E-Commerce Business Model

business model :
a set of planned activities designed to result in a profit in a marketplace

e-commerce business model :

a business model that aims to use and leverage the unique qualities of the
Internet, the Web, and the mobile platform


 THE EIGHT KEY ELEMENTS OF A BUSINESS MODEL E-commerce Business Models 327

value proposition : defines how a company’s

FIGURE 5.1 THE EIGHT KEY ELEMENTS OF A BUSINESS MODEL

product or service fulfills the needs of customers

revenue model : describes how the firm will earn

revenue, produce profits, and produce a superior
return on invested capital

market opportunity : refers to the company’s intended

marketspace and the overall potential financial
opportunities available to the firm in that marketspace

marketspace : the area of actual or

potential commercial value in which a
company intends to operate

A business model has eight key elements. Each element must be addressed if you hope to be successful.
competitive environment : refers to the other companies operating in the same
marketspace selling similar products

competitive advantage : achieved by a firm when it can produce a superior product

and/or bring the product to market at a lower price than most, or all, of its
competitors

market strategy : the plan you put together that details exactly how you intend
to enter a new market and attract new customers

organizational development : plan that describes how the company will

organize the work that needs to be accomplished

management team : employees of the company responsible for making the

business model work
E-Commerce Business Classification
Business-to-Consumer (B2C)

- Business-to-Business-to-Consumer (B2B2C)

Business-to-Business (B2B)
Participant
Consumer-to-Business (C2B)

Consumer-to-Consumer (C2C)

Social Commerce








 TABLE 5.6 B2C BUSINESS MODELS
B2C BUSINESS MODELS

BUSINESS REVENUE
MODEL VARIATIONS EXAMPLES DESCRIPTION MODELS

E-tailer Virtual Merchant Amazon Online version of retail store, where Sales of goods
Blue Nile customers can shop at any hour of the day
Bluefly or night without leaving their home or
office
Bricks-and-Clicks Walmart Online distribution channel for a Sales of goods
Target company that also has physical stores
Catalog L.L.Bean Online version of direct mail catalog Sales of goods
Merchant LillianVernon
Manufacturer- Dell Manufacturer uses online channel to Sales of goods
Direct Mattel sell direct to customer
Nike
Community Facebook Sites where individuals with particular Advertising,
Provider LinkedIn interests, hobbies, common experiences, or subscription,
Twitter social networks can come together and affiliate referral
Pinterest “meet” online fees
Content Provider Wall Street Journal Offers customers newspapers, magazines, Advertising,
Netflix books, film, television, music, games, and subscription fees,
Apple Music other forms of online content sales of digital
goods
Portal Horizontal/ Yahoo Offers an integrated package of content, Advertising,
 TABLEProvider
Content 5.6 B2C BUSINESS MODELS
Wall Street Journal Offers customers newspapers, magazines, Advertising,
Netflix books, film, television, music, games, and subscription fees,
BUSINESS Apple Music other forms of online content R Esales
V E NofUdigital
E
MODEL VARIATIONS EXAMPLES DESCRIPTION MO DELS
goods
Portal
E-tailer Horizontal/
Virtual Merchant Yahoo
Amazon Offersversion
Online an integrated
of retail package of content,
store, where Advertising,
Sales of goods
General AOLNile
Blue search, and
customers cansocial network
shop at services:
any hour of the news,
day subscription fees,
MSN
Bluefly ore-mail, chat, music
night without downloads,
leaving their homevideo
or transaction fees
Facebook streaming, calendars, etc. Seeks to be a
office
user’s home base
Bricks-and-Clicks Walmart Online distribution channel for a Sales of goods
Vertical/ Target
Sailnet company
Focusesthat
on aalso has physical
particular subjectstores
matter or Advertising,
Specialized
Catalog L.L.Bean market
Online segment
version of direct mail catalog subscription
Sales of goods fees,
(Vortal)
Merchant LillianVernon transaction fees
Manufacturer-
Search Dell
Google Manufacturer uses online
Focuses primarily channel
on offering to
search Sales of goods
Advertising,
Direct Mattel
Bing sell direct to customer
services affiliate referral
Nike
Community Facebook Sites where individuals with particular Advertising,
Transaction E*Trade Processors of online transactions, such as Transaction fees
Provider LinkedIn interests, hobbies, common experiences, or subscription,
Broker Expedia stockbrokers and travel agents, that
Twitter social networks can come together and affiliate referral
Monster increase customers’ productivity by helping
Pinterest “meet” online fees
Travelocity them get things done faster and more
Content Provider Wall Street Journal
Orbitz Offers customers newspapers, magazines,
cheaply Advertising,
Netflix books, film, television, music, games, and subscription fees,
Apple Music other forms of online content sales of digital
Market Creator eBay Businesses that use Internet technology to Transaction fees
goods
Etsy create markets that bring buyers and
Portal Horizontal/ Yahoo Offers an integrated package of content, Advertising,
Uber sellers together
General AOL search, and social network services: news, subscription fees,
Airbnb
MSN e-mail, chat, music downloads, video transaction fees
Service Provider Facebook
Envoy streaming,
Companies calendars, etc.money
that make Seeks by
to be a
selling Sales of services
Wave user’s
usershome base rather than a product
a service,
RocketLawyer
Vertical/ Sailnet Focuses on a particular subject matter or Advertising,
Specialized market segment subscription fees,
 TABLE 5.7 B2B BUSINESS MODELS

BUSINESS REVENUE
MODEL EXAMPLES DESCRIPTION MODEL

(1) NET MARKETPLACE

E-distributor Grainger Single-firm online Sales of goods

Amazon Business version of retail and
wholesale store;
supply maintenance,
repair, operation
goods; indirect inputs
E-procurement Ariba Supplier Single firm creating Fees for market-
Network digital markets where making services,
B2B BUSINESS Proactis sellers and buyers
transact for indirect
supply chain
management, and

MODELS
inputs fulfillment services
Exchange Go2Paper Independently owned Fees and
vertical digital commissions on
marketplace for transactions
direct inputs
Industry Consortium The Seam Industry-owned Fees and
SupplyOn vertical digital commissions on
market open to select transactions
suppliers

( 2 ) P R I VAT E I N D U S T R I A L N E T W O R K

Walmart Company-owned Cost absorbed by

Procter & Gamble network that network owner and
coordinates supply recovered through
chains with a limited production and
set of partners distribution
efficiencies
 332 CHAPTER 5 E-commerce Business Strategies

E-Commerce Business
TABLE 5.2
Classification
FIVE PRIMARY REVENUE MODELS

REVENUE MODEL EXAMPLES REVENUE SOURCE

Advertising Yahoo Fees from advertisers in

Facebook exchange for advertisements
Subscription eHarmony Fees from subscribers in
The Economist exchange for access to content
Netflix or services
Revenue
Transaction Fee eBay Fees (commissions) for enabling
Model E*Trade or executing a transaction
Sales Amazon Sales of goods, information, or
Asos services
Birchbox
iTunes
Affiliate MyPoints Fees for business referrals

describes how the rm will earn revenue, produce

pro ts, and produce a superior return on invested
capital

For instance, let’s assume you are analyzing a software training company that creates
fi

fi
 INFRASTRUCTURE P L AY E R S

Hardware: Web Servers HP • Dell • Lenovo

Software: Web Server Software
Cloud Providers
Hosting Services
Domain Name Registration
Content Delivery Networks
Site Design
Small/Medium Enterprise E-commerce
Platforms
Enterprise E-commerce Platforms
M-commerce Hardware Platforms
M-commerce Software Platforms
E-Commerce Streaming, Rich Media, Online Video
Microsoft • IBM • Red Hat Linux (Apache) • Oracle
Amazon Web Services • Microsoft Azure • IBM Cloud • Google Cloud
Platform
Liquid Web • WebIntellects • 1&1 • HostGator • Hostway
GoDaddy • Network Solutions • Dotster
Akamai • Limelight Networks • Amazon CloudFront
Weebly • Wix • Squarespace • Jimdo
Shopify • BigCommerce • YoKart
Magento • IBM • Oracle • Salesforce • SAP • Intershop
Apple • Samsung • LG
Mobify • PredictSpring • Usablenet • GPShopper
Adobe • Apple • Webcollage

Enablers Security and Encryption VeriSign • Check Point • GeoTrust • Entrust Datacard • Thawte • Intel
Security
Payment Systems PayPal • Authorize.net • Chase Paymentech • Cybersource
Web Performance Management Compuware • SmartBear • Dynatrace
Comparison Engine Feeds/Marketplace ChannelAdvisor • CommerceHub • CPC Strategy
Management
Customer Relationship Management Oracle • SAP • Salesforce • Microsoft Dynamics
Order Management JDA Software • Jagged Peak • Monsoon
Fulfillment JDA Software • Jagged Peak • CommerceHub
Social Marketing Buffer • HootSuite • SocialFlow
Search Engine Marketing iProspect • ChannelAdvisor • Merkle
E-mail Marketing Constant Contact • Cheetah Digital • Bronto Software • MailChimp
Affiliate Marketing CJ Affiliate • Rakuten LinkShare
Customer Reviews and Forums Bazaarvoice • PowerReviews • BizRate
Live Chat/Click-to-Call LivePerson • Bold360 • Oracle
Web Analytics Google Analytics • Adobe Analytics • IBM Digital Analytics • Webtrends