In order to succeed, it’s vitally important for online entrepreneurs to diversify their businesses both in terms of business models and revenue sources.
Diversification is a vital factor for growing a business in any industry. You may have a product that is selling well right now, but if you aren’t actively looking for ways to sell more products more efficiently, then you run the risk of losing everything.
Even high-volume e-commerce sellers who have been very successful in this business understand the truth of this and they make significant efforts to ensure their longevity by diversifying their business models and sources of income.
Even Amazon, which had an impressive revenue of $280 billion in 2019 has diversified its business model.
In this article, we take a look at the different ways you can replicate this in your own business so you can be confident of driving growth and success even in the face of such uncertainty.
Always Start With One Success
When you begin the process of diversification, you should always get one successful site first before moving onto the next one.
Once you’ve built a successful and profitable website, it then becomes a lot easier for you to gradually add different income-generating tactics as well as make adjustments to your business model.
Examples of companies that have done this successfully include General Electric and Walt Disney. They started with one core business before diversifying into several different segments that they operate in today.
The Risks Never Stop in Online Business
Many people wonder if diversification is really necessary, particularly if your business is doing extremely well.
The truth is, you don’t necessarily have to diversify, there are many companies that found their specialties early on and stuck to it. They built their markets around specific products and made them their focus.
Horizontal Diversification
This type of diversification involves providing brand-new, unrelated products, and services to your existing customers.
An example of a company pursuing horizontal diversification in its strategy would be a computer company that begins to produce video game consoles.
With this type of strategy, you keep the focus on your core business while, at the same time, innovating and introducing brand-new products and services to your target market.
Concentric Diversification
This involves adding products and services that are similar to the ones that already exist in your business.
For instance, if a computer company primarily produces laptop computers, they can start manufacturing desktop computers as part of their concentric diversification strategy.
Conglomerate Diversification
This type of diversification involves adding new products and services which are completely unrelated and have no commercial or technological similarities to the business’s existing products.
Continuing with the example above, the computer company may decide to produce notebooks as part of their conglomerate diversification strategy.
This is a risky strategy as it requires the business to enter a totally new market and sell their products and services to a brand-new consumer base. There are higher costs incurred with research and development as well as advertising. Furthermore, the probability of failure with this type of diversification strategy is much greater.
