E-Commerce Business Models & The Ever Changing Environment
Unbelievably, the E-Commerce Business models are probably the most discussed and least understood aspect of the Internet. In the simplest form, a business model is the method of doing business by which a company can sustain itself while generating positive revenue. Internet will give rise to new kinds of business models. The Internet business models continue to evolve on a daily basis. The models could be implemented in a variety of ways. Furthermore, a company may combine several different models as part of its overall Internet business strategy. For example, it is not uncommon for businesses to blend customer service with a marketing model. Business models have taken on greater importance recently as a form of intellectual property that can be protected with a patent. Indeed, business models have fallen increasingly within the realm of patent law. A number of business method patents relevant to e-commerce have been granted. But some of the more noteworthy patents may be challenged in the courts.
Some questions that arise are as follows: Which models will prove most effective for which kinds of businesses? How can each be pursued most effectively? What combinations of the pure models tend to be particularly effective and which tend to be in conflict? It is understood that each of the business models should be applied to a Web site under centralized management. Here are some important example of E-commerce business models:
· STOREFRONT MODEL: An organization offers products or services for sale. Many Web sites of this sort also have Customer Service Model features, and if not then probably they should have. One legal issue that might arise from this model is misrepresentation of the customer service model.
· MALL MODEL: Someone who offers products or services to consumers from a collection of distinct businesses that retain their individual identities and pay for inclusion in the mall. They may also pay for special mall advertising or other mall services. Many malls have gone out of business while breaching of contracts, and that has given this business model a bad name.
· IMAGE-BUILDING MODEL: Establish a Web presence that aims mainly to provide product information and enhance public awareness for some target group or groups. One legal ramification is false advertisements which occurs consistently within this model.
· CUSTOMER SERVICE MODEL: Provide support to customers. There may be cost-avoidance savings for the organization, or even revenue generation from quality customer services.
· ACCESS CHARGE MODEL: Offer services that users are willing to pay an access charge (e.g. monthly subscription fee). Commonly this model is combined with the Advertising Model, with basic content for free and premium content for pay. It may also be combined with the Customer Service Model when premium customer services are offered; whether it is best to view such a site as one or the other depends on the site’s primary intention. Sometimes such charges are not distinguishable on a particular website which will sometimes create an uproar. People are constantly taking legal action web companies on the basis of being charged and not knowing that there is a charge.
· COMMISSION MODEL: Offer services with the opportunity to make transactions, and charge a fee or commission on the transactions actually made. E -trade is a prime example for this type of model and they are constantly being sued for unethical practices.
· USER DATABASE MODEL: Offer a service that requires users to register or otherwise provide information about themselves. Then sell access to this information database to others, usually but not always with personal identities concealed. This most times violates the participants privacy.
· REFERRAL MODEL: Offer services that refer visitors to another Web site or sites in return for a referral fee or other expected economic benefits (e.g., sales of a company’s products by the referred-to site).
An important question is how each business model can be practiced most effectively. One way to approach this question is to seek the essentials of each model. Some essentials are common to all or nearly all business models:
· Build traffic vigorously, especially the kinds of traffic most important to the chosen model(s).
· Plan for global reach. People will visit your site from around the world.
· Every site offering products, content, or services should make sure that these are of good quality.
· Make use of the opportunities on the Internet
· Respond to increased Internet-enabled competition within the industry and by those poaching on the industry. Try to offer features and functionality that are difficult to copy.
· Finally, to the extent that a Web site addresses some aspect of business, it must do most of the things that a businesses do, such as produce product(s) and/or service(s), pick-pack-and-ship if tangible products are involved, set prices rationally, advertise or otherwise stimulate demand, manage customer retention programs, etc. Contemporary management thought yields imperatives for most of these functions.
Both the new Internet-based companies and the traditional producers of goods and services are transforming their business processes into e-commerce processes in an effort to lower costs, improve customer service, and increase productivity. The Interent is open 24 hours a day, 7 days a week. Online transactions, incidentally, are the most tangible elements of e-commerce for most people but the most significant aspect of e-commerce is the way in which fundamental business processes are being transformed by the possibilities inherent in the Internet. E-Commerce Business models are still being constantly redefined. Some general classifications of models that have emerged are as follows:
This is type of e-commerce most recognizable to the general Internet public. For examples of this model are Amazon.com.
This model is person to person and it is like a community gathering. The best example of this is http://www.napster.com.
Believe it or not, a good business requires good management. The role of management in E-commerce is to provide vision, direction and funding. This can be said of most any business in which it is the responsibility of management to show everyone the path. There are many ways in which e-commerce can benefit the bottom line. The most obvious being direct payment for goods online. Customers arrive at your site, browse your products, add selections to a shopping cart and then make payment at checkout. Anyone who has bought a book from E-bay is familiar with this process. E-commerce has the potential to provide additional benefits to your company’s bottom line. Advanced information systems can allow business decisions based on up to the minute information. Information about the state of your business systems, communication and interaction with customers, customers, and business partners are the basis of a well-run e-commerce system. Regular business tasks, such as regular business review and collaborative projects are greatly facilitated by information technologies speeding up the time to market for products and innovating ideas. A decentralized organization can remain in virtual contact despite geographical location, can share and add to the company data store and remain in close communication with peers at the home office and in the field. These are just some of the ways in which e-commerce can potentially benefit business operations with a positive outcome to the bottom line. It is certain however that rapidly advancing technologies and business models will continue to impact and transform the business landscape through the continuing creativity and development of e-commerce.
E-commerce Revitalizing, 2001, New York, Irv Townsend