Unit I: Internet e-commerce Business Models

Electronic commerce:

Electronic commerce better known as e-commerce consists of the buying or selling of products via electronic means such as the internet or other electronic services. This type of trade has been growing rapidly because of the expansion of the Internet.

The need for electronic commerce emerged from the need to use computers more efficiently in banks and corporations. With the increasing competition, there was a need amongst organizations to increase customer satisfaction and information exchange. Electronic commerce started with the introduction of electronic funds transfer (EFT) by banks. Over time many variants of EFTs within banks were introduced like debit cards, credit cards and direct deposits.

Business model:

A business model describes the rationale of how an organization creates, delivers, and captures value, in economic, social, cultural or other contexts. The process of business model construction and modification is also called business model innovation and forms a part of business strategy.

In theory and practice, the term business model is used for a broad range of informal and formal descriptions to represent core aspects of a business, including purpose, business process, target customers, offerings, strategies, infrastructure, organizational structures, sourcing, trading practices, and operational processes and policies including culture.

Component Business Model (CBM) is a technique to model and analyse an enterprise. It is a logical representation or map of business components or "building blocks" and can be depicted on a single page. It can be used to analyse the alignment of enterprise strategy with the organization's capabilities and investments, identify redundant or overlapping business capabilities, analyse sourcing options for the different components (buy or build), prioritizing transformation options and can be used to create a unified roadmap after mergers or acquisitions.

The model is organized as business components along with columns and "operational levels" along rows. The Business components are defined partly as large business areas with characteristic skills, IT capabilities and process. The three operational levels are "Direct", "Control" and "Execute" - they separate strategic decisions (Direct), management checks (Control), and business actions (Execute) on business competencies.

Social Media MODAL

Social media marketing is the use of social media platforms and websites to promote a product or service.[1] Although the terms e-marketing and digital marketing are still dominant in academia, social media marketing is becoming more popular for both practitioners and researchers.[2] Most social media platforms have built-in data analytics tools, which enable companies to track the progress, success, and engagement of ad campaigns. Companies address a range of stakeholders through social media marketing, including current and potential customers, current and potential employees, journalists, bloggers, and the general public. On a strategic level, social media marketing includes the management of a marketing campaign, governance, setting the scope (e.g. more active or passive use) and the establishment of a firm's desired social media "culture" and "tone."

When using social media marketing, firms can allow customers and Internet users to post user-generated content (e.g., online comments, product reviews, etc.), also known as "earned media," rather than use marketer-prepared advertising copy.

Advertising modal

Online advertising, also known as online marketing, Internet advertising, digital advertising or web advertising, is a form of marketing and advertising which uses the Internet to deliver promotional marketing messages to consumers. Many consumers find online advertising disruptive and have increasingly turned to ad blocking for a variety of reasons. When software is used to do the purchasing, it is known as programmatic advertising.

Online advertising includes email marketing, search engine marketing (SEM), social media marketing, many types of display advertising (including web banner advertising), and mobile advertising. Like other advertising media, online advertising frequently involves a publisher, who integrates advertisements into its online content, and an advertiser, who provides the advertisements to be displayed on the publisher's content. Other potential participants include advertising agencies who help generate and place the ad copy, an ad server which technologically delivers the ad and tracks statistics, and advertising affiliates who do independent promotional work for the advertiser.

Many common online advertising practices are controversial and, as a result, have been increasingly subject to regulation. Online ad revenues also may not adequately replace other publishers' revenue streams. Declining ad revenue has led some publishers to place their content behind paywalls.

Retail modal

Retail is the process of selling consumer goods or services to customers through multiple channels of distribution to earn a profit. Retailers satisfy demand identified through a supply chain. The term "retailer" is typically applied where a service provider fills the small orders of many individuals, who are end-users, rather than large orders of a small number of wholesale, corporate or government clientele. Shopping generally refers to the act of buying products. Sometimes this is done to obtain final goods, including necessities such as food and clothing; sometimes it takes place as a recreational activity. Recreational shopping often involves window shopping and browsing: it does not always result in a purchase.

Retail markets and shops have a very ancient history, dating back to antiquity. Some of the earliest retailers were itinerant peddlers. Over the centuries, retail shops were transformed from little more than "rude booths" to the sophisticated shopping malls of the modern era.

Retail shops occur in a diverse range of types and in many different contexts – from the strip shopping centres in residential streets through too large, indoor shopping malls. Shopping streets may restrict traffic to pedestrians only. Sometimes a shopping street has a partial or full roof to create a more comfortable shopping environment – protecting customers from various types of weather conditions such as extreme temperatures, winds or precipitation. Forms of non-shop retailing include online retailing (a type of electronic-commerce used for business-to-consumer (B2C) transactions) and mail order.

HYBRID MODEL

It looks like the hybrid retail model is here to stay and not just a passing phase. We are talking about the retail industry in India, which has realized the significance of two-dimensional retailing and gradually shifting focus to mixed or hybrid retailing. All this is because retail businesses have to keep up with the hyper-competitive and ever-changing retail landscape, where digital and physical retailing are truly becoming one.

The recent trends show that the hybrid model, also known as the “Marketplace Model,” is disrupting the conventional brick-and-mortar and online retailing as stand-alone businesses. Even the big players of the Indian e-retail market Snapdeal and Flipkart has initiated to set up its offline stores in different cities. The purpose is to gain credibility and a huge consumer base. This hybrid retail model may prove to be efficient in India because of increasing point-of-purchase and consumers getting the experience of both online and physical purchases. However, despite huge growth potential, there can be various grey areas that need fixing. Some of these areas include packaging, timeliness, logistics, quick reversals and others. Here, we would try to provide some of the key insights into hybrid retailing, including its advantages.

• Major Ecommerce Business Classification
• B2B: Business to Business Ecommerce
• B2c: Business to Consumer Ecommerce
• C2C:  Consumer to Consumer
• C2B: Consumer to Business Ecommerce
• B2G: Business to Government / Public Administration Ecommerce

MERCHANT MODEL

The merchant model of e-commerce involves the establishment of an electronic storefront on the World Wide Web, an information-technology infrastructure capable of receiving and processing orders, appropriate security measures to assure the safety, secrecy, and the authenticity of transaction information, and means for procuring payments—either online or in the physical world—and completing orders via shipping and delivery. Under this broad outline, however, there are myriad considerations dependent on market conditions, financial ability, and technological capabilities.

The most important first step in implementing a successful e-commerce merchant strategy is drawing visitors to the company's Web site, and then turning those visitors into customers—preferably repeat customers. There are several ways a merchant may go about achieving this. One very popular method in the late 1990s was for merchants to contract with affiliate Web sites to place advertisements on the affiliates' pages. These advertisements, such as banners—the equivalent of cyberspace billboards—are clickable graphics or links that direct users to the merchant's site. In such an arrangement, the merchant agrees to pay the affiliate for posting the advertisement—either a flat fee or a tiny commission for each visit or sale based on a user clicking through from the affiliate's site. However, this method was losing favour in the early 2000s, as studies showed that the click-through model and banner advertisements were generating paltry returns. Increasingly, savvy marketing schemes were another favoured method of drawing traffic to e-merchants' sites.

Information model

An information model is at the conceptual level and defines relationships between objects information model in software engineering is a representation of concepts and the relationships, constraints, rules, and operations to specify data semantics for a chosen domain of discourse. Typically it specifies relations between kinds of things, but may also include relations with individual things. It can provide the sharable, stable, and organized structure of information requirements or knowledge for the domain context.

Defining Dropshipping

Dropshipping is a retail fulfilment method where a store doesn’t keep the products it sells in stock. Instead, when a store sells a product using the drop-shipping model, it purchases the item from a third party and has it shipped directly to the customer. As a result, the seller doesn’t have to handle the product directly.

The biggest difference between dropshipping and the standard retail model is that the selling merchant doesn’t stock or own inventory. Instead, the seller purchases inventory as needed from a third party—usually a wholesaler or manufacturer—to fulfil orders.

Benefits of drop shipping

Dropshipping is a great business model for aspiring entrepreneurs to start with because it’s accessible. With drop shipping, you can quickly test different business ideas with limited downside, which lets you learn a lot about how to choose and market in-demand products. Here are a few other reasons why dropshipping is such a popular model.

1. Less capital is required

Probably the the biggest advantage to dropshipping is that it’s possible to launch an eCommerce store without having to invest thousands of dollars in inventory upfront. Traditionally, retailers have had to tie up huge amounts of capital purchasing inventory.

2. Easy to get started

Running an eCommerce business is much easier when you don’t have to deal with physical products. With drop shipping, you don’t have to worry about:

• Managing or paying for a warehouse
• Packing and shipping your orders
• Tracking inventory for accounting reasons
• Handling returns and inbound shipments
• Continually ordering products and managing stock level

3. Low overhead

Because you don’t have to deal with purchasing inventory or managing a warehouse, your overhead expenses are quite low. In fact, many successful dropshipping stores are run as home-based businesses, requiring little more than a laptop and a few recurring expenses to operate. As you grow, these costs will likely increase but will still be low compared to those of traditional brick-and-mortar businesses.

4. Flexible location

A dropshipping business can be run from just about anywhere with an internet connection. As long as you can communicate with suppliers and customers easily, you can run and manage your business.

5. Wide selection of products to sell

Since you don’t have to pre-purchase the items you sell, you can offer an array of trending products to your potential customers. If suppliers stock an item, you can list it for sale on your online store at no additional cost.

6. Easier to test

Dropshipping is a useful fulfilment method for both launching a new store and for business owners looking to test the appetite customers have for additional product categories, e.g., accessories or wholly new product lines. The main benefit of drop shipping is, again, the ability to list and potentially sell products before committing to buying a large amount of inventory.

7. Easier to scale

With a traditional retail business, if you receive three times the number of orders, you’ll usually need to do three times as much work. By leveraging dropshipping suppliers, most of the work to process additional orders will be borne by the suppliers, allowing you to expand with fewer growing pains and less incremental work.

Sales growth will always bring additional work—especially related to customer support—but businesses that utilize dropshipping scale particularly well relative to traditional eCommerce businesses.

Disadvantages of drop shipping

All the benefits we mentioned making dropshipping a very attractive model for anyone getting started with an online store, or for those looking to expand their existing product offerings. But like all approaches, dropshipping has its downsides, too. Generally speaking, convenience and flexibility come at a price. Here are a few shortcomings to consider.

1. Low margins

Low margins are the biggest disadvantage of operating in a highly competitive dropshipping vertical. Because it’s so easy to get started, and the overhead costs are so minimal, many competing stores will set up shop and sell items at rock-bottom prices in an attempt to grow revenue. Since they’ve invested so little in getting the business started, they can afford to operate on minuscule margins.

2. Inventory issues

If you stock all your own products, it’s relatively simple to keep track of which items are in and out of stock. But when you’re sourcing from multiple warehouses, which are also fulfilling orders for other merchants, inventory can change on a daily basis. Fortunately, these days, there are a handful of apps that let you sync with suppliers. So drop shippers can “pass along” orders to a supplier with a click or two and should be able to see in real-time how much inventory the supplier has.

3. Shipping complexities

If you work with multiple suppliers—as most drop shippers do—the products on your online store will be sourced through a number of different drop shippers. This complicates your shipping costs.

Let’s say a customer places an order for three items, all of which are available only from separate suppliers. You’ll incur three separate shipping charges for sending each item to the customer, but it’s probably not wise to pass this charge along to the customer. And even when it does make sense to include these charges, automating these calculations can be difficult.

4. Supplier errors

Have you ever been blamed for something that wasn’t your fault, but you had to accept responsibility for the mistake anyway?

Even the best dropshipping suppliers make mistakes fulfilling orders—mistakes for which you have to take responsibility and apologize. And mediocre and low-quality suppliers will cause endless frustration with missing items, botched shipments, and low-quality packing, which can damage your business’s reputation.

5. Limited customization and branding

Unlike custom-made products or print on demand, dropshipping doesn’t give you a lot of control over the product itself. Usually, the product drop shipped is designed and branded by the supplier.

Some suppliers can accommodate your business’s product changes, but even then, the supplier has the most control over the product itself. Any changes or additions to the product itself usually require a minimum order quantity to make it viable and affordable for the manufacturer.

Contents   1   2   3   4   5