E-commerce Business Models

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A horizontal market is one that supplies goods to a variety of industries instead of just one. Therefore, horizontal market software is software that can be used by several different types of industries. For example, word processing and spreadsheet programs are horizontal market applications because they can be used by many types of businesses and consumers. A business owner might use word processing software to type memos to his employees, while a student might use the same program to write a paper for a class. Software developers that create programs for horizontal markets typically have a broad audience , but also face high levels of competition. The opposite of horizontal market software is vertical market software, which is only developed for a specific industry. Example: Designing a payroll software ware for an organization according to its needs.

Concept Horizontal / Vertical Market

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B2B E-CommerceBusiness Models

Net marketplaces A B2B Net marketplace is a commerce site that enables communities of buyers and sellers to meet on the Internet and to conduct trade. Private industrial network Private industrial networks (some times referred to as PRIVATE TRADING EXCHANGES or PTXs) constitute about 75% of all B2B expenditures(payments) by large firms
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B2B E-CommerceBusiness Models

Net marketplaces
E-distributor E-procurement

Exchange
Industry consortium

Private industrial network

Single firm Industry-wide
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B2B Models: E-distributor

Supplies products and services directly to

individual businesses
Owned by one company seeking to serve

many customers(Businesses)
Revenue model: Sales of goods Examples: Grainger.com, Partstore.com, Dell
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With e-distributors, the more products and services a company makes available on its site, the more attractive that site is to potential customers.
is the largest distributor of maintenance, repair, and operations (MRO) supplies are thought of as indirect input to the production process
Grainger relied on catalog sales and physical distribution centers in metropolitan areas. Its catalog of equipment went online in 1995 at Grainger.com, giving businesses access to more than 220,000 items. Now Company(Buyers) purchasing agents can search by Copyright 2010 Pearson Education, Inc.

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One stop shopping is always preferable to having to visit numerous sites to locate a particular part or products.
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B2B Models: E-procurement

Creates and sells access to digital

electronic markets
Includes B2B service providers, application service

providers (ASPs)-> they are able to offer firms much lower costs of software b achieving scale economies.

Revenue model:

Transaction fees, usage fees(per workstation), annual licensing fees

Firms such as Ariba, for instance, have created software that helps large firms organize their procurement process by creating mini-digital markets for a single firm.
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Ariba creates custom integrated online catalogs (where supplier firms can list their offerings) for purchasing firms. On the sell side, Ariba helps vendors sell to large purchasers by providing software to handle catalog creation shipping, insurance, and finance. Both the buy and sell side software is referred to generically as value Copyright 2010 Pearson Education, Inc. chain management software.

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Ariba to specialize and offer their software to firms at a cost far less than the cost of developing it.

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B2B Models: Exchanges

Electronic digital marketplace where suppliers and purchasers conduct transactions

Usually owned by independent firms whose business is

making a market
Usually serve a single vertical industry

Revenue model: Transaction, commission fees

Create powerful competition between suppliers

Number has dropped dramatically
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B2B Models: Industry Consortia

Industry-owned vertical marketplaces that serve specific industries (e.g., automobile, chemical, aerospace )

More successful than exchanges

Sponsored by powerful industry players Strengthen traditional purchasing behavior

Example: Exostar(connect with 300 procurement systems , in 20 different countries, 24,000 trading partners worldwide.)
Example: BA SYSTEMS
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Private Industrial Networks(ptxs)

Private industrial networks are digital networks(often but not always internet-based networks) designed to coordinate the flow of communications among firms engaged in business together. For instance Wal-Mart(RETAILER) operates one of the largest private industrial networks in the world for its suppliers, who(Suppliers) on a daily bases use Wal-Marts network to monitor

the sales of their goods, the status of shipments and the actual inventory level of their goods.

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Private Industrial Networks(ptxs)

B2B E-commerce relies ON A TECHNOLOGY CALLED Electronic data interchange (EDI) EDI is useful for one to one relationship between a single supplier and a single purchaser and originally was designed for proprietary networks(Intranet /extranet), although it is migrating rapidly to the internet. EDI USEFUL FOR ONE(SINGLE SUPPLIER) ONE(Single Purchaser) But later on EDI USE FOR M(Many suppliers):1(PURCHASER AS WALMART) or M(Many suppliers):M(SMALL GROUP OF PURCHASERS) RELATIONSHIPS. EDI NOT DESIGNED FOR EXCHANGES (many sellers and many buyers)
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Private Industrial Networks(ptxs)

Single firm networks

Most common form , Owned by single large purchasing firm, use EDI & ERP (Scm, inventory, CRM)

Example: Wal-Marts network for suppliers, (FRESH DIRECT.COM using SAP(ERP-SCM,CRM, INVENTTORY CONTROLL, ) DELL private network to its suppliers.

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Private Industrial Networks(ptxs)

Industry Wide Private Network( A network of Retailers/suppliers) industry-owned network that sets standards, coordinates supply and logistics for the industry

Example: Agentrics (17 out of top 30 retailers

and over 200 suppliers , Serving more than 30,000 items)

1. 2. 3. 4. 5. 6. 7. 8.

Provides collaborative design tools, Planning and management Negotiations and auctions Order execution Demand aggregations World wide item management World wide logistics And global catalog in different languages
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For instance, wal-mart has refused to open its very successful network to other members of the retail industry, in effect to become an industry standard, for fear it will be sharing technology secrets with other retailers like Sears. In response, Sears and other retailers around the world have created their own set of organizations and networks that are open to all in the industry.

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Business Models in Emerging E-commerce Areas Consumer-to-consumer (C2C)

Examples: eBay, Half.com

Peer-to-peer (P2P)
Examples: The Pirate Bay, Cloudmark

M-commerce: (Mobile user greator than Internet users)

E-commerce models using wireless technologies
Technology platform continues to evolve In the United States, demand still highest for digital

content like ring tones

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Do u mind applying your mind ? Copyright 2010 Pearson Education, Inc.the Logistic Game? Try

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