The Best Online Business Models for New Entrepreneurs

Online Business Models

So, you want to start your own business. However, you don’t have much time, money, or expertise. What’s a budding entrepreneur to do? Thankfully, with the rise in internet commerce, it’s easier than ever before to launch new businesses in the digital world. eCommerce has significant advantages over brick-and-mortar businesses. There’s less capital required to launch and maintain your site. Tons of resources and support groups are available to help new entrepreneurs. Reaching your audience is easier. Those are just a few of the benefits. eCommerce also lends itself well to a variety of online business models. These are just a few of the most popular models that you can use to shape your business:

  • Physical product model
  • Dropshipping model
  • Digital good model
  • Service model

The Physical Product Model

Physical products

When most people think of other businesses, the first examples that come to mind are those that sell physical products. This is one of the most popular and longest-lasting models for businesses, and also one of the most successful. Consumers are more likely to part with their money in return for a tangible product. All online business models have a variety of pros and cons for the businesses they shape. A few for the physical product model include:

  • Pro: Many consumers don’t have time to shop for products in physical stores. Instead, they turn to online stores. This increases your chances of running a popular business.
  • Pro: eCommerce websites have excellent tools to encourage purchasing behaviours. They allow you to add product information, testimonials, variations, and more.
  • Pro: By not being tied to a specific geographic location, your online store has the potential to reach a larger audience than a business selling physical goods in a brick-and-mortar store.
  • Con: Making, storing, and shipping physical goods can be a limitation for some entrepreneurs, especially those with little money to invest in a business.
  • Con: Because online shoppers can’t see an online product in person, there’s certain risk involved in buying online. In order to be successful, most ecommerce stores need to implement robust return policies which must benefit the customer, but rarely benefit the small business.

The Dropshipping Model


If you don’t have the time to make or space to store your own, custom products, dropshipping might be the solution for you. This business model allows entrepreneurs to take product orders on their website, but have them fulfilled by a third-party. Dropshipping is a great way to launch a side hustle with a minimum of effort. A few pros and cons for this business model include:

  • Pro: Dropshipping is one of the most hassle-free online business models for entrepreneurs. You don’t have to worry about the logistics and time sink of storing and shipping your products. In addition, dropshipping keeps overhead reasonably low.
  • Pro: There are thousands of products on the market that are available for dropshipping. This variety allows you to curate a store with as many or as few items as you want.
  • Con: The nature of dropshipping means you must rely on a third-party to manufacture and distribute your orders. Unfortunately, not all third-parties are equal. This can result in low quality products, late or undelivered orders, and many other issues that will create disgruntled customers.

Online Business Models: Digital Goods

Digital goods

Not every ecommerce store is devoted to selling physical goods. Many entrepreneurs don’t have the aptitude, skill, or interest to create and ship something tangible. Thankfully, digital goods are an alternate for many business owners. They include things like music, ebooks, digital artwork, and more. Digital products are especially popular with entrepreneurs who want to turn a hobby into a money-making endeavour. As with all online business models, the digital good model has pros and cons. They include:

  • Pro: Once you create your digital product, very little time is actually required to maintain your business. Purchases are completed instantly and there are no logistical issues with storing or shipping your goods.
  • Pro: Digital good businesses are easy to grow because you can’t run out of stock.
  • Con: In order to maintain consistent sales, new products need to be added to your website on a regular basis, to tap into the power of repeat customers.

The Service Model


If you have a particular skill set that you can offer to customers as a service, you have the backbone of an ecommerce business. There’s no limit to the types of services you can offer. Some popular ones include accounting, editing, tutoring, and more. Service businesses typically require more labour from the store owner than other models that allow for products to be stockpiled, but they also have the potential to earn more revenue. A few service model pros and cons include:

  • Pro: If your website is well-designed, lead generation to increase revenue can be highly effective. This reduces overall marketing costs.
  • Pro: Setting up a service as an online business is often faster than creating a storefront for physical or digital products.
  • Con: Depending on the industry your service operates within, you may have significant amounts of competition with which to compete.

Every entrepreneur has a business model that will work best for them. This guide can help you determine yours.

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