Overview
E-commerce business model
Key components of e-commerce business
Models
Major B2C business models
Major B2B business models
Business models in other emerging areas
of e-commerce
Business Models
 A method of doing business by which a company can
generate revenue to sustain itself
 Spells out where the company is positioned in the
value chain
 Business models are a component of a business plan or
a business case
2
Business Plans & Business Cases
 Business plan:
 Business case:
- A written document
that identifies the
business goals and
outlines the plan of
how to achieve them
- A written document
that is used by
managers to garner
funding for specific
applications or
projects; its major
emphasis is the
justification for a
specific investment
3
The Content of a Business Plan
 Mission statement and
 Marketing and sales plan
company description
 The management team
 The market and the
customers
 The industry and
competition
 The specifics of the
products and/or services
 Operations plan
 Financial projections
and plans
 Risk analysis
 Technology analysis
4
E-commerce business model
 Business model – set of planned activities designed to
result in a profit in a marketplace
 Business plan – document that describes a firm’s
business model
 E-commerce business model – aims to use and
leverage the unique qualities of Internet and Web
Categorising E-commerce
Business models
 We categorize business models according to e-
commerce sector (B2C, B2B, C2C)
 Type of e-commerce technology used can also affect
classification of a business model
 Some companies use multiple business models
B2C Business Models
 E-tailer/Storefront model
 Portal model
 Content Provider
 Transaction Broker
 Market Creator
 Service Provider
E-tailer/Storefront Model
 The customers and the seller interact directly, e.g. amazon.com,
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dell.com, play.com
Organise an online catalogue of products
Take orders through Web site
Shopping cart technology
Accept payments in a secure environment
Send merchandise to customers
Manage customer data
Market Web site to potential customers
Revenue through product sales
Low barriers to entry -> very competitive
Portal Model
 Portal sites give visitors access to a variety of information in one
place
 News, sport, weather, online shopping, searching
 Revenue through charging advertisers and charging for premium
services
 Charging strategies for portals:
 charge merchants for a link
 per customer “click-through”
 reserve best areas for paying customers
Portal Model- Cont
 Horizontal portals – aggregate information on a broad
range of topics, e.g. search engines
 Yahoo! , Altavista.com, About.com
 Vertical portals (community sites) – large amount of
information in one subject area
 www.webmd.com, Bolt.com, IVillage.com
Content Provider
 Content providers distribute digital content (news, music, video,
artwork) over the Web
 WSJ.com, Rhapsody.com, CNN.com
 Second largest source of B2C e-commerce revenue in 2002
 Revenue generates through subscription fees, pay for download,
or advertising
 Syndication a variation of standard content provider model
Transaction Broker
 Sites that process transactions for consumers
 E-Trade.com, Ameritrade.com Monster.com
 Primary value proposition – saving of time and money for
customers
 Typical revenue model – transaction fee
 Based on frat rate or sliding scale
 Industries using this model:
 Financial services
 Travel services
 Job placement services
Market Creator
 Uses Internet technology to create markets that bring buyers and
sellers together
 Where they can display products, search for products and establish
prices
 Priceline.com (reverse austion), eBay.com
 Typically uses a transaction fee revenue model
 Usually a commission on sales is collected and sometimes a
submission fee
 A middleman – no inventory and production costs, not involved
in payment and delivery
Service Provider
 Offers services online
 xDrive.com – information storage
 Mybconsulting.com – consulting for small businesses
 Value proposition – valuable, convenient, timesaving, low-cost
alternatives to traditional service providers
 Revenue models – subscription fees or one-time payment
 Mixing services with products – powerful strategy
B2C Business Models Summary
B2B Business Models
 E-distributor
 E-procurement
 Exhanges (B2B hubs)
 Industry Consortia
 Private Industrial Networks
E-distributor
 Company that supplies products and services directly
to individual businesses
 Grainger.com
 GE Electric Aircraft Engines (geae.com)
 Owned by one company seeking to serve many
customers
 Revenue through sale of goods
E-procurement
 Create and sell access to digital electronic markets
 Ariba
 CommerceOne
 B2B service provider is one type – offer purchasing
firms sophisticated set of sourcing and supply chain
management tools
 Application service providers a subset of B2B service
providers
 Revenue through fees (for market making services,
supply chain management)
Exchanges
 An electronic digital marketplace where suppliers and
commercial purchasers can conduct transactions
 Exchange.eSteel.com, GEPolymerland.com
 Usually owned by independent firms whose business is
making a market
 Generate revenue by charging transaction fees
 Usually serve a single vertical industry
 Number of exchanges had fallen to around 700 in 2003
Industry Consortia
 Industry-owned vertical marketplaces that serve
specific industries
 Horizontal marketplaces, in contrast, sell specific
products and services to a wide range of industries
 Leading example: Covisint
Private Industrial Networks
 Digital networks (usually, but not always Internet-
based) designed to coordinate the flow of
communications among firms engaged in business
together
 Single firm network: the most common form (example
– Walmart)
 Industry-wide networks: often evolve out of industry
associations (example – WWRE)
B2B Business Models Summary
What is working?
 Pornography
 Travel / Tourism
 Retail - items that don’t need personal touch - objectivity in
product quality and performance
 music, books, gifts, Computers, electronic items
 Auctions
 Real Estate - houses and investment properties.
 Customer support services
 More efficient and effective processes between businesses (B 2 B)
What is not working?
 Items which require “touch and trial”
 Luxury goods
 Clothes - beyond Tshirts
 Groceries - it works for some people but market is
restricted
Note: Many OFF line factors determine success of
Online service. Eg. Transport network, customer profiles,
Getting online
 Why get online?
 Promote awareness of your Organization
 Sell a product
 Customer support
 Information and contact page
 Networking
 Everyone else has a web page
Plan
 What is your product?
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Electronic, Services or physical
Portable and inexpensive to deliver
Tourism
 Who is your market?
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Overseas Fish buyers
Upper income art collectors
Budget travellers / Up market
 Obstacles, Implementation and deadlines.
Getting Online
 Hosting Your Website
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Fast Access
Cost, Support, Space and Services
 Choosing a Domain Name (web address)
 www.myname.com / .nu / .to / .tv / .fj /
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Calling Card
Choose name that relates to product
Reflects on organization
Easy to remember
Design Issues
 Often Simple Is Better
 E.g. National PNG, Yahoo
 Complexity depends on your website objectives
 Planning content
 How do you keep content fresh and relevant
 Who Develops your website?
 Professional Services
 Do it Yourself
Web Site Software
 Web-site Creation
Common Software Tools.
Image Editing
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Adobe Photoshop
 Jasc.com
Web Page Development
 Paintshop Microsoft Front page - $150
 Dream Weaver - $150 – 200
 Netscape Communicator-Free
Note: There are a lot of cheaper software online.
Managing your Web Site
 Managing your website can take TIME!
 Adapting Business processes
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Good Samaritan Inn example
Look at employee time
Customer expectations
Limitations of the medium (non face to face)
Marketing Web site
 How do people find your website?
 ONLINE Strategy
 Links from related and / or popular web sites
 Search Engines
 Online Advertisements
 Informed by other users
Marketing Your Website
 OFFLINE Strategy - Show Your URL
 www.MYCOMPANY.com
 Stationary
 Advertising on conventional media
 Trade shows