E-Commerce Business Models
Developments in computing technology and communication systems, most notably the Internet,have created many new business opportunities for electronic commerce. New mechanisms for making money have developed. Many patents have been granted in this field. Whenappropriate, a reference to a relevant patent has been included. Please note that this does notmean that that patent covers the technique in question, or even that the patent is a valid one. Allit means is that the patent in some way relates to the technique in questionThe overview below discusses the most common of these business models
A merchant is a wholesaler or retailer of goods and services. The merchant provides a website with product information and an online ordering mechanism. Users select the products they want to buy and place an order. The product price can be fixed or negotiable. The merchantmakes his money the same way as traditional "brick-and-mortar" shops: through the profitmargin in the product price. This model is mainly suited for physical goods and services, such as books, computers or a pizza delivery service. The merchant can directly reach end users and sellto them without needing wholesalers or retailers.
"Click-and-mortar" shops, combining a website with a physical store, have the additionaladvantages that they (usually) already have an established brand name, and that they canuse their physical store to promote the website. Further, users can return unwanted ordefective products simply by going to the store, rather than mailing it to a web siteoperator.Traditional mail-order businesses (catalog merchants) already have the necessary facilities to process orders over the Internet (basically, orders come in by e-mail ratherthan by letter or phone, the shipping and handling is the same).
Build To Order Merchants
A manufacturer such as a computer vendor can use this model by not only offering hisgoods or services for sale, but also by offering the ability to order customized versions.The customized product is then assembled individually and shipped to the customer (US6,167,383). This provides added value to consumers and allows the manufacturer tocreate only those products that will be sold.
The Service Provider
For some services, the merchant model is quite appropriate. A pizza delivery service can operate on apay-per-item basis. However, many Internet-based services cannot easily be handled this way. It isoften difficult to define the "product" that is sold, or to set a price for this product. For instance, anews site can offer the service of access to its archive, but even one dollar is probably too much forretrieving one article. Some service providers provide advertising-based access to their service, hopingto recover the costs through revenue from the advertisers. However, this appears to be a doomedstrategy, since few ad-driven sites are able to get sufficient income (Yahoo! being one of the very few successful ones).