Business Models In e-Commerce

Business Models In e-Commerce

There are many types of e-commerce models. Examples and details can be found throughout this text. The following list describes some of the most common or visible models. Detail are provided throughout the text.

1. Online direct marketing. The most obvious model is that of selling online, from a manufactures to a costumer (eliminating intermediaries), or such as in the case of Mark & Spencer, from retailers to costumers (making distribution more efficient). Such a model is especially efficient for digitizable products and services (those that can be delivered electronically). These are several variations to this model.
2. Electronic tendering systems. Large organizational buyers, private or public, usually make large-volume or large-value purchases through a tendering (bidding) system, also known as a reverse auction. The buyers requests would-be sellers to submit bids, the lowest bidder wins. Such a tendering can be done online, saving time and money. Pioneered by General Electric Corp, e-tendering system are gaining populartity. Indeed, several government agencies mandate that most procurement by the agencies must be done through e-tendering.
3. Name your own price. The name-your-own-price model allows a buyer to set a price they are willing to pay for a specific product or service. Priceline.com will try to match the costumer’s request with supplier willing to sell the product or service at that price. This model is also known as a “demand collection model”.
4. Find the best price. According to this model, also known as a “search engine model”, costumer specifies his or her need and then an intermediate company. Matches the costumer’s need against a database, locates thelowest price, and submits it to the costumer. The potential buyer then has a 30 to 60 minutes to accept orreject the offer. Many companies employ similar models to find the lowest price.
5. Affiliate marketing, is an arrangement whereby a marketing partners business, (a organization, or even an individual) refers consumers to a selling cimpany’s Web site. The referrals done by placing a banner ad or the logo of the selling company on the affiliate company’s web site. Whenever the costumer that was referrer to the selling company’s web site make a purchase there, the affiliated partner receives a commission (which may range from 3 to 15percent) of the purchase price. In other words, by using affiliate marketing, a selling company creates a virtual commissioned sales force.
6. Viral marketing. According to the viral markerting model, an organization can increase brand awareness or even generate sales by inducing people to send messages to other people to recruit friends to join certain program. Group purchasing. In the offline world of commerce, discounts are usually available for purchasing large quantities. So, too, e-commerce has spawned the concept of demand aggregation, wherein a third party finds individuals or SME’s ( Small to Medium enterprises), aggregates their order to get large quantity, and then negotiates (or conduct a tender) for the best deal. Thus, using the concept of group purchasing, a small business or even an individualcan get a discount. This model, also known as “volume-buying model”.
7. Online auctions. Almost everyone had heard about eBay.com, the world largest online auction site. Several hundred other companies, including Amazon.com and Yahoo.com, also conduct online auctions. In the most popular type of auction, online shoppers make consecutive bids for various goods and services, and the highest bidders get the items auctioned.
8. Product and service costumization, costumization of products or services means creating a products or services according to the buyer’s specifications. Costumization is not a new model, but what is new is the ability to quickly costumize products online for consumers at prices not much higher than the noncostumized counterparts.
9. Electronic marketplaces and exchanges. Electronic marketplaces existed in isolated applications for decades (e.g., stock and commodities exchanges), but in 1999, thousandof e-marketplaces have introduced new efficiencies to the trading process by going to the internet. If they are well organized and managed e-marketplaces can provide significant benefits to both buyers and sellers.
10. Value-chain integrator. Similar to the previous one, this model offer complementarygoals and services that aggregate information-rich products into a more complete package for costumers, thus adding value.
11. Value chain service providers. These providers specializein a supply chain functionsuch as logistics (UPS.com) or payment (PayPal.com, now part of eBay).
12. Information brokers. Information brokers provide privacy, trust, matching, content, and other services (Google.com)
13. Battering. Under this model, companies exchange surplus they do not need for things that they do need. A market maker arranges such exchanges.
14. Deep discounting. Companies such as Half.com offer products and services at deep discounts, such as 50% off the retail price.
15. Membership. A popular off-line model, in which only member get a discount, is also being offered online.
16. Supply chain improvers. One of the major contributions of e-commerce is in the creation of new models that change or improve supply chain management. Most interesting is the conversion of a linear supply chain, which can be slow, expensive, and error prone, into a hub.

Source :

Electronic Commerce - A Managerial Perspective 2004

Efrain Turban, David King. Jay Lee, Dennis Viehland

Pearson Prentice Hall