Exploring Different Business Models: A Look at Various Examples (2025)

This move led to a 680% surge in SilkSilky sales over a two-year period.

No upfront costs. You don’t have to invest in inventory upfront, reducing your financial risk.

Low maintenance. Once you’ve set up your designs and listings, the business can run with minimal effort on your part.

Cons of POD business model

• Lower profit margins. Due to the cost of production and fulfillment, profit margins on POD products tend to be lower compared to other business models.
• Limited control over production. You rely on your POD partner to produce and ship the products, so you have limited control over the quality and speed of production.
• Less branding control. Since the products are made by a third party, you have less control over the packaging and branding of the products.
• Dependence on third-party partners. Your business is reliant on your POD partner for production and fulfillment, so any issues on their end can affect your business.

Overall, the print-on-demand business model is a great option for creatives and those looking to start an online business with minimal upfront costs. While profit margins may be lower, the low-risk nature of the business model makes it an attractive option for many entrepreneurs.

Once the sale is made, your responsibility shifts to providing excellent customer service. Lower upfront costs are a benefit of the print-on-demand business model, as you can easily add or remove products, test new ideas, and cater to niche markets. However, there may be challenges such as less control over shipping and limited customization options based on the vendor and product.

On the other hand, the direct-to-consumer business model allows brands to sell directly to customers, eliminating the need for intermediaries. This model offers benefits like owning customer relationships, collecting valuable data, higher profits, and faster feedback. However, it also comes with challenges such as higher distribution costs and the need to build an audience from scratch.

Subscription business models, where customers pay a recurring fee for access to a product or service, can lead to predictable revenue, increased cash flow, loyal customers, and easier cross-selling opportunities. But they also come with risks like high churn rates, the need to constantly refresh products, and the potential for small issues to escalate quickly.

In conclusion, each business model has its pros and cons, and success stories like Fanjoy in print-on-demand, Velasca in direct-to-consumer, and Clevr Blends in subscription services showcase how these models can be leveraged effectively to build successful businesses. This business model is common across all types of businesses, including B2C, DTC (such as a hair salon), B2B (like a corporate cleaning company), C2C (such as your neighbor’s kid shoveling your driveway), or C2B (the same kid shoveling for an office building).

The service industry is actually the fastest-growing sector in the US, according to the Bureau of Labor Statistics. While this often indicates hourly workers, there’s plenty of opportunity for aspiring business owners to sell their time and expertise.

Pros of the fee-for-service business model include getting paid for your time and low startup costs. On the other hand, cons include limited scalability and justifying your time and rate.

A successful example of a fee-for-service business is Path, a virtual photo editing studio that delivers services to other businesses, operating on a B2B model.

Another business model to consider is the freemium model, where merchants offer both free and paid versions of their product or service. This model allows for easier customer acquisition and more cross-selling opportunities, but may also face difficulty in conversion and higher risk of churn.

One successful example of a freemium business is Spotify, a music-streaming service that offers a free plan with ads and limited features, along with paid plans that provide additional features.

Lastly, the affiliate business model involves earning a commission or referral fee from an affiliated business in exchange for driving customers to make a purchase from your affiliate partner. Pros include potential for passive income and collaborations, while cons include low profits and the need for an established network.

A successful affiliate business example is QALO, a company selling silicone engagement rings and wedding bands that launched an affiliate program to spread the word in its early days, focusing on online communities. Co-founder KC Holiday emphasizes the importance of creating affiliates through online organizations and followings, rather than relying on physical individuals to promote products. This strategy was crucial for the brand’s growth after its launch in 2013, and the affiliate program remains in place today.

To further boost your brand and earn competitive commissions, consider becoming a Shopify Affiliate. This program offers exclusive opportunities to refer new businesses to Shopify and grow your brand.

One effective business model is the razor blade strategy, where initial affordable purchases lead to recurring future product sales. This model, commonly used by razor blade companies, ensures higher margins on supplementary products. The reverse of this model involves securing recurring revenue with supplemental products after a big initial investment, as seen with companies like Canopy.

Franchising is another successful model where franchisees distribute products and services under a brand’s umbrella. This allows for built-in brand awareness and support, but may limit flexibility and require high startup costs. Decathlon, a popular athletic brand, found success through franchising, expanding its products in big-box stores.

Digital products, such as downloadable files or templates, offer lower overhead costs and scalability. This model allows for extensive product offerings and automation as the business grows. Consider different approaches like freemium models, monthly subscriptions, or licensing to maximize revenue from digital products. Non-profits can access funding through grants and donations to support their mission.

Cons of non-profit business model

• Financial constraints. Non-profits may struggle to generate consistent revenue streams, relying on donations and grants.
• Competition for funding. With limited resources available, non-profits may face stiff competition for grants and donations.
• Complex regulations. Non-profits must comply with specific regulations and reporting requirements to maintain their tax-exempt status.

A non-profit success story

Charity: water is a non-profit organization dedicated to providing clean and safe drinking water to people in developing countries. Through innovative fundraising campaigns and transparent communication, they have raised millions of dollars to support their mission.

• Non-profits funding options. Non-profits can access funding through grants, donations, and sponsorships.

Cons of non-profit business model

• Funding dependency. Non-profits often rely heavily on external funding, which can be inconsistent.
• Regulatory requirements. Maintaining non-profit status involves adhering to strict rules and reporting standards.
• Limited scalability. Growth can be constrained by mission focus and funding limitations.

A non-profit success story

Sweden-based agood company designs and manufactures sustainable everyday products. It’s also a B Corp–certified company with a non-profit arm, agood Foundation. The brand uses Shopify Plus to manage its catalog of more than 20,000 products, all while dedicated to its mission in protecting the environment.

How to select a business model

Most products will fall into one of those core business models. Some businesses stick to one business model while others use a combination of business models to execute their vision. On the other hand, depending on your product or niche, you may not even have the option of which ecommerce business model you choose; your product might naturally fit into one model and not any of the others.

Whichever route you go down, the business model you use will also help to define and shape your entire business plan going forward. That might feel like a lot of pressure, but you have a few tools at your disposal that will help you approach the decision-making process more easily. Let’s go over those approaches next.

Understand your audience

Knowing who you want to sell to is an important first step of market research. This tells you there’s enough people out there with the willingness to purchase your product, validating market demand.

Beyond understanding the size of your audience, you’ll also want to look at their background and behaviors to understand what motivates their purchase behavior. You can later leverage this information when devising strategies for pricing, product development, marketing, and advertising.

Identify the problem you’re solving

Once you’ve gotten to know your audience, you should have a good grasp on their wants and needs. Dive deeper to look at the problem you’re solving. For example, if you sell jewelry, you may solve your customers’ pain points by selling high-quality earrings at affordable prices, or bracelets they can wear in the water without getting destroyed.

When you know the problem you’re solving, you can begin to understand the value you offer to people. This will help you devise a value proposition to help you stand out and stay true to your original vision.

Create a business plan

The process of writing a business plan is essentially laying out a blueprint for your business. Your business plan will note what type of business model you’ll use, who your customers will be, where you’ll get funds to launch, the functions of the back end of your operation, and how you plan to promote and grow. A business plan will help you ensure profitability while factoring in expenses, pricing, and other challenges.

When you go through this process, you might realize multiple business models can work for your vision. That’s OK—you don’t have to strictly fall into one category. You can operate with multiple business models under the same business. For example, you may sell clothing in a B2C retail store or on your website, but you might also sell bulk orders to other retail stores with a B2B wholesale business model. Using a variety of business models is sometimes the best way to reach your goals and maximize revenue potential.

Launch your successful business model with Shopify

Once you figure out your ideal business model, you can use it as a reliable launchpad as you grow your business and innovate how you deliver value to your customers.

Whatever your business model, you can use Shopify to design a website, sell products, and build your brand. With the platform’s versatile, user-friendly platform, you’ll soon start to see the impact of a good business model, avoid one of many common business mistakes, and kick off your path to entrepreneurship with a clear focus.