on behalf of my sister just to get my teeth wet. The problem with the merchandising is obtaining the product to sell. I like the idea of local wholesalers vs. the other two models. The Wholesaler assumes some of the risk and smaller order-sizes and free shipping for orders over $200 are available. I am on the fence about non-US merchandise sources. I think that dealing with a country like England where I would have some legal rights would be preferable over Mainland China, where my rights may not be enforceable. There is the further stress of arranging all stages of the FOB shipping process, the 31 day minimum shipping time and increased minimum buy-in due to the minimum shipping weights (about 1 Kilo). Plus will they be name brand products? I think that once you can establish a relationship with a reputable overseas manufacturer/wholesaler, it could lead to a larger profit margin earned on an exclusively owned right-to-distribute brand name. For now I like US Wholesalers the best.
Affiliation vs. Drop Shipping
I will admit I was all for the Affiliation business model before I did the comparison between it and drop shipping. Affiliation is where a blogger blogs about a certain product and then a link is provided to a site where that product can be purchased. Some affiliates pay-per-click and a percentage of the sold product (5-10%) to the publisher. Others only pay the percentage. I realize that this mixed with advertising could be a viable method of making money on the web. Drop shippers package and ship their products based on the orders you send them from customers who order through you catalog website. You never see or handle the merchandise (in theory). There is a downside to this business model. Returns, back charges and fraud can leave you, the original taker of the money, in the lurch. However, I found that there were outfits who helped you deal with these problems. Helping you deal with wholesalers and manufacturers. The products available to drop ship were often readily available to view, whereas only one of the eleven affiliates I looked at let you look at their products without joining. Including Google Adsense and Amazon. More spam anyone?
My Favorite So Far for My Web Business?
I think I am still going to stick with the Affiliation model for my class business mixed with some other advertising. However, I am very interested in talking to my big brother and other respected friends about getting into a real business. Drop shipping and working with wholesalers are both something I would like to explore at my leasure.
I’ll say it again. A fun class.
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