Chapter 2 eBusiness Models Outline 2 1 Introduction

Chapter 2, e-Business Models Outline 2. 1 Introduction 2. 2 Storefront Model 2. 2. 1 Shopping-Cart Technology 2. 2. 2 Online Shopping Malls 2. 3 Auction Model 2. 4 Portal Model 2. 5 Dynamic-Pricing Model 2. 5. 1 Name-Your-Price Model 2. 5. 2 Comparison-Pricing Model 2. 5. 3 Demand-Sensitive Pricing Model 2. 5. 4 Bartering Model 2. 5. 5 Rebates 2. 5. 6 Offering Free Products and Services 2. 6 B 2 B e-Commerce and EDI 2. 7 Click-and-Mortar Businesses 1

Introduction n In this chapter we explore the many business models currently being implemented on the Web Models include: The Storefront Model n The Auction Model n The Portal Model n The Name-Your-Price Model n The Comparison Pricing Model n The Demand Sensitive Pricing model n The B 2 B Exchange Model n 2

Introduction n e-Business n A company that has an online presence n E-commerce businesses allow customers to sell, trade and barter over the Web n A company’s policy, operations, technology and ideology define its business model 3

Storefront Model n Storefront model enables merchants to sell products on the Web n n What people hear most about e-business Transaction processing, security, online payment, information storage n E-commerce allows companies to conduct business 24 -by-7, all day everyday, worldwide n An e-commerce storefront should include: n n Online catalog of products Order processing Secure payment Timely order fulfillment 4

Shopping Cart Technology n Shopping Cart n An order-processing technology allowing customers to accumulate lists of items they wish to buy as they continue to shop n Shopping cart is supported by n Product catalog n Merchant server n Database technology n Combine a number of purchasing methods to give customers a wide array of options 5

Online Shopping Malls n Wide selection of products and services n Offers greater convenience than shopping at multiple online shops n Consumers can make multiple purchases in one transaction 6

Auction Model n Online auction sites Act as forums through which Internet users can log -on and assume the role of either bidder or seller n Collect a commission on every successful auction n Sellers post items they wish to sell and wait for buyers to bid n Reserve price n The minimum price a seller will accept in a given auction n 7

Auction Model n Reverse-auction model Lowest-unique-bid auction n Allow the buyer to set a price as sellers compete to match or even beat it n If no bid meets the reverse price, the auction is unsuccessful n If a successful bid is made, the buyer and the seller must commit n Most auction sites do not involve themselves in payment or delivery, except they can get revenue and profit n 8

Auction Model n Lowest-unique-bid auctions probably aren't auctions at all, but that's the common name for them. They work like this: n The seller places a high-value item up for "auction". n Each buyer makes one or more sealed bids. n Each bid costs the buyer some money (typically the cost of a premium-rate SMS or phone call). n The person who makes the lowest unique bid wins the item for that price. n So. . . as a buyer, what's the best approach? Bid low? Big high? Multiple bids? n Is there a "best" here at all, or is this a just a lottery by any other name? 9

Auction Model e. Bay home page. (These materials have been reproduced by Prentice Hall

Portal Model n Portal sites n Give visitors the chance to find almost everything they are looking for in one place n Horizontal portals n Portals that aggregate information on a broad range of topics n Yahoo!, Alta. Vista, Google n Vertical portals n Portals that offer more specific information within a single area of interest n Web. MD, IMDB, First. Gov 11

Portal Model n Helps users collect information on an item for which they are looking for and allow users to browse independently owned storefronts 12

Dynamic Pricing Models n In the past, bargain hunter had to search for deals by visiting numerous local retailers and wholesalers. n Ways to generate pricing for business in Internet n Enable customers to name the prices they are willing to pay for travel, homes, automobiles, consumer goods, etc. n Find lower prices by joining with other buyers n Offer products and services free by selling advertising n Join with other buyers to purchase products in large quantities. n Etc. 13

Dynamic Pricing Models n The Web has changed the way products are priced and purchased n Comparison pricing model Allow customers to poll a variety of merchants and find a desired product or service at the lowest price n Web sites using shopping bot technology to find the lowest price for a given item n Sites get revenue from partnerships with merchants n E. g. Bottom. Dollar. com n 14

Dynamic Pricing Models n Demand-sensitive pricing model n Group buying reduces price as volume of sales increase n Because pricing and products vary between these and other, similar sites, customers should visit several such sites before making a purchase. 15

Dynamic Pricing Models n Name-your-price model n Name-your-price for products and services n Empowers customers by allowing them to state the price they are willing to pay for products and services n Use Intelligent agent n Search and arrange large amounts of data and report answers based on the data 16

Dynamic Pricing Models n Bartering Model n Individuals and business trade unneeded items for items they desire n Ubarter. com, isolve. com 17

Dynamic Pricing Models n Rebate Model n Sites offer rebates on product at leading online retailers in return for commission or advertising revenues n n Help attract customers to the sites n n pass discounts, e. g. E. g. , “everyday low prices”, “buy one get one free” e. Bates n Add value to a customer’s visit to build customer satisfaction and loyalty 18

Dynamic Pricing Models n Free offering model n Use advertising-driven revenue streams n Offer free products and services to generate high traffic n Obtain revenue from advertising n Freemerchant, Start Sampling, Free. Samples. com 19

B 2 B E-commerce and EDI n B 2 B e-business n The electronic business relationship between two or more companies n Traditional EDI uses a value-added network or VAN n A closed network that includes all members of a production process n XML (e. Xtensible Markup Language) n A development technology similar to HTML (Hypertext Markup Language) n Improves the compatibility between disparate systems, creating new market opportunities 20

B 2 B E-commerce and EDI n B 2 B e-commerce and the use of exchange sites allow businesses to reach their markets faster and more efficiently n Lead time n The time it takes to receive a product from a supplier after an order has been placed n Long lead times increase inventory costs, increase worker stress levels and strain relationships between the manufacturer and the supplier 21

B 2 B E-commerce and EDI n JIT (just-in-time) inventory management n Supplies arrive at the exact time they are needed, thereby limiting any unnecessary inventory expense n Enterprise Application Integration (EAI) n The process of integrating traditional EDI systems with the Web 22

B 2 B E-commerce and EDI n Business-to-business integrators (B 2 Bi) n Companies that use XML and similar technologies to help other companies integrate their current systems with the Web n www. excara. com, Webmethods. com, commerceone. com, tibco. com, Freemarkets. com, mercator. com 23

Click-and-Mortar Businesses n Brick-and-mortar n Companies that operate solely offline with traditional business practices n Click-and-mortar n Companies operating with both an online and offline presence n Click and mortar companies have brand recognition, and an established customer base Barnesandnoble. com n Bestbuy. com n 24

Click-and-Mortar Businesses n Key benefits to automotive industry n Combined supplier base n Connects automobile manufacturers, dealers and consumers in a single marketplace n Decreases lead time and production costs n Key benefits to electronics industry n Provides access to thousands of components from hundreds of electronic suppliers n Provides ability to search by part number, product type or manufacturer n Increases competitive pricing 25

Click-and-Mortar Businesses n Key benefits to energy industry n Provides real time pricing data on energy commodities n Provides access to hundreds of energy commodities n Allows regional energy providers to gain access to a worldwide market n Key benefits to food industry n Reduced lead time preserves perishables n Provides access to real time pricing data n Online auction technology allows for alternative pricing 26

Click-and-Mortar Businesses n Benefits to chemical industry n Access to millions of chemical products from thousands of suppliers n Integrated supply chains provide faster, more reliable transactions n Benefits to construction industry n Contracting and subcontracting are made simpler by online bidding n Construction companies can find raw materials from suppliers worldwide 27