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Running a profitable e-business involves accepting continual change and finding the correct business model is not always easy. Thanks to many of the Internet pioneers, corporations now have some history to analyze their desired approach. IBM analyzed over 700 companies that are currently active on the web and noticed that specific online business model patterns emerged (see table below). "Interestingly, while these groupings remain constant across geography, industry, company size or type of commerce, their distinction is marked by their primary focus and market scope" (IBM, p1).
The following is a list of these groupings and a brief description each
1) Offline facilitator promote their brands online, but do not take online orders in an effort to avoid potential channel conflicts,
) Context provider also called affinity groups or content aggregators, they are experts in a particular domain, are aligned with a specific value proposition, and might be based on subscriptions, advertising or transaction fees,
) Commerce destination direct sales channels that exist to sell a company's product or service.
4) Online exchange bring buyers and sellers together and revenue is generated from commission, advertising and subscription fees,
5) Gateway generally a search engine, ISP or shopping agent deriving most of its revenue from advertising.
While most companies find themselves in one of these models hybrid versions do exist. The key concept to remember is that "[…] the dynamic nature of the digital economy demands constant reevaluation and adjustment" (IBM, p). This paper will look at three different e-business models Business-to-Consumer (BC), Consumer-to-Consumer (CC), and Business-to-Business (BB) and discuss the differences and similarities between these models.
BC
First, we will look at Amazon.com. Amazon sells and ships products to consumers. The company launched its site in 15 and quickly took on the nations major retailers. The company's web site offers several pages of product categories to choose from. It is laid out very much like a major retailers "Super Store" with many departments. While Amazon originally started with books they have definitely branched out in many directions. The website offers several features to help increase the number of browsers that become buyers (see graphic below).
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As the header from the web page shows, they offer shopping carts, wish lists and personalized recommendations. Amazon.com is very easy to find through any search engine. In fact, information searches will often lead to a book which they stock and searches for items for sale will take you to their web site. Pushing the "shopping button on many home pages will also take you directly to Amazon.
This site offers many benefits to both the organization and its customers. First, the organization benefits through the shear volume of visitors. They offer such a variety of items it is easy to begin any search for merchandise on the web site. Browsers can look through Amazons offerings, add and remove items from their shopping carts, and pay for everything through an existing account.
The organization benefits by having a high volume of traffic. While not every visitor is a customer, the cost is lower than having a chain of stores. Therefore, a relatively low number of buyers are required to produce a profit.
There are three main downsides to this model higher overhead than CC sales, low browser to buyer ratio, lack of comfort from customers. Amazon stocks inventory in it own warehouses and ships material to customers. The carrying and shipping costs are significant. Further, it is estimated that only 1% of all browsers ever become buyers. Hence, Amazon has developed all the features and functions to entice more browsers to buy. Finally, customers dread the possibility of returning an item. Most shoppers still prefer the simplicity of dealing with a traditional retail store.
CC
Second, we will examine eBay. EBay acts as a broker between buyers and sellers. They never touch the product and manage to make 6% off every sale. Since eBay never touches the product it does not incur the hefty overhead of Amazon. As a result of this approach to business eBay generates a hefty 85% gross profit margin. EBay's model of real-time auctions could not work without and are perfectly suited to the Internet.
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EBay offers everything imaginable for sale on its website. There are actually over million items for auction daily on eBay ranging. Browsers can search for products by category, seller, key word, or many other possibilities. The auctions are real-time and bidders can track their progress at any time. As the graphic from eBay's website (above) shows the whole process is very well thought out and easy to use. EBay's website is very easy to find through search engines, home pages, etc.
EBay's business model offers some very unique benefits to the organization, sellers, and buyers. First, as previously mentioned, eBay does not ever take position of any products. It acts as a broker and can, therefore, operate with a very low head count (18 compared to Amazon's ,000) and overhead costs. The business model is perfectly suited for the Internet with its real-time auctions. Second, sellers can easily set up an account and post their products. Anyone can instantly become a player in the on-line auction game. Finally, buyers can search for an anything and everything imaginable. Every aspect of conducting business through eBay is very intuitive and easy to use.
BB
Finally, BB is more than companies buying and selling to each other on the Internet. It has evolved to encompass supply chain management as more companies outsource parts of their supply chain to their trading partners. Some of the benefits realized by companies through BB e-commerce include managing inventory more efficiently, adjusting to customer's demands more quickly, getting products to market faster, reducing administrative costs, controlling rogue purchases, and obtaining lower costs on some supplies.
ILink Systems, Inc. sells BB software solutions to companies. They are doing so as BB seller. Companies come to them to meet their BB requirements. Their goals are to enable its clients to conduct business any time, anywhere, in any language and currency through any distribution channel. The company's website offers lists of clients, partners, careers, feedback, and a sitemap. This company is targeting companies that want to expand their BB involvement. Their goal is to strengthen the relationships between customers, suppliers, and partners. The solutions they offer enable companies to interact directly and securely with a variety of customers, suppliers and partners. The benefits of doing so include decreasing the time it takes companies to respond to the constantly changing market place. The website has links to business sites and is easy to find using several search engines. ILink is an active participant in its target market.
Hof, Robert D. (1, May 1) Businessweek Online. EBay vs. amazon.com. Retrieved from the World Wide Web October 0, 00 http//www.businessweek.com/1/_/b61001.htm
Models made "e" What Business are You In? Retrieved from the World Wide Web October 0, 00 http//www-1.ibm.com/services/innovation/gsee510160000f.pdf
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