When you decide to start your own online store, the biggest question you have to deal with is – what should you sell?
- should you sell other people’s brands or
- should you sell products from small manufacturers under your own label or
- should you rather get your own clothing line manufactured
These are questions that every start-up has to deal with in the early stages of business. Until you’re not a Fashion Designer who knows exactly what you want to sell, it’s a tricky question to answer. It starts an intense debate about business models, profitability, core strategy etc. As a start-up, you mainly have to pick between two business models:
- Multi-Brand Store: you can sell other people’s brands, for example – Amazon Fashion & Zappos
- Sell Proprietary Products brand: you can start your own label , while providing a great customer service, for example NastyGal.com
There is a also a 3rd kind – proprietary experience, in which you can start your own label and sell other brands with a proprietary customer experience. Subscription based e-commerce company – burchbox.com is a good example of proprietary experience. But in this article, I would like to only focus on Multi Brand Online Store Vs. Proprietary Products Brand Online Store.
- you can either get your own clothing line designed or manufactured
- or you can sell exclusive / proprietary products manufactured from a vendor-base
You can either start selling proprietary products and nurture your own vendor-base of manufacturers and suppliers who can give you exclusive products to sell on your store OR you can work with smaller manufacturers to produce exclusive products for you. When you source products from these small manufacturers and suppliers, you enjoy much higher profit margins than what you get by selling branded merchandise. And then if you sign-up an exclusivity contract with these vendors, your products become exclusive and they won’t sell that product to anyone else, which means you can sell these products at desired profit margins and not at the margins dictated by a competitor.
There are few essential requirements for building a Proprietary Products Online Store though, such as:
- Niche: You must offer a narrow and deep selection of a rare category of products to people who have a common belief, taste, likes, dislikes, style, art, size, body type etc
- Remarkably different: There has to be something ‘remarkably’ different about your business that makes your company newsworthy.
- Solid Core product: There has to be one core product category that works as the foundation of your business.
- Solid content strategy: You will need solid editorial content strategy to establish a relationship with your audience
- Great Service: If you have done everything right in the above 4, you should have enough cash liquidity to invest in providing a great customer service.
- Innovation: You need to constantly innovate your products and brand experience to be the ultimate work in progress.
This is how great businesses like NastyGal and ModCloth were built. Which business model is for you? Be ambitious, yet realistic. If you’re looking to venture into Multi Brand E-commerce venture, just remember that your chances to build a profitable & sustainable business are very low, let alone your chance of being the next Amazon or Zappos. You must pick a business model that ensures enough profit margins that you are not only able to cover your costs but also make enough profits to ensure long term growth of your business. That’s why we recommend most of our clients to go for a Proprietary Products Business Model; because even if you don’t become the next NastyGal or ModCloth, you can still build a profitable & sustainable business.