Business Models Vol.1
Does this Model really work for me?
As lovers of innovation, business models are the things that really get us going. It’s like going into a new house to discover what the layout is like, the furniture the fittings and a bunch of other exciting things.
What business model have you set up to structure and grow your business? Are these growth strategic or customer centric. Here’s a run down of different business models that could disrupt the way your business operates.
Before we dive in, just a quick question on what is currently the most important goal for your business at the moment.
A. Your products being sold everywhere and in as many places as possible.
B. Creating an emotional connection with your customer and knowing more about them.
C. Making as many sales (money) as possible.
Image: Lagos Fashion Week
Here are some business models you’re may already be accustomed to
Direct To Consumer
Wholesale
Dropshipping
1.Direct To Consumer (DTC)
Are you selling straight to your customer, no middle man, no extra margins in your price? Direct to consumer is great for that.
Selling direct to your customer all means you can get feedback directly and adapt that feedback almost immediately which often becomes trickle down information with retailers and stockists.
To run your DTC model at maximum efficiency, consider how many touchpoint with your customer you currently have and ensure you are maximising these by turning these into sales channels. Your customer should be able to buy from you on any platform or anywhere they find you. This could be through a link or a website or physical stores in key markets.
Routes to developing a broad DTC model would include e-commerce (because it is inexpensive), social selling and brick & mortar to be able to create a complete brand experience in store.
For Direct To Consumer brands, delivering customer satisfaction is of utmost importance, as you are in charge of the entirety of your customer journey, ensure you are using your touchpoint to build notable relationships with your customers and encourage repeat business.
Most importantly, DATA!! To run a DTC model effectively, keep very close eye on your data, who orders what, when and why. Data is invaluable in this market full of guesswork, this data will also help make calculated decisions about design, production, pricing and even inventory.
Image: Mmuso Maxwell
2. Wholesale
Wholesale is a traditional business model that has worked well in fashion with the rise of department and concept stores. This model relies predominantly on the relationships you can foster as a brand with your wholesale buyers.
The pros of a wholesale model are glaring with bulk pre-orders and exposure to new customers through third-party traffic. Multi-brand stores are also uniquely placed to deliver a curated and well celebrated collection of fashion and similarly placed products for their wide range of customers.
Working with a wholesale model however requires greater infrastucture and organisation than a purely DTC brand. Wholesale terms are often include quality standards, deadlines and payment terms set by your wholesale buyer providing little flexibility on deliverables.
With a wholesale model, you lose out on proximity to your customer and building an emotional connection with them. Retailers do however provide reports and details of product sales and performance.
Image: Lagos Fashion Week
3. Dropshipping
Dropshipping - a younger business model made its way into the fashion industry in the last 20 years, with the rise of amazon and companies such as Farfetch customers can now source products from anywhere in the world. This is great because it makes supply accessible to demand in less catered to markets at a low cost (of shipping).
Dropshipping is good for finding where your customers are from previous orders. Dropshipping is a low cost solution for brands as the host site is responsible for promotion, marketing and customer acquisition. Some drop shipping platforms may also charge a hosting fee to ensure each brand gets as much visibility as possible. As this is handled through third parties, although sales can be made to new customers there is little data that can be collected and reports will also be made available at the discretion of your host site.
As businesses differ, you can build a strategy to prioritise one of the three above. Companies often solidify and make inroads with either wholesale, drop ship or DTC before developing a strategy for scaling by introducing a second. What is the current state of your business and are you ready to develop a second stream to strengthen your business model.
If you would like to discuss your options in developing your current business model and opportunities for expansion book an introductory call with us with the link below.
