Business Models: Types and Examples (2025)

You have a lot of choices to make when starting a business. In addition to deciding what products to sell and how to market them, one of your biggest questions to answer is: What business model will be best to pursue?

There’s not one right answer to that question—there are pros and cons to each business model. Depending on your product, market, and cost structure, one type may be more suitable for your business than the others.

Ahead, get a high-level breakdown of those many different business model options. Once you understand each type of business model, you’ll be able to make the most informed decision about how to structure your small business. 

Ready to start your business? Create your website today or learn more about Shopify’s tools for selling online and in person.

What is abusiness model?

A business model is a company’s core framework for operating profitably and providing value for customers. Features of an effective business model explain a business’s value proposition and pricing strategy. The model also identifies the products and services a company offers, informs its target market, and predicts future expenses.

Why are business models important?

Business models are essential for both new and established businesses. A successful business model helps companies understand their customers, motivates employees with a clear direction, attracts investors, and provides a sustainable competitive advantage by identifying growth opportunities.

Think of your business model as a live asset for your company. It’s healthy to update it regularly to stay on top of upcoming trends and obstacles. If you’re planning to raise capital or partner with someone, active business model innovation shows stakeholders you can adapt and meet changing market demands.

5 main types of business models

There are five main business model types:

1. Business to consumer (B2C)
2. Direct to consumer (DTC)
3. Business to business (B2B)
4. Consumer to consumer (C2C)
5. Consumer to business (C2B)

1. Business to consumer (B2C)

The business-to-consumer (B2C) business model refers to commerce between a business and an individual consumer. For example, think of the last time you bought something from Target—that’s an example of a B2C transaction. B2C business can include ecommerce, brick-and-mortar stores, or a combination of both.

2. Direct to consumer (DTC)

Often conflated with B2C, the direct-to-consumer (DTC) business model has a key difference: Whereas the B2C model can typically describe retailers that sell to consumers, the DTC model describes individual brands or manufacturers that sell to consumers. For an example of this distinction, let’s look at the inclusive apparel brand TomboyX: You could purchase TomboyX products from Target (B2C), or you could purchase TomboyX products from its Shopify website (DTC). Particularly popular as an ecommerce business model, DTC businesses rose during the pandemic and continue to be a strong slice of the ecommerce market. 

💡Many people actually consider DTC to be a subcategory of B2C. As it’s a relatively newer term, we’ll go into the pros and cons of selling under a DTC business model later in this guide. 

3. Business to business (B2B)

Business to business (B2B) refers to any commerce between two businesses. Wholesale transactions typically fall under this category. You can include business-to-business offerings as either an ecommerce business or a brick-and-mortar. It’s also common for businesses to serve audiences in both B2C and B2B models. For instance, a coffee brand can sell its beans to consumers on its website (B2C), while also selling beans in bulk to coffee shops (B2B).

4. Consumer to consumer (C2C)

The consumer-to-consumer (C2C), or peer-to-peer, business model is when a consumer sells a product or service to another consumer. For instance, selling a used laptop on Facebook Marketplace falls under this category. Individual sellers often begin selling on online marketplaces, then start an online store to build a brand and capture more profits.

5. Consumer to business (C2B)

The rise in the creator economy led to a spike in consumer-to-business (C2B) companies. This business model refers to when a consumer sells their own products or services to a business or organization. If you want to become an influencer who partners with brands or a photographer who sells photos online, C2B is the type of business model you’d use.

19 examples of business models

Within those five types of business models, there are many different business model subcategories. Below, we’ve outlined 19 examples of business models you can use as inspiration to start your own business.

1. Ecommerce business model

The ecommerce business model is one of the most accessible and versatile. It involves selling products or services online through a digital storefront. That could mean selling through an online marketplace (like Etsy or Amazon), social media platforms (like Instagram or TikTok), a dedicated ecommerce website, or a combination of other sales channels. Brands that utilize the ecommerce business model can range from a small, niche store selling handmade products to a global marketplace offering thousands of items. Ecommerce businesses most commonly operate as B2C, B2B, or DTC, depending on the target audience and business goals.

Pros of ecommerce business model

• Broad audience reach. Online stores aren’t limited by geography, allowing businesses to reach customers worldwide.
• Lower upfront costs. Compared to physical retail, ecommerce eliminates the need for leasing retail space, which cuts down on startup expenses.
• Scalability. With the right tools and platforms, ecommerce businesses can grow quickly and handle increasing volumes with ease.

Cons of ecommerce business model

• Highly competitive. The online space is saturated, making it challenging to stand out and acquire customers.
• Reliance on technology. Ecommerce businesses are dependent on functioning websites and digital tools, which can fail or require costly updates.
• Logistics challenges. Shipping, returns, and inventory management require careful planning and resources.

An ecommerce success story

SilkSilky specializes in selling silk products with the vision that the future of fashion will be healthy and comfortable. Founded in April 2021, the brand launched with Shopify to establish an independent, branded DTC site. An upgrade to Shopify Plus allowed the brand to tap into even more powerful tools—a multi-site layout to drive international expansion and advanced customization features. This move drove a 680% increase in SilkSilky sales over two years.

2. Retail business model

Retail is when you sell products made by a variety of brands directly to consumers in a B2C business model. This could include a combination of sourcing products through wholesale suppliers, manufacturing your own products, and even developing a private label product line (think: Costco’s Kirkland brand). Retail businesses can be based in traditional brick-and-mortar stores,through temporary retail activations like pop-up shops, or online through websites and ecommerce marketplaces. 

Some retail may also function as a B2B business model. Wholesale transactions qualify as such, as well as selling any products to businesses. If you sell office furniture, for example, it’s wise to model your retail store as both B2C and B2B to broaden your audience.

Pros of retail business model

• Make strong customer connections. For physical retail locations, you get the chance to interact with customers face to face, offering unique opportunities to create and nurture relationships.
• Boost sales. Online-only merchants have to reach customers digitally. Physical retail gives you the chance to reach in-store shoppers while also driving online sales to your website. Plus, people get deeper engagement with your products in store versus only looking at pictures online.
• No shipping hassles. When you sell in person, you don’t have to worry about fulfilling orders and all that comes with it—the costs, admin time, and potential for costly returns.

Cons of retail business model

• High overhead. Opening a physical retail store has tons of upfront costs, not to mention ongoing operating expenses.
• Inflexibility. While an online store offers you the option to make tweaks and adjustments with just a few clicks, such overhauls to your physical retail space require more effort.
• More things to manage. Running an online business is busy enough without the added stress of managing a physical storefront. When you have a retail shop, you’ll need to stay on top of more things than if you were online-only.

A retail success story

The luxury floral brand famous for its Eternity® flowers, Venus et Fleur, got its start online in 2015. It used Shopify’s platform to support its expansion from ecommerce to physical retail, allowing the brand to tackle new challenges in managing multiple sales channels and store locations. The brand expects to double down on its retail success, with future plans to offer buy online, pickup in-store (BOPIS) functionality. 

3. Dropshipping business model

Dropshipping attracts people who prefer to keep startup costs as low as possible and are less concerned about margins. It’s also a great business model for someone who doesn’t want to hold and manage inventory. Dropshipping involves B2C commerce (when a consumer buys a product from your store) as well as B2B commerce (the amount you pay for the dropshipper to provide the product and fulfillment services on your behalf).

Pros of dropshipping business model

• Low startup cost. Because you’re never carrying inventory, you have no inventory costs—which generally are the most substantial expense for a new ecommerce business.
• Low risk. Since you don’t actually purchase your inventory upfront, you aren’t taking the risk of holding items you can’t sell.
• Streamlined sales. Dropshipping suppliers will take on the tasks of picking, packing, and shipping your product for you. This option provides convenience and efficiency, so you can manage your business from anywhere in the world.

Cons of dropshipping business model

• High competition. Because dropshipping has such low barriers to entry, a lot of people are doing it. Competition is stiff, and it’s hard to set yourself apart from the crowd.
• Low margins. Low margins make it difficult to compete in paid advertising space, which means you’ll have to rely more on organic tactics like content marketing. You also have to sell at significant volume to make a decent profit.
• Inventory syncing issues. Because you’re relying on someone else’s inventory, there may be times when you place a shipment request to the wholesaler but the dropshipping product is sold out. These delays due to back orders can reflect badly on your business.

A dropshipping success story

Subtle Asian Treats is a top dropshipping business on Shopify selling plushies and cases for AirPods and iPhones. It was founded by Tze Hing Chan, a young Malaysian entrepreneur, who aimed to jump on the bubble tea trend happening in Asia. 

The brand attracted thousands of bubble tea fans from the area by giving people a unique selection of products at a fair price. It’s also done a great job of building awareness on social media via user-generated content (UGC), and it appeals to customers with any budget through product diversification.

4. Manufacturing business model

Manufacturing your product makes the most sense for entrepreneurs with a unique idea or a variation on an existing idea for a B2C or B2B business model. It’s also suitable for those who’ve already validated the market for their product. 

You can look at manufacturing through a few lenses:

1. Private label. A private label product is created by a third-party manufacturer and sold under your own business’s name. As the business owner, you control everything about the private label product, including what goes in the product, how it’s packaged, and what the labels look like. Private label manufacturing is best for brands that want to create unique products but don’t have the resources to do it themselves.

1. White label. A white label product is created by one manufacturer and sold to various retailers to sell under their own brand names. They tend to be generic products that you can sell to wider customer segments.

1. DIY makers. Manufacturing can also include makers—entrepreneurs who sell handmade products. This is when you literally take production into your own hands. DIY (do-it-yourself) manufacturing allows for precise control over quality and your brand, but it does come at the cost of personal limitations, time, and scalability.

Manufacturing is best for the do-it-yourselfer—someone who has their own unique ideas, can physically produce the goods themselves, and has the skills and resources to do so. But the most important thing to note here is not all products can be made by hand. Your product choices are limited to your skills and available resources.

Pros of manufacturing business model

• Lowest cost per unit. Manufacturing often garners the lowest cost per unit, giving you the greatest margins on your product.
• More control. You can build your own brand, set your own prices, and control the quality of your final result without any constraints.
• Agility. Making your own products can give you the greatest level of agility for your business. You can adjust quality, features, and even the entire product on the fly.

Cons of manufacturing business model

• Minimum order quantities (MOQs). The startup costs for initial orders can be quite high. Depending on the MOQs, the costs of your product, and your choice in manufacturer, your initial inventory investment can be thousands or tens of thousands of dollars.
• The perils of outsourcing. Trusting external parties puts you at risk to a lot of challenges outside of your control. Nothing will bring your business to a halt like being scammed by an overseas manufacturer.
• Upfront investment. Both routes require time and money to get up and running. Manufacturing can be a long process of prototyping, sampling, refining, and production. And the primary costs associated with making your own products include the purchasing of raw materials, the storage of inventory, and labor costs.
• Time-consuming. Depending on your product choice, making your own products can be a time-consuming process, leaving you with less time to focus on actually building your business.

A manufacturing success story

Old World Kitchen began as a family-owned business selling products door-to-door in its local area. It’s since gone through a period of growth, in which the best move for getting the business online was to sell on Etsy.

The brand, which specializes in handcrafted kitchen utensils, wanted to expand further, but to do that, it needed full control over pricing, branding, and quality control—things Etsy couldn’t offer.

After moving from Etsy to Shopify, Old World Kitchen saw a sharp increase in online conversions. It was also able to partner with relevant brands and increase its prices, all while staying true to selling goods made by hand.

5. Wholesale business model

Purchasing products wholesale is a good option if you want to get up and running quickly or if you want to sell a variety of products and brands. Wholesaling provides a wide range of opportunities, as there are many different types of products in demand through the B2B wholesale business model. 

Pros of wholesale business model

• Selling established products. Buying and selling wholesale is typically lower risk. You’re dealing with brands that are already validated on the market, so you don’t run the risk of wasting time and money developing a product no one wants.
• Brand familiarity. Selling already established brands can help position your business by creating an aura effect around your own brand.

Cons of wholesale business model

• Product differentiation. Selling already established products can work for you as well as against you. Because the products are available from multiple wholesale suppliers, you’ll need to fight extra hard to differentiate yourself and convince potential buyers to purchase from you.
• Price control. Selling other brands means to some extent you have to play by their rules. Some brands will enforce price controls to prevent you from discounting their products.
• Inventory management. When purchasing wholesale you will likely have to purchase a minimum order of each product. The minimum order will depend on the product and manufacturer. However, you will have to stock and hold inventory as well as manage that inventory for re-order.
• Dealing with supply partners. If you’re carrying an array of products, dealing with multiple supply partners can become difficult to manage. Requirements may vary from supplier to supplier.

The wholesale business model might be considered a safe middle ground between manufacturing and dropshipping. Although each case is unique, it’s typical to see a 50% margin on wholesale goods resold at retail pricing.

A wholesale success story

Pernell Cezar Jr. and Rod Johnson founded BLK & Bold with the goal of helping local communities through selling coffee. The company pledges 5% of all profits to programs that assist youth programs, improve workforce development, and eliminate youth homelessness.

BLK & Bold leverages wholesale and DTC channels to drive sales. The majority of its wholesale partners include coffee shops, restaurants, offices and coworking spaces, and hospitality providers such as boutique hotels, Airbnbs, and classic bed and breakfasts. 

6. Print-on-demand business model

Print on demand (POD) is a mostly hands-off way to sell made-to-order products that feature your designs. This is common for B2C businesses, but it also works for B2B (think: client gifts, conference swag bags, and the like). For print on demand, you simply make the design, mock it up through a POD partner, and list it wherever you sell online. When a customer orders a product with your design, your chosen third-party printing service creates, packs, and ships the order.

Much like with the dropshipping model, the print-on-demand model reduces the cost of entry into selling online. You don’t have to pay for a product until you make the sale, so there’s little upfront investment. Plus, everything from printing to packing to shipping is handled by your printing partner.

Print on demand is a particularly great business model for creatives. You can sell popular POD products like:

• Duffle bags
• Yoga leggings
• Face masks
• Watch bands
• Canvas prints and posters
• Throw pillows
• Blankets

On-demand products typically yield thinner profit margins, depending on your pricing strategy and customer acquisition costs. But it’s a good low-risk business model for those new to ecommerce or who want to test different revenue streams for their existing business.

Pros of POD business model

• Develop and list products quickly. Once you create the design, you can mock up the product and sell it in your online store in minutes.
• Automated shipping. Shipping and fulfillment is handled by your supplier. After you make the sale, you’re responsible only for providing great customer service.
• Lower upfront cost. Since you don’t hold any inventory, it’s easy to add and remove products, test new business ideas, and create products for niche markets.

Cons of POD business model

• Less control over shipping. Shipping costs can get complicated, as they often vary for different products. Your options also may be limited if you want to create a standout unboxing experience.
• Limited customization. What you can customize depends on the vendor and the product. You’ll have to determine base costs, printing techniques, and available sizes when deciding which products to customize.

A POD success story

Fanjoy is an online marketplace selling curated print-on-demand products from a variety of artists and creators. CEO Chris Vaccarino started the company in 2014 after realizing the opportunity through his experiences selling merch on the road with his brother’s band.

Now, Fanjoy is a thriving marketplace that connects creators with tools they need to be successful entrepreneurs—and customers ready to buy their designs. To date, it has shipped more than three million packages.

7. Direct to consumer business model

As touched on above, the direct-to-consumer (D2C or DTC) business model refers to brands that sell products directly to consumers, without intermediaries like wholesalers or third-party retailers like Amazon. 

Think about some of the biggest trending brands: Warby Parker, Barkbox, Bonobos, Casper. What do they all have in common? A DTC business model. Even major brands like Apple and Tesla are leveraging mobile commerce as a main channel for DTC sales.

These DTC brands eliminate the hassle of researching and choosing from hundreds of competing retailers, making the entire shopping experience easier for customers.

Pros of DTC business model

• Own the customer relationship. Selling directly helps you nurture more relationships and increase customer lifetime value.
• Collect customer data. Selling direct lets you collect first-party data you can use to personalize customer communications and experiences. 
• Higher profits. You don’t have to share profits with any third-party distributors.
• Get feedback faster. Since you can communicate with customers directly, you can easily collect feedback to improve your products and customer experience.

Cons of DTC business model

• Costs of direct distribution. There’s no sharing of shipping or storage costs. DTC businesses need to invest more upfront to get their business operating smoothly.
• No built-in audience. One advantage of working with retailers is that customers can more easily find your products. If you’re a new brand, you’ll have to market yourself to build an audience. You also don’t benefit from the distributor’s experience or salesforce.

While it may take time and money to establish reliable distribution channels, selling direct is a smart business model for building a loyal customer base and improving profitability over time.

A DTC success story

Handcrafted leather shoes and “Made in Italy” go hand in hand. Consumers who wear this type of footwear have traditionally accepted its high price tag—thanks to an industry flooded with distributors, agents, resellers, and retailers.

But then in 2013, Velasca, a Milanese footwear startup, stepped into the scene with a goal to disrupt the industry by connecting consumers directly to shoemakers. Velasca was born out of a casual conversation between co-founders Enrico Casati and Jacopo Sebastio in the back of a taxi. It has since grown into a blossoming DTC brand, selling hundreds of thousands of shoes in over 30 countries.

8. Subscription business model

A subscription business model charges customers a recurring fee—usually monthly or yearly—to access a product or service. Subscription models help businesses capitalize on ongoing customer relationships. If they continue to see the value in your offer, they’ll continue to pay your fee.

It doesn’t matter if you’re an ecommerce business or online educator, you can start a subscription business across many industries, including:

• Streaming services
• Monthly subscription boxes
• Membership communities
• Food services
• Digital content (e.g., newsletters, on-demand video)

A recurring revenue model can lead to higher revenues and stronger customer relationships. Though a subscription membership, the longer customers use your product or service, the more valuable it becomes to them.

Pros of subscriptions business model

• Predictable revenue. Monthly recurring revenue helps you forecast sales, plan inventory, and understand how much to reinvest for business growth.
• More cash on hand. Receiving monthly payments upfront means more cash flow (and piece of mind) for your startup.
• Loyal customers. Regular purchases give you deeper insight into customer behavior, so you can continually improve products and keep customers coming back for more.
• Easier cross-selling and upselling opportunities. The more customers use your products, the more trust you build with them. This makes it easier to sell additional products to them, because they already know you provide value. 

Cons of subscriptions business model

• High risk of churn. One drawback of the subscription business model is churn. You have to constantly keep people interested and engaged for them to keep paying you.
• Varied products. Products become dull if they don’t change often. For example, Netflix adds and removes movies every month, and Trunk Club promises to invest in subscribers’ changing styles over time. You need to keep products fresh to maintain a subscription business. 
• Small issues, big problems. Most subscription services give their customers the same thing, at the same time, every month. While this seems simple, if there’s one small kink in your system, it can turn into a big problem fast if you don’t plan for it.

A subscription success story

Subscription businesses come in many forms. B2C ecommerce retailers can include a subscription model in their offering, similar to Clevr Blends, a popular online latte brand. The company, founded in California, has grown into a thriving business since its launch in 2016.

The brand offers a subscription option which gives discounts, early access to new products, and a free scoop in every order.

9. Fee-for-service business model

A fee-for-service business is also known as a service-based business model. In other words, the merchant sells its services rather than selling products. This type of business is common across all models, including B2C and DTC (like a hair salon), B2B (a corporate cleaning company), C2C (your neighbor’s kid shoveling your driveway), or C2B (that 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. And while this often indicates hourly workers, there’s plenty of opportunity for aspiring business owners to sell their time and expertise.

Pros of fee-for-service business model

• Get paid for your time. While product-based businesses don’t always compensate you for your time, the opposite is generally true for fee-for-service arrangements. You can charge hourly to ensure you’re getting paid for all your time spent working.
• Low startup costs. Depending on the business you want to start, offering services comes with low startup and overhead expenses. Even if your dream is to open a dog grooming salon, you can start small by offering dog-walking services and save up to invest in what you need to fully launch your vision.

Cons of fee-for-service business model

• Limited scalability. Because a service-based business requires your time, it’s difficult to scale on your own. The main ways to increase your income is to raise your rates or subcontract some of the work to lower-wage service providers. However, these both come with their own challenges—clients may not want to pay more, and it takes a lot of time to find and manage high-quality subcontractors.
• Justifying your time and rate. Many service-based businesses that charge hourly need to justify how much time a job takes to complete. Even if you’re not charging hourly, service-based businesses often face more pushback or negotiation from clients.

A fee-for-service success story

Many ecommerce businesses need photos edited to make their products shine on web pages. However, not everyone has the skills, time, or software needed to make edits like background removal and color changes. Path is a virtual photo editing studio that delivers those services to other businesses, operating on a B2B model.

Path is a team of more than 300 editors and graphic designers who perform basic but necessary photo edits. Rather than charging an hourly rate, Path applies a flat per-photo editing fee, depending on the complexity of the edits. It also offers faster turnaround times at an additional fee.

10. Freemium business model

A freemium business is when a merchant offers both free and paid versions of its product or service. This is typically used for B2C or B2B businesses. Oftentimes, software companies and software-as-a-service (SaaS) businesses use this approach.

The freemium business model allows merchants to create relationships with new customers easily, since there’s no cost or commitment to sign up and try it out. The way freemium businesses earn money is by getting these people to use and love their platform so much that they want access to additional features—features they have to pay for.

Pros of freemium business model

• Easier customer acquisition. Because there’s no risk to try out your product or service, it can be relatively easy to convert new customers. They don’t need to pay for anything, so it’s easier to convince them to sign up.
• More cross-selling and upselling opportunities. Even free users provide lots of insightful data you can use to your advantage when personalizing promotions and recommendations.

Cons of freemium business model

• Difficulty to convert. Your free users may already be happy with their experience and have no interest in accessing additional features. It may be more difficult for them to justify the added expense if they can have a similar, albeit somewhat downgraded, experience for free.
• Higher risk of churn. Subscriptions are susceptible to high churn rates—even more so if you offer a free alternative to your paid options.

A freemium success story

Spotify is one of the most high-profile freemium businesses. The music-streaming service operates on a subscription-based business model. Users can subscribe to its free—or freemium—plan, which exposes them to ads and limited features. However, paid plans eliminate ads and provide additional features such as offline listening, unlimited skips, and playlists.

11. Affiliate business model

An affiliate business model is when you earn a commission or referral fee from an affiliated business in exchange for driving customers to make a purchase from your affiliate partner. Affiliate marketing is often viewed as a C2C business model, because affiliates are typically regular people who refer the products or services to other consumers.

There are many ways to use affiliates in a business model. Your brand can also tap into the power of affiliate networks, recruiting a group of brand spokespeople to promote on your behalf.

Pros of affiliate business model

• Potential for passive income. Whether you’re the affiliate or the brand, this offers a great opportunity for passive promotion and income. As a brand, you have a network of people promoting on your behalf. As an affiliate, you can set up an optimized website with affiliate links, sit back, and watch it grow.
• Opportunity for collaborations. As an affiliate, you can partner with a whole array of brands. This opens you up to new opportunities and exposes you to things you may not have otherwise had access to.

Cons of affiliate business model

• Low profits. Affiliates typically only earn a small percentage of the income generated from the referrals they send, so you need lots of referrals to convert if you want any sizable payout.
• Requires a network. The most successful affiliates already have their own audience or network. If you haven’t already established an audience, you’ll need to invest in doing so.

An affiliate success story

QALO sells silicone engagement rings and wedding bands on its Shopify site. To spread the word in its early days, QALO launched an affiliate program, focusing primarily on online communities. “Creating affiliates through people that have organizations and followings online makes things a lot easier instead of having tangible people on the ground trying to move your product around their gym or whatever it may be,” says co-founder KC Holiday.

These affiliate relationships were critical to the brand’s growth shortly after its 2013 launch, and it still has the affiliate program today.

12. Razor blade (and reverse) business model

The razor blade business strategy is when you sell an affordable item upfront which then requires additional products and recurring future products in order for that original product to stay in continued use. These supplemental purchases are priced with higher margins for the merchant, while the initial product may have been sold at a lower markup.

The name for this model comes from the fact that it’s most commonly used by razor blade companies. Razor blades may be inexpensive to buy at first, but things like replacement blades and other shaving supplies are not so affordable and thus earn these brands more revenue.

The reverse of the razor blade model is to switch it up: The initial purchase may have been a big investment, but you secure recurring revenue with supplemental products. For example, a company like Canopy follows this model: They sell a premium humidifier and diffuser at the outset, then retain customers through recurring accessories like essential oil refills. Although this model may not produce large margins, it keeps customers coming back and offers you opportunities to continue marketing to them.

Pros of razor blade business model

• Drive repeat purchases. Due to the nature of this business model, customers need to become repeat buyers. This is great for boosting customer loyalty and lifetime value.
• Collect customer data. You have more touchpoints with customers, allowing you to collect more first-party data the more purchases they make. Businesses with their own customer data are empowered by these valuable insights without third-party limitations or restrictions.

Cons of razor blade business model

• Potential for brand dilution. If you sell an inexpensive product upfront and then charge a lot for the required recurring purchases, customers may start to question the quality of your products—and also the reliability of your brand.
• Susceptible to competition and disruption. Many businesses operating with this model aren’t pricing products because they have to price them that way; they’re pricing strategically to manipulate perceived value and inspire repeat purchases. As a result, this also leaves these businesses open to the threat of competition—it won’t be difficult for competitors to jump in with a more affordable or superior product.

A razor blade success story

Dollar Shave Club, one of the more well-known trailblazing DTC razor blade brands, tapped into this opportunity. It also leveraged the recurring revenue from subscriptions, with more than 100 million active subscribers to boot. 

13. Franchise business model

A franchise is a business that uses franchisees to distribute its products and services. Essentially, the franchisor creates the brand and the product, and the franchisees can buy into the franchise and start their own business under the same brand umbrella.

Franchises are B2C business models in the sense that the products and services are often sold directly to consumers (although some franchises operate on a B2B model as well). The relationship between the franchisor and the franchisee also mirrors a B2B business model.

Pros of franchising business model

• Built-in brand awareness and support. Rather than starting a business, brand, and product from scratch, franchising allows a more approachable way to get into entrepreneurship. As a franchisee, you can take advantage of brand awareness and existing resources to get you off the ground.
• Spread the word about your business. If you want to become a franchisor and turn your existing business into a franchise, this offers a great way to expand your geographic footprint without having to physically do so yourself. This also offers you more in-depth local expertise in new markets where your franchisees set up shop.

Cons of franchising business model

• Limited flexibility. When opening a franchise business, you have limited control. You’ll have to adhere to the franchise requirements, including branding, pricing, product displays, customer service, and more.
• Startup costs can be high. It’s not free to become a franchisee. Most franchises require some sort of upfront investment or signup fee. These can be pretty hefty on top of the other startup costs you’re already facing.

A franchising success story

Athletic and outdoor apparel brand Decathlon found success through franchising. The brand refers to its franchise opportunities as “partnerships.” This business model has allowed the retailer to expand since first opening its doors in 1976. Now, its products are in some of the most recognizable big-box stores, like Target and Walmart.

14. Digital products business model

A digital product is a nonphysical asset or media type that can be sold and distributed online, repeatedly, without restocking inventory. These products often come in the form of downloadable, streamable, or transferrable digital files, such as MP3s, PDFs, videos, plug-ins, and templates.

The upfront costs of creating a digital product can be high, but the variable costs of selling them is comparatively low. Once you create an asset, it’s incredibly cheap to deliver to customers.

Pros of digital products business model

• Lower overhead costs. You don’t hold any inventory or run up any shipping charges.
• Scalability. Orders can be delivered instantly, letting you be hands-off with fulfillment. As the business grows, you can easily convert tasks into automation to free up time.
• Extensive product offerings. There are various routes you can take: a freemium model where you provide products for free with upgradable features, monthly paid subscriptions for access to exclusive content, or licenses to use your digital products. You can build a business solely around digital products or incorporate them into your existing business.

Cons of digital products business model

• High competition. Unless you serve a pretty unique niche market, people might be able to find free alternatives to your digital products. You’ll have to consider the niche you target, provide superior products, and know how to build your brand in order to succeed. It’s helpful to do a SWOT analysis of your competition to find an edge.
• Piracy and theft. You’re at risk of people stealing and reusing your products as their own.
• Selling restrictions. For example, you can only sell physical products through Facebook and Instagram according to their commerce policy.

A digital products success story

Online store Pixie Faire has tons of products for sale, but don’t expect any of them to arrive in a package. Instead, this Shopify merchant has gone all-in on digital products, selling downloadable patterns for doll clothes.

15. Brokerage business model

A brokerage is a business model in which the broker connects the customer to the product or service provider, acting as a liaison of sorts between the two. You often see brokerages in B2C and B2B business models, such as real estate or insurance brokerage, but not often in ecommerce.

Pros of brokerages business model

• Simplify complicated transactions. Brokerages are often used in complicated transactions such as real estate. This is because they provide additional services that are typically required of such complicated purchases.
• Leverage brand awareness. Some brokerage firms are successful and have brand awareness in their own right. Gaining representation by such a firm also grants you the benefits of being associated with that brand.

Cons of brokerages business model

• Inflexibility. Much like with franchises, operating under a brokerage firm often requires you to follow the firm’s policies and procedures. This can be frustrating for aspiring entrepreneurs with their own vision.
• Fees and commissions. Because brokerages offer services and other advantages, they also take a cut from your profits. This is often paid as a percentage of the transaction value in the form of a commission.

A brokerage success story

The Oppenheim Group is a now-famous real estate brokerage firm with multiple offices and a huge team of real estate agents. Founded in 1889, the firm has earned lots of recognition over the years and it now even has Netflix shows.

16. Bundling business model

Bundling is a business model where multiple products or services are sold together as a single package, often at a discounted price. This model works well for businesses looking to increase the perceived value of their offerings and boost average order value. Bundling is common in both B2C and B2B industries, from tech subscriptions to curated gift sets.

Pros of bundling business model

• Increased sales. Bundles often encourage customers to buy more than they originally intended.
• Improved customer experience. Offering complementary items together makes it easier for customers to find what they need.
• Simplifies decision-making. Customers perceive bundles as a better deal, reducing friction in the buying process.

Cons of bundling 

• Lower margins. Discounted bundles can reduce profit margins if not carefully priced.
• Inventory risks. Bundling requires sufficient stock of all included products, which can create logistical challenges.
• Customer perception. If a bundle contains less desirable items, customers may feel the deal is not worth it. It may help to offer customizable bundles wherever it makes sense.

A bundling success story

EasyStandard is a brand that offers long-lasting and comfortable wardrobe essentials built to perfectly fit all body types. After migrating to Shopify, it was able to introduce product bundles to its customers. This move streamlined back-end business operations and supported a 19% increase in conversion.

17. Marketplace business model

A marketplace business model connects buyers and sellers on a single platform, acting as an intermediary rather than a direct retailer. Well-known examples include Amazon, Etsy, and Airbnb. Marketplaces can operate across industries and support transactions in B2C, B2B, and even peer-to-peer (P2P) contexts, as in the case of Craigslist or Poshmark.

Pros of marketplace business model

• Low inventory requirements. The platform doesn’t need to stock or produce items, lowering upfront costs.
• Scalable model. Adding new sellers can expand the offerings without significant investment.
• Diverse revenue streams. Marketplaces can earn money through listing fees, commissions, or premium memberships.

Cons of marketplace business model

• High competition. Marketplaces often compete with established platforms in their niche.
• Complex logistics. Managing disputes, ensuring quality, and handling payments can be challenging.
• Dependent on network effects. Success relies on attracting both buyers and sellers, requiring significant marketing efforts.

A marketplace success story

Kick Game is a DTC brand that turned into a brick-and-mortar retailer that later grew into a global, multichannel marketplace. Shoppers can browse sneakers, socks, and related accessories from Kick Game itself as well as tons of select brands.

18. Reselling business model

The reselling model involves purchasing products and then selling them at a profit. This is common in the fashion, electronics, and collectibles industries and can take place at physical stores, online shops, or platforms like eBay, ThredUp, or Poshmark.

Pros of reselling business model

• Simple startup. There’s no need to create products, making it easier to launch a business.
• Flexibility. Reselling allows entrepreneurs to pivot quickly based on market trends.
• Established demand. Selling recognizable brands or trending items can attract customers easily.

Cons of reselling business model

• Thin margins. Resellers often face pricing constraints due to competition and market saturation.
• Inventory risks. Holding unsold inventory ties up capital and increases financial risk.
• Dependence on suppliers. Resellers rely on third parties for product availability and quality, which can be unpredictable.

A reselling success story

New Jersey–based Shopify merchant Packer Shoes started as a small neighborhood custom shoe shop. It also resells sneakers from household name brands like Adidas, Asics, and Nike. 

19. Non-profit business model

Non-profit organizations operate with the goal of serving a mission rather than generating profits. These businesses often focus on addressing social, environmental, or educational needs, and reinvest surplus funds into furthering their cause. Non-profits can engage in product sales, fundraising, or service delivery.

Pros of non-profit business model

• Mission-driven. Non-profits align with meaningful goals, which can attract passionate supporters and employees.
• Tax benefits. Many governments offer tax exemptions to non-profits, reducing operating costs.
• Grants and donations. 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.