Overview Ecommerce business model Key components of ecommerce

Overview E-commerce business model Key components of e-commerce business Models Major B 2 C business models Major B 2 B business models Business models in other emerging areas of e-commerce

Business Models A method of doing business by which a company can generate revenue to sustain itself Spells out where the company is positioned in the value chain Business models are a component of a business plan or a business case 2

Business Plans & Business Cases Business plan: - A written document that identifies the business goals and outlines the plan of how to achieve them Business case: - A written document that is used by managers to garner funding for specific applications or projects; its major emphasis is the justification for a specific investment 3

The Content of a Business Plan Mission statement and company description The management team The market and the customers The industry and competition The specifics of the products and/or services Marketing and sales plan Operations plan Financial projections and plans Risk analysis Technology analysis 4

E-commerce business model Business model – set of planned activities designed to result in a profit in a marketplace Business plan – document that describes a firm’s business model E-commerce business model – aims to use and leverage the unique qualities of Internet and Web

Categorising E-commerce Business models We categorize business models according to ecommerce sector (B 2 C, B 2 B, C 2 C) Type of e-commerce technology used can also affect classification of a business model Some companies use multiple business models

B 2 C Business Models E-tailer/Storefront model Portal model Content Provider Transaction Broker Market Creator Service Provider

E-tailer/Storefront Model The customers and the seller interact directly, e. g. amazon. com, dell. com, play. com Organise an online catalogue of products Take orders through Web site Shopping cart technology Accept payments in a secure environment Send merchandise to customers Manage customer data Market Web site to potential customers Revenue through product sales Low barriers to entry -> very competitive

Portal Model Portal sites give visitors access to a variety of information in one place News, sport, weather, online shopping, searching Revenue through charging advertisers and charging for premium services Charging strategies for portals: charge merchants for a link per customer “click-through” reserve best areas for paying customers

Portal Model- Cont Horizontal portals – aggregate information on a broad range of topics, e. g. search engines Yahoo! , Altavista. com, About. com Vertical portals (community sites) – large amount of information in one subject area www. webmd. com, Bolt. com, IVillage. com

Content Provider Content providers distribute digital content (news, music, video, artwork) over the Web WSJ. com, Rhapsody. com, CNN. com Second largest source of B 2 C e-commerce revenue in 2002 Revenue generates through subscription fees, pay for download, or advertising Syndication a variation of standard content provider model

Transaction Broker Sites that process transactions for consumers E-Trade. com, Ameritrade. com Monster. com Primary value proposition – saving of time and money for customers Typical revenue model – transaction fee Based on frat rate or sliding scale Industries using this model: Financial services Travel services Job placement services

Market Creator Uses Internet technology to create markets that bring buyers and sellers together Where they can display products, search for products and establish prices Priceline. com (reverse austion), e. Bay. com Typically uses a transaction fee revenue model Usually a commission on sales is collected and sometimes a submission fee A middleman – no inventory and production costs, not involved in payment and delivery

Service Provider Offers services online x. Drive. com – information storage Mybconsulting. com – consulting for small businesses Value proposition – valuable, convenient, timesaving, low-cost alternatives to traditional service providers Revenue models – subscription fees or one-time payment Mixing services with products – powerful strategy

B 2 C Business Models Summary

B 2 B Business Models E-distributor E-procurement Exhanges (B 2 B hubs) Industry Consortia Private Industrial Networks

E-distributor Company that supplies products and services directly to individual businesses Grainger. com GE Electric Aircraft Engines (geae. com) Owned by one company seeking to serve many customers Revenue through sale of goods

E-procurement Create and sell access to digital electronic markets Ariba Commerce. One B 2 B service provider is one type – offer purchasing firms sophisticated set of sourcing and supply chain management tools Application service providers a subset of B 2 B service providers Revenue through fees (for market making services, supply chain management)

Exchanges An electronic digital marketplace where suppliers and commercial purchasers can conduct transactions Exchange. e. Steel. com, GEPolymerland. com Usually owned by independent firms whose business is making a market Generate revenue by charging transaction fees Usually serve a single vertical industry Number of exchanges had fallen to around 700 in 2003

Industry Consortia Industry-owned vertical marketplaces that serve specific industries Horizontal marketplaces, in contrast, sell specific products and services to a wide range of industries Leading example: Covisint

Private Industrial Networks Digital networks (usually, but not always Internetbased) designed to coordinate the flow of communications among firms engaged in business together Single firm network: the most common form (example – Walmart) Industry-wide networks: often evolve out of industry associations (example – WWRE)

B 2 B Business Models Summary

What is working? Pornography Travel / Tourism Retail - items that don’t need personal touch - objectivity in product quality and performance music, books, gifts, Computers, electronic items Auctions Real Estate - houses and investment properties. Customer support services More efficient and effective processes between businesses (B 2 B)

What is not working? Items which require “touch and trial” Luxury goods Clothes - beyond Tshirts Groceries - it works for some people but market is restricted Note: Many OFF line factors determine success of Online service. Eg. Transport network, customer profiles,

Getting online Why get online? Promote awareness of your Organization Sell a product Customer support Information and contact page Networking Everyone else has a web page

Plan What is your product? Electronic, Services or physical Portable and inexpensive to deliver Tourism Who is your market? Overseas Fish buyers Upper income art collectors Budget travellers / Up market Obstacles, Implementation and deadlines.

Getting Online Hosting Your Website Fast Access Cost, Support, Space and Services Choosing a Domain Name (web address) www. myname. com /. nu /. to /. tv /. fj / Calling Card Choose name that relates to product Reflects on organization Easy to remember

Design Issues Often Simple Is Better E. g. National PNG, Yahoo Complexity depends on your website objectives Planning content How do you keep content fresh and relevant Who Develops your website? Professional Services Do it Yourself

Web Site Software Web-site Creation Common Software Tools. Image Editing Adobe Photoshop Jasc. com Web Page Development Paintshop Microsoft Front page - $150 Dream Weaver - $150 – 200 Netscape Communicator-Free Note: There a lot of cheaper software online.

Managing your Web Site Managing your website can take TIME! Adapting Business processes Good Samaritan Inn example Look at employee time Customer expectations Limitations of the medium (non face to face)

Marketing Web site How do people find your website? ONLINE Strategy Links from related and / or popular web sites Search Engines Online Advertisements Informed by other users

Marketing Your Website OFFLINE Strategy - Show Your URL www. MYCOMPANY. com Stationary Advertising on conventional media Trade shows