Business Models of
E-Commerce
Source: Dr Suboohi Nasim (AMU)
Business Model?
Business Model
“A business model is not just a
description of a complex social system
itself, with all its actors, relations and
processes.
Instead, it describes the logic of a
business system for creating value
that lies behind the actual processes”
(Petrovic, Kittl and Teksten, 2000)
Business Model Logic Triangle
Planning ICT processes
Level strategy
Architectural BUSINESS E-business
level MODEL opportunity
& challenge
E-business
Implementation
Business Process
adoption
Level Process
Business Model Definition
Business model is the conceptual
and architectural implementation
of a business strategy and the
foundation for the
implementation of a business
process.
Business Model Definition
The business model spells out
how a company plans to
make money and how it is
competitively positioned in
an industry
Essential elements of e-com business
models
COST Value Add Revenue
profit price
Infrastructure Product Customer
Management Innovation Relationship
•Resources /Assets
▪ Target •Information
•Activities customers
•Feel & Serve
/processes
▪Value proposition
•Trust & loyalty
•Partner networks ▪Capabilities
Categories of E-commerce /Business Models
Based on
Relationship
of
TRANSACTION TRANSCTION
PARTIES TYPES
Business Models
based on Transaction Parties
Transaction Parties Based E-commerce Models
B2B
BUSINESS BUSINESS
G2B
GOVERNMENT B2C
B2C
G2C
CONSUMER CONSUMER
C2C
B2C Models
Business-to-Consumer
Alternative way of executing
transactions between &
sellers, in which buyers are
individual consumers.
Business-to-Consumer
• Refers to businesses selling products or services to end-
user consumers.
• B2C stands for transaction activities involving a business
and a consumer (business-to-consumer transaction).
• Electronic commerce comprises commercial transactions,
involving both organisations and individuals. From the
technical point of view e-commerce is the processing and
transmission of digitised data. E-commerce decreases the
distance between producers and consumers. Consumers
can make their purchase without entering a traditional
shop.
Business-to-Consumer Variants
Pure Dot Com
(virtual e-tailers)
Vs.
Brick & Click
(web storefronts)
Business-to-Consumer Variants
Pure Dot Com
• Purely internet based models;
• have the advantage in areas of new e-business
models that stress cost efficiency.
• not burdened with brick and mortar costs and can
offer products at very low marginal cost.
• they tend to spend substantially more on customer
acquisition.
• Amazon.com; Netflix.com……etc
Business-to-Consumer Variants
Brick & Click
(web storefronts)
• is a business model by which a company integrates both
offline (bricks) and online (clicks) presences
• Example: Walmart.com; safeway.com; Barnes&
Noble.com; Blockbuster.com(take-over by Dish Network,
April 2011)
Business-to-Consumer Variants: Brick & Click
• The success of the model in many sectors has lessened the credibility of some
analysts who argued that the Internet would render traditional retailers obsolete
through disintermediation
• "On the other hand, an online-only service can remain a best-in-class operation
because its executives focus on just the online business." It has been argued that a
bricks and clicks business model is more difficult to implement than an online only
model (Stross Randall-2010, NY Times-. "Netflix Is Beating Blockbuster With Clicks,
Not Bricks“)
• In the future, the bricks and clicks model may be more successful, but in 2010
some online only businesses grew at a staggering 30%, while some bricks and clicks
businesses grew at a paltry 3% (www.rfidjournal.com)
• The key factor for a bricks and clicks business model to be successful "will, to a
large extent, be determined by a company’s ability to manage the trade-offs
between separation and integration" of their retail and online businesses (Gulati &
Jason, 2000, HBR)
Business-to-Consumer Variants
Virtual Malls
(website that hosts many online merchants)
• A web site that brings together different electronic retailers at a
single virtual (online) location.
• This contrasts with a fixed location infrastructure the traditional
arrangement where retail organizations operate from retail stores
situated in fixed locations such as real world shopping malls
• Catalog merchants deal with a specific product segment: qevon.com;
cooking.com….
• Indiaplaza.com-India’s largest online mall
• Amazon.com evolved from online book store to a virtual mall
Business-to-Consumer Variants
Manufacturer/Services
Vs.
Merchant/Intermediary
model
Business-to-Consumer…..
•Basic Rationale???
•B2C Process??
B2B Models
Business-to-Business
Alternative way of executing
transactions between buyers & sellers,
that are
business organizations.
(a network of independent organizations and long
term trading partners)
Business-to-Business
• B2B stands for "business-to-business," as in businesses
doing business with other businesses. The term is most
commonly used in connection with e-commerce and
advertising, when you are targeting businesses as
opposed to consumers.
• On the Internet, B2B (business-to-business), is the
exchange of products, services, or information between
businesses. B2B is e-commerce between businesses.
• Business-to-business electronic commerce (B2B) typically
takes the form of automated processes between trading
partners and is performed in much higher volumes than
business-to-consumer (B2C) applications.
Business-to-Business Variants
B2B Storefronts
(provides businesses with purchase orders,
fulfillment and other value added services)
–Supplier oriented- Dell, Cisco, IBM
–Buyer oriented- GE’s Trade Processing
Network(TPN)
Business-to-Business Variants: B2B Storefronts
Trading Process Network (TPN) General Electric :Benefits
• 60% procurement staff reduction (have been redeployed)
• 6-8 free days/ month for sourcing department to concentrate on strategic
activities (rather than paperwork, photocopying, envelope stuffing)
• materials costs declined 5%-20% (due to ability to reach a wider base of suppliers
online)
• Reduced cycle time
– 18-23 days to identify suppliers, prepare a request for bid, negotiate a price and award
the contract to a supplier
– now 9-11 days.
• invoices automatically match purchase orders, reflecting any modifications
made(electronic transaction from beginning to end)
• sharing information about their best suppliers for all GE procurement
departments worldwide
Business-to-Business Variants
B2B Vertical Markets
(provides a trading community for a specific
industry)
–Example: agriwatch.com (provides agri-business related
information that includes news, commentary and market research and e-
commerce in agricultural products)
pnatransport.com; bimaonline.com,
castingworld.com,
aspdotnetstorefront.com
bijleeindia.com, ...etc
Business-to-Business Variants
B2B Trading Hubs
(provides a marketplace for multiple vertical
markets)
Example:
–Alibaba.com (world’s largest B2B hub for
SMEs)
–commodityindia.com
–indiamart.com
Business-to-Business Variants
B2B Auction Market
(buyers & sellers enter competitive bids on
contracts)
Example:
–esteel.com
–e2commerce.com
–auctionindia.com
Business-to-Business Variants
B2B Fully automated exchanges
(buy & sell orders are completely matched
automatically)
Example:
–paperexchange.com
–metexchange.com
C2C & C2B Models
Consumer-to-Consumer Variant
• Abbreviation for consumer-to-consumer commerce; that
is, commerce with no middle business people The most
notable examples are Web-based auction and classified as
sites. Most large venues for such models (for example,
eBay and Classifieds2000) are quickly permeated by
consumers who participate so actively and regularly that
they become small businesses for them.
• C2C stands for consumer to consumer electronic
commerce. The Internet has facilitated new types of C2C
although it is important to note that this kind of
commerce -- in the form of barter, yard sales, flea
markets, swap meets, and the like -- has existed since
time immemorial.
Consumer-to-Consumer Variant
–Transactions among customer
–Common platform where buyers & sellers
meet
–Auction based pricing
Example:
–E-bay.com
–Bazee.com (taken over by e-bay)
Consumer-to-Business Variant
–Transactions between customer & business
–Reverse-Auction based pricing
–Enables the buyers to name their own
price
Example:
–Priceline.com
–Reverseauction.com
G2C & G2B Models
Government-to-Business Variant
–Transactions between government &
business
–Enables the businesses to expedite their
interactions with govt.
Example:
–incometaxindia.gov.in
–mca.gov.in (MCA21) – most successful B2G
project in India
(online registration of company till its liquidation)
Government-to-Business
• B2G is the idea that government agencies
and businesses can use central Web sites to
conduct business and interact with each
other more efficiently than they usually can
off the Web.
Business Models
based on Transaction Types
Business Models
(Based on Transaction Types)
High
AGGREGATORS VALUE CHAIN
Control INFOMEDIARY
BROKERAGE COMMUNITY
low
low High
Value Integration
BROKERAGE MODEL
–Key principle: Price discovery mechanism
–Modes of transaction: auction & exchanges
–Virtual marketplaces - global network of
buyers & sellers
–Encompasses almost all types of
organizations
BROKERAGE MODEL
Brokers are market makers: they bring buyers and
sellers together and facilitate transactions.
Brokers play a frequent role in business-to-business
(B2B), business-to-consumer (B2C), or consumer-
to-consumer (C2C) markets.
Usually, a broker charges a fee or commission for
each transaction it enables. The formula for fees can
vary.
Brokerage models include exchanges, demand
collection systems, and auction brokerages.
AGGREGATOR MODEL
–Connectors between buyers & sellers
–Sales made on list price/auction
–May/may not have a brick and mortar
existence
Variants of AGGREGATOR MODEL
– Virtual Merchants: operate only from web; may
offer traditional/ web specific products/services
– Surf & Turf: traditional B&M with web
storefront; potential for channel conflict
– Bit Vendor: deals strictly with digital products;
sales & distn. over the web
– Subscription model: users pay for access to the
site or content
INFOMEDIARY MODEL
–Organizer of virtual community
–Helps customers to collect, manage and
maximize the value of information about
consumers:
–Generic Agents: netzoo.com; compare.com,
compete.com
–Specialized Agents: chaindrugstores.com;
deja.com (bought by Google..), eMachines.com;
COMMUNITY MODEL
–Unified body of individuals with common
interests
–Begets loyalty & thus builds business
–Tools: Newsletters, Discussion list, Bulletin
Boards, Chat rooms….
–Advertizing based revenue model..
–Rediff, yahoo, google…
VALUE CHAIN MODEL
– Moves business away from discrete streams of data to
one unified pool of knowledge - extends outside the co.
to suppliers and customers
– Goal is to develop full and seamless interactions among
all members of the value chain-resulting in lower
inventories, higher customer satisfaction, and shorter
time to market.
» Generalized portals: Yahoo.com (Altavista.com); Google.com
» Personalized portals: My yahoo.com etc.
