“E-commerce: Business Models” Academic Year 2015

Traditional and Electronic Commerce The traditional Commerce is based on the following rules:  It needs to hire sales executive, sales managers, accountants, and other staffs.  Operates at business hours within a certain period of time.  Requires location renting/purchasing, staff employment, advertising, inventory shipping and handling all sums up the high-cost equation which makes many people negate from starting a business entirely.  No sharing of the information with the competitors.  The basis of a traditional business depends on the frequency of new and old customers buying from them to keep the business running.

Traditional and Electronic Commerce E-Commerce is based on the following rules:  It involves an agreement between the involved parties to continue with the succeeding phases.  Order is made for the goods after an agreement is concluded  E-payment systems on the internet are used for receiving payments.  Goods are delivered to the customers. If it is a tangible product, it is sent by transportation.

Difference

E-Commerce Advantages Advantages to Organizations – Expansion of market to national and international – Ability to reach greater audience easily and cheap – Reduction of cost of paper based Information – Better customer service Advantages to Consumers – 24x7 support – Easier and secure transaction – Review products/Availability of Information – Increase in completion can lead to reduction in price

Business Models of E-Commerce Business to Consumer (B2C) Business to Business (B2B) Consumer-to-Consumer or Peer-to-Peer (C2C/P2P) Other notable: C2B, B2G, G2B, G2C

B2C Product are sold directly to customer. Involves E-tailing E.g. Amazon.com, Muncha, Bhatbhatenionline

B2B Product are sold to intermediate buyer who then sells product to final customer (wholesale -> retail -> customer) E.g. Alibaba, Amazon Supply, Grepsr

C2C Consumer sell their assets like residential property, cars etc. or rent a room by publishing their information on the website. E.g. E-bay, Quickr, Hamrobazaar

Other notable models C2B A consumer approaches website showing multiple business organizations for a particular service /A consumer places an estimate of amount he/she wants to spend for a particular service. B2G A variant of B2B model Used by government to trade and exchange information with various organizations

B2C

Activities of B2C E-Commerce ORDERING B2C E-commerce SERVICE & SUPPORT FULFILLMENT Information Sharing PAYMENT Company Website Online Catalogs Online advertisement Message board system Newsgroup and Discussion groups Credit Cards Electronic cheque Digital Cash

Models of B2C 1.Auctions 2.Online Stores 3.Online Services

1. Auctions Auction/Online auction: Buying and selling goods or services by offering them up for bids. E.g. Advantages: – Convenience: No place or time limitation for bidder participation – Flexibility: Asynchronous bidding – Increased reach: Global – Economical to operate: Cheaper infrastructure costing Disadvantages: – Inspection of goods – Potential for fraud

2. Online Stores Marketing of company’s products through web to promote or to actually sell the products through this virtual store – Amazon.com

3. Online Services Providing of internet based electronic commerce infomediary solutions E.g. Makethemove.com, e-banking

Major Challenges of B2C 1.Getting browsers to buy things 2.Building customer trust/privacy 3.Building customer loyalty 4.Fulfillment

B2B

All e-commerce transactions between two organizations. Includes: – Purchase – Procurement – Supplier management – Channel Management – Sales activities – Payment management – Service and support E.g. Companies that specialize in marketing strategies, advertising, companies, internet consultants, website development…

Key technologies Electronic Data Interchange (EDI) – Inter exchange of business documents in a structured and standard electronic format. Internet Intranet Extranet Back-End Information System Integration

EDI

Development scenario of B2B e-commerce Stage 1: A company to stay competitive thinks of getting on-line (no existing website or online communication) Stage 2: The company starts using net for research, marketing and communication tool (Still no link between any web activity and existing back office systems) Stage 3: The company uses net to interact with customers and offer full service storefront and integration with its back systems Stage 4: Company starts moving towards a more integrated on-line relationship with trading partners. (information can be easily gathered from online storefront, manufacturing and fulfillment) Stage 5: The business joins online exchanges, e-marketplace and related services using the net to connect with others.

Types of B2B Markets Independent e-marketplace Buyer oriented e-marketplace Supplier oriented e-market place Vertical and horizontal e-marketplace

Independent/Intermediary e-marketplace online platform operated by a third party which is open to buyers or sellers in a particular industry. By registering on an independent e-marketplace, you can access classified ads or requests for quotations or bids in your industry sector. There will typically be some form of payment required to participate. E.g. Alibaba.com

Supplier oriented e-marketplace Manufacturer-driven electronic stores Same store as used by individual consumers and business corporations. (B2C, B2B) May involve auctions run by the supplier. E.g.: – Cisco Connection Online: Networking equipment – Dell: PC and servers

Buyer-oriented e-marketplace Buyer opens a market on its server Invites potential suppliers to bid on the RFQ (Request for quotes) E.g: GE Lightning Trading Process Network,