STUDY UNIT 3: SELLING ON THE WEB

Purpose The purpose of this unit is to demonstrate a thorough understanding

of the selling on the WEB and business presence on the Web that is
effective.

Specific By the end of this study unit, students should be able to:
Learning
• Define a revenue model and illustrate their use for online
Outcomes
commerce
• Identify issues affecting online businesses
• Create business presence on the Web that is effective
• Highlight factors that improve the usability of a site
• Evaluate methods used by organisations to connect with
customers

Time It will take you 15 hours to make your way through this unit.

Important terms An advertising-supported revenue model is a business approach

and definitions that emphasizes the sale of advertising as a major source of
revenue.

A revenue model for e-commerce is a strategy used to generate

revenue from an online business.

Guo (2016) defined the business model in general by stating that a

―business model is abstract rational cognition about how corporation
created, delivered and obtained value and is the enterprise‘s core
competitive advantages from the perspective of value creation‖.

3.1 Introduction
Various e-commerce strategies implemented by businesses should be able to generate
revenue. Different electronic commerce tools are targeted for different goals. Some
models focus on revenue generation, cost reduction or improve customer service. This
unit discusses several models that are used by online businesses to generate revenue.
These methods include digital content, catalogues, fee-based

42
models and advertising support. Organisations can use these models in both B2B and
B2C e-commerce.

3.2 Revenue models and their use in e-commerce

E-commerce has come with new selling possibilities for businesses via the online
platform. The advent of the Internet brought significant opportunities for businesses to
generate revenue online.

―During the dot-com bubble, newly minted entrepreneurs crashed through the doors of
business magazines, showing off their business plans to editors with the zeal of
evangelists. The vast majority of those business plans had no — that's right, zero —
mechanisms for actually generating revenue. History shows what happened to most of
those companies. So, defining a revenue model for your new business is a necessity;
it's the underpinning of success‖ (Grant 2017).

According to Schneider (2017), a revenue model for e-commerce is a strategy used to

generate revenue from an online business. Guo (2016) defined the business model in
general by stating that a ―business model is abstract rational cognition about how
corporation created, delivered and obtained value and is the enterprise‘s core
competitive advantages from the perspective of value creation‖. The revenue model
generates revenue from service fees, online product sales, advertising sales, licence
fees and data access fees (McLaughlin, 2016).

Schneider (2017) identified the following revenue models for online business:

3.2.1 Web Catalogue Revenue Model

Businesses in the e-commerce sector have several goals that include improving
customer service, reducing cost, while the primary aim of most e-commerce sites is to
generate revenue and earn a profit. This is the most simple and common type of e-
business model for generating revenue. This model would use the electronic catalogue
and shopping cart providing access to customers throughout the world as the ones
shown in figure 3.1 below.

43
Figure 3.1: Online catalogue

Source: Youtube.com. (Online)

This type of a revenue model is popular with businesses that include sellers of
computers, electronic items, books, music, videos, toys, flowers, gifts, clothes etc. The
source of revenue for this model is the payment received from customers.

3.2.2 Digital Content Revenue Model

Business content can be efficiently and effectively distributed using the Web. E-
businesses can offer various types of digital services such as corporate information,
legal information, government information and resources for academic libraries. E-
businesses can customise these services according to the needs, sizes and usage
patterns of customers. Digital content revenue models require the customer to subscribe
to such services by paying a certain amount as subscription fee which becomes the
main revenue generator for e-business. The customers can pay via the credit card
option instead of relying on the subscription fee. Online journals, newspapers, libraries
are good examples.

3.2.3 Advertising-Supported Revenue Model

According to Kokemuller (2018) “An advertising-supported revenue model is a
business approach that emphasizes the sale of advertising as a major source of

44
revenue. This structure is most prominent in traditional broadcast and print media, as
well as online media”. Schneider (2017) argued that advertising-supported revenue
model is supplied for free to the customers due to the fact that advertising revenue
provides sufficient income to support business operations. Companies involved in e-
commerce (online companies) and use revenue models that are supported by
advertising generally provide free content because it is funded by advertisers. Good
examples are, “Yahoo portal provides useful information and a search engine free of
cost, but earns revenue through advertisements on its portal Website to bear the
operational cost” Wright (n.d).

3.2.4 Advertising-Subscription Mixed Revenue Model

In this model type, subscribers pay a fee and accept some level of advertising. Thus, an
ebusiness can earn its revenue from both sources, that is, through subscription and
advertisements. On Websites that use this model, normally, the subscribers are
subjected to much less advertising than they are on advertising-supported sites. For
instance, in case of certain online newspapers, a customer has to pay a subscription
fee for certain services/information whereas some services are free of charge as they
are supported by advertising.

3.2.5 Fee-for-Transaction Revenue Model

This model involves businesses charging a fee for services rendered. An example is
online travel agents who receive a fee for making travel arrangements for their clients,
as well as, advising them about lodging, transportation etc. Stock brokerage firms also
use this model as they charge their customers a commission for each transaction of
stocks/shares executed through them.

3.2.6 Fee-for-Service Revenue Model

This model differs from services provided by agents or brokers to complete a transaction
(the above case). This fee is instead charged on the basis of the value of some service
rendered. Examples are the professional services provided online by doctors, lawyers,
and accountants. E-businesses that provide online entertainment and online games are
also good examples.

45
3.3 Issues Affecting Online Businesses
According to Menezes (2016), online businesses face the challenge of cash on delivery
slowing sales, difficulty in maintaining customer loyalty, sudden changes in e-
commerce, stringent regulations and cyber-crime. Schneider (2017) identified the
following issues with revenue models discussed above:
3.3.1 Channel Conflict and Cannibalization:
Some businesses have existing sales outlets and distributions networks which they fear
might become irrelevant because of Website sales. For example, Levi’s began selling
clothing online in the mid-1998. But many of the actual clothing stores complained that
Websites were making more profits than before. Therefore, in January 2000, Levi
Strauss decided to stop selling products on its own Website. Levi then decided to
prevent Cannibalisation by ensuring that the online Website serves the sole purpose of
providing product information and redirecting the customer to the retail store (Schneider,
2017).
3.3.2 Strategic Alliances and Channels Distribution Management:
When two or more companies join forces over a period of time to execute a business
activity, this is called a strategic alliance. Levi’s Online Website and Levi’s retail
stores partnership is a good example.
3.3.3 Luxury goods strategies
Not all products can be easily sold online or by e-commerce means. Expensive goods
that are of a luxurious nature and other high-fashion clothing items generally requires
customers to touch and feel them. The need to make customers experience and feel
the uniqueness of luxurious products sold facilitates the existence of physical shops.
3.3.4 Overstock Sales Strategies
Online platform provides businesses with an expanded opportunity to offload
overstocked items because of its ability to reach a wider target of audience and the ease
at which prices can be changed.
3.4 Creating an Effective Online Business Presence
Business presence is dominated by the ability of a business to make its brand known
within the industry and space it operate in. This is determined by the physical location
of the business, structure designs, corporate colours, office design and space, signage,
symbols and displaced business logos. For online businesses, the can create a Web
page that can mimic

46
a product showroom, a product brochure, an employment advert or customer contact
point (Schneider, 2017).
According to etraffic (2016), the following ten ways are key to having an effective
Website:
• Creating a professional Website with appealing visuals, content and design
• Optimising chances of being found in search results
• Using paid adverts to increase Web site traffic
• Generating a social media buzz
• Connecting with log influencers
• Connecting with online communities
• Linking the site with directories
• Network with the audience via email
• Continuous analysis and Website improvement
Schneider (2017) suggested the objectives and strategies listed in table 3.1 below as
some of the approaches that can be used to enhance an organisation’s presence on
the Web.

Table 3.1: Web presence objectives and strategies

47
Source: Schneider (2017)
Attracting visitors on the Web, putting links for information access on the Web and
getting Web visitors trust are some of the important ways of enhancing Web presence
as presented in table 3.1 above. Below are some important tips for effective Web
presence in figure 3.2.
Figure 3.2: An effective Web presence

48
Source: slideplayer.com
Organisational presence on the Web should create an image desirable to the
company‘s stakeholders such as employees, suppliers, customers, banks and the
community as indicated in figure 3.2 above.

3.5 Factors that Improves Web Site Usability

Website usability is improved by making it accessible to more people, easy to use and
building customer trust and loyalty on the Website (Schneider, 2017).

An ideal Website should provide quick information to the visitor on the history of the
organisation, its vision, mission, goals, and the financial status of the company, products
offered and the management structure. An effective two-way communication should be
available on the Website, otherwise, customers will go to the competitors. Below are
some of the reasons why people visit or leave Websites:

Table 3.2: Reasons for visiting or leaving a Website

Reasons for visiting a Website Schneider, Reasons for leaving a Website Lake
(2017)
(2010)

• To understand products offered • Playing auto sound on the Web

• Website pop-ups
• To purchase company products
• Slow loading times
• To get information about • Poor navigation design

49
 warrants, repairs and service • Concealing key information
• Demands from registration
policies
• Use of too much jargon
• Knowing individuals responsible
for managing the company
• Assessing company
performance for investment
purposes
Source: Author’s adaptation

Study group/ online discussion

Web designers face some challenges when trying to create a site
that is useful for everyone because visitors arrive for many
different reasons, Identify and explain these eight reasons?

The Website accessibility should accommodate all customers, including the disabled by
allowing adjustments for the level of detail, downloading format and viewing format. In
addition, online business should build on customer trust and loyalty through delivery,
product selection support, and product installation.

It is therefore of paramount importance for companies to do usability testing, defined as

the evaluation and testing of a Website by its owner to ensure that the visitors will enjoy
using it Schneider (2017). Testing the Website is best executed by gathering the
feedback from the users themselves. Effective implementation of changes as
recommended by users will eliminate an exodus of people from a Website due to factors
highlighted in table 3.2 above.

Building a customer-centric Website requires the design to allow quick access to

information, use descriptive language, avoid the use of jargon, consistency in using
colours and features on the site, avoid adverts, test the combination of colours and the
font size as some visitors maybe colour blind.

3.6 How Organisations Connect with Customers on the Web

50
There are three main modes of communication used by businesses, mass media (one-
tomany), the Web (many-to-one and many-to-many) and personal contact (one- to-one)
as shown in figure 3.3 below.

Figure 3.3: Business Communication Modes

Source: Schneider (2017)

Mass media sends a single message to a thousand or millions of recipients. The Web
can receive multiple or only one visitor at a point in time while the other hand, personal
contact involves a salesperson meeting a customer, usually for more specialised
products as seen at the bottom of figure 3.3 above.

https://www.youtube.com/watch?v=D6R6kZ4tKAE

3.7 Summary

This unit discussed several models that are used by online businesses to generate
revenue. These methods include digital content, catalogues, fee-based models and
advertising support. Organisations can use these models in both B2B and B2C e-
commerce. For businesses to successfully sell their products on the Web, their

51
Website should provide quick information to the visitor on the history of the organisation,
its vision, mission, goals, and the financial status of the company, products offered and
the management structure. An effective two-way communication should be available on
the Website, otherwise, customers will go to the

3.8 Self-Assessment

3.6.1 Provide a critical analysis of the Web catalogue revenue

model.
3.6.2 To what extent has the role of the Web site changed for
companies that are now involved in e-commerce?
3.6.3 Is brand loyalty as important in the digital market-place as
it has been in traditional bricks and mortar retails outlets/ Give
reasons for your answer, suggesting how the two differ?
3.6.4 You are a Web designer at XYZ limited. What measures
would you put in place to in order to attract customers to the
company‘s Website?
3.6.5 Analyse the existing e-commerce revenue models.

3.9 Revision Question

An E-commerce Problem

Olwethu Snebunhle Enterprises has been selling spare parts for vehicles in South Africa
for over five years. The company is based in Durban and supplied customers in all South
African provinces. This location is strategic for the company as most of their spare parts
are shipped from overseas. In the past five years, customers were placing their orders
telephonically and this has been a challenge in that the staff at Olwehu Snebunhle would
at times forget to write correct details and send wrong products to the customers.

Now that the market for Olwethu Snebunhle spare parts has grown to the rest of
Southern Africa, the Chief Executive officer has instructed senior management to
consider launching an e-commerce system. She is however worried about the possibility
of resistance to change from both management and staff.

Required

52
Write an e-commerce implementation plan for Olwethu Snebunhle Entreprises.
Your write up should be structured as follows:
1. An introduction (5)

2. The market for vehicles spare parts in South Africa (15)

• Main competitors

• E-commerce systems in use

3. Challenges of lacking an e-commerce system at OlwethuSnebunhle

Enterprises. (20)

4. E-commerce systems for consideration (10)

5. Benefits of an e-commerce system to the institution (20)

6. Measures to enhance e-commerce system adoption at the institution. (20)