OverviewE-commerce business modelKey components of e-commerce business ModelsMajor B2C business modelsMajor B2B business modelsBusiness models in other emerging areas of e-commerce

Business ModelsA 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

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Business plan: - A written

document that identifies the business goals and outlines the plan of how to achieve them

Business case: - 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

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Business Plans & Business Cases

Mission statement and company description

The management teamThe market and the

customersThe industry and

competitionThe specifics of the

products and/or services

Marketing and sales plan

Operations planFinancial projections

and plansRisk analysisTechnology analysis

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The Content of a Business Plan

E-commerce business modelBusiness model – set of planned activities

designed to result in a profit in a marketplaceBusiness plan – document that describes a

firm’s business modelE-commerce business model – aims to use

and leverage the unique qualities of Internet and Web

Categorising E-commerceBusiness 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 modelSome companies use multiple business

models

B2C Business ModelsE-tailer/Storefront modelPortal modelContent ProviderTransaction BrokerMarket CreatorService Provider

E-tailer/Storefront ModelThe customers and the seller interact directly, e.g.

amazon.com, dell.com, play.comOrganise an online catalogue of productsTake orders through Web siteShopping cart technologyAccept payments in a secure environmentSend merchandise to customersManage customer dataMarket Web site to potential customersRevenue through product salesLow barriers to entry -> very competitive

Portal ModelPortal sites give visitors access to a variety of

information in one placeNews, sport, weather, online shopping, searchingRevenue through charging advertisers and charging

for premium servicesCharging strategies for portals:

charge merchants for a linkper customer “click-through”reserve best areas for paying customers

Portal Model- ContHorizontal portals – aggregate information on

a broad range of topics, e.g. search enginesYahoo! , Altavista.com, About.com

Vertical portals (community sites) – large amount of information in one subject areawww.webmd.com, Bolt.com, IVillage.com

Content ProviderContent providers distribute digital content (news,

music, video, artwork) over the WebWSJ.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 BrokerSites that process transactions for consumers

E-Trade.com, Ameritrade.com Monster.comPrimary value proposition – saving of time and money

for customersTypical revenue model – transaction fee

Based on frat rate or sliding scaleIndustries using this model:

Financial services Travel servicesJob placement services

Market CreatorUses Internet technology to create markets that bring

buyers and sellers togetherWhere they can display products, search for products

and establish pricesPriceline.com (reverse austion), eBay.com

Typically uses a transaction fee revenue modelUsually 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 ProviderOffers services online

xDrive.com – information storageMybconsulting.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-distributorCompany that supplies products and services

directly to individual businessesGrainger.comGE Electric Aircraft Engines (geae.com)

Owned by one company seeking to serve many customers

Revenue through sale of goods

E-procurementCreate and sell access to digital electronic

marketsAribaCommerceOne

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)

ExchangesAn electronic digital marketplace where

suppliers and commercial purchasers can conduct transactionsExchange.eSteel.com, GEPolymerland.com

Usually owned by independent firms whose business is making a market

Generate revenue by charging transaction feesUsually serve a single vertical industryNumber of exchanges had fallen to around 700

in 2003

Industry ConsortiaIndustry-owned vertical marketplaces that

serve specific industriesHorizontal marketplaces, in contrast, sell

specific products and services to a wide range of industries

Leading example: Covisint

Private Industrial NetworksDigital 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? PornographyTravel / Tourism Retail - items that don’t need personal touch -

objectivity in product quality and performance music, books, gifts, Computers, electronic itemsAuctions

Real Estate - houses and investment properties.Customer support servicesMore efficient and effective processes between businesses

(B 2 B)

What is not working?Items which require “touch and trial”

Luxury goodsClothes - 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 onlineWhy get online?

Promote awareness of your OrganizationSell a productCustomer supportInformation and contact pageNetworkingEveryone else has a web page

PlanWhat is your product?

Electronic, Services or physical Portable and inexpensive to deliver Tourism

Who is your market? Overseas Fish buyers Upper income art collectors Budget travellers / Up market

Obstacles, Implementation and deadlines.

Getting OnlineHosting Your Website

Fast Access Cost, Support, Space and Services

Choosing a Domain Name (web address)www.myname.com / .nu / .to / .tv / .fj /

Calling Card Choose name that relates to product Reflects on organization Easy to remember

Design Issues Often Simple Is Better

E.g. National PNG, YahooComplexity depends on your website objectives

Planning contentHow do you keep content fresh and relevant

Who Develops your website?Professional ServicesDo it Yourself

Web Site SoftwareWeb-site Creation

Common Software Tools. Image Editing Adobe Photoshop Jasc.com Web Page DevelopmentPaintshop Microsoft Front page - $150Dream Weaver - $150 – 200Netscape Communicator-FreeNote: There are a lot of cheaper software online.

Managing your Web SiteManaging your website can take TIME!Adapting Business processes

Good Samaritan Inn example Look at employee time Customer expectations Limitations of the medium (non face to face)

Marketing Web siteHow do people find your website?ONLINE Strategy

Links from related and / or popular web sites

Search EnginesOnline AdvertisementsInformed by other users

Marketing Your WebsiteOFFLINE Strategy - Show Your URLwww.MYCOMPANY.com

StationaryAdvertising on conventional mediaTrade shows