E-COMMERCE

BUSINESS MODELS
AND CONCEPTS
Business Model

■ A business model is a set of planned activities

(sometimes referred to as business processes) designed
to result in a profit in a marketplace.
■ E-commerce business model is a business model that
aims to use and leverage the unique qualities of the
Internet and the World Wide Web.
Key Elements of a Business Model
1. Value proposition
2. Revenue model
3. Market opportunity
4. Competitive environment
5. Competitive advantage
6. Market strategy
7. Organizational development
8. Management team
1. Value Proposition

■ Why should the customer buy from you?

■ Successful e-commerce value propositions:
– Personalization/customization
– Reduction of product search, price discovery
costs
– Facilitation of transactions by managing product
delivery
2. Revenue Model
■ How will the firm earn revenue, generate profits, and
produce a superior return on invested capital?
■ Major types:
– Advertising revenue model
– Subscription revenue model
– Transaction fee revenue model
– Sales revenue model
– Affiliate revenue model
3. Market Opportunity

■ What marketspace do you intend to serve and what is its

size?
– Marketspace: Area of actual or potential commercial
value in which company intends to operate
– Realistic market opportunity: Defined by revenue
potential in each of market niches in which company
hopes to compete
■ Market opportunity typically divided into smaller niches
4. Competitive Environment
■ Who else occupies your intended marketspace?
– Other companies selling similar products in the same
marketspace
– Includes both direct and indirect competitors
■ Influenced by:
– Number and size of active competitors
– Each competitor’s market share
– Competitors’ profitability
– Competitors’ pricing
5. Competitive Advantage
■ What special advantages does your firm bring to the
marketspace?
– Achieved when firm produces superior product or can
bring product to market at lower price than competitors
■ Important concepts:
– Asymmetries
– First-mover advantage
– Unfair competitive advantage
– Leverage
6. Market Strategy
■ How do you plan to promote your products or
services to attract your target audience?
– Details how a company intends to enter market
and attract customers
– Best business concepts will fail if not properly
marketed to potential customers
7. Organizational Development
■ What types of organizational structures within the
firm are necessary to carry out the business plan?
■ Describes how firm will organize work
– Typically divided into functional departments
– Hiring moves from generalists to specialists as
company grows
8. Management Team
■ What kinds of experiences and background are
important for the company’s leaders to have?
– Employees are responsible for making the
business model work
– Strong management team gives instant credibility
to outside investors
– Strong management team may not be able to
salvage a weak business model, but should be able
to change the model and redefine the business as
it becomes necessary
E-commerce Business Models

■ Drop shipping
■ Wholesaling and Warehousing
■ White-labelling
■ Private labelling and Manufacturing
■ Subscription-based
Drop shipping

■ Where you sell items on your website that someone

else manufactures and ships to your customer
■ Consumer places order on online store, online store
passes order to drop shipper and the supplier ships
order directly to consumer
Wholesaling and warehousing

■ Where you buy products in bulk and store them in a

warehouse (usually for B2B market)
■ Online store orders directly from supplier, supplier
sends products to online store warehouse and
consumer places order from online store
White labelling

■ Where you have a contract that allows you to put your

brand on the product as if you are the manufacturer
■ Online store orders direct from supplier, existing
product is relabelled with your branding and consumer
places order from online store
Private labelling and manufacturing

■ Where you're paying to have the products created for

you and you fulfil the order yourself
■ Online store orders direct from factory, product is
made specifically for online store and the consumer
places order from online store
Subscription

■  Where you rely on a subscription model that delivers

your products to customers at regular, scheduled
intervals
■ Online store orders direct from supplier, consumer
places order from online store, however, subsequent
orders are automatically billed and shipped to
consumer
Product Models

■ Single product
■ Single category
■ Multiple category
■ Affiliate
■ Hybrid
Single product

■ Single-product ecommerce businesses focus on a

single product, potentially in varying levels, offered to
businesses or consumers.
Single category

■ By offering a small selection of carefully chosen

products 
Multiple category

■ Multiple category e-commerce sites are a good choice

for established brick and mortar stores .
Affiliate

■ Often through blogs, but sometimes through dedicated

ecommerce stores, affiliate sales benefit the original
seller by providing additional visibility and the affiliate
by providing an opportunity to monetize product
reviews, a personal blog, or other site.
Hybrid

■ For businesses that have outgrown the income stream or

the product confines of a single category store, becoming
a single category and affiliate hybrid store can be
beneficial. You can test related product categories in your
niche, risk-free, to see what your customers like. This
gives you the benefit of an additional product category
without requiring you to commit to marketing and
managing additional products.
E-commerce Business Classifications/Types

■ B2B – Business to Business

■ B2C – Business to Consumer
■ C2C – Consumer to Consumer
■ C2B – Consumer to Business
 Business to Business

■ A website following the B2B business model sells its

products to an intermediate buyer who then sells the
product to the final customer.
■ A B2B model focuses on providing products from one
business to another; selling goods/services to other
businesses.
 Business to Consumer

■ A website following the B2C business model sells its

products directly to a customer. B2C sales are the
traditional retail model, where a business sells to
individuals, but business is conducted online as opposed
to in a physical store.
■ Selling products/services directly to individual consumers
 Consumer to Consumer

■ A website following the C2C business model helps

consumers to sell their assets by publishing their
information on the website. Website may or may not
charge the consumer for its services. These sites allow
customers to trade, buy, and sell items in exchange for a
small commission paid to the site.
Consumer to Business

■ This type of ecommerce business involves individuals

selling products or services to businesses, and is
roughly equivalent to a sole proprietorship serving a
larger business where a sole proprietor may be serving
a larger business
Other Ecommerce Business
Classifications
■ B2G – Business to Government
■ G2B – Government to Business
■ G2C – Government to Citizen
Business to Government

■ B2G model is a variant of B2B model. Such websites are

used by governments to trade and exchange information
with various business organizations. Such websites are
accredited by the government and provide a medium to
businesses to submit application forms to the government.
■ For businesses whose sole clients are government
Government to Business

■ Governments use B2G model websites to approach

business organizations. Such websites support
auctions, tenders, and application submission
functionalities.
■ For government sales to private businesses
 Government to Citizen

■ Governments use G2C model websites to approach

citizens in general. The main objective of G2C websites is
to reduce the average time for fulfilling citizen’s requests
for various government services.
■ For government sales to the general public