Group2

TOPIC:
Ecommerce business models
and concepts
What Is a Business Model? And what is its importance
• A business model refers to a company's plan for making a profit. It
identifies the products or services the business plans to sell, its
identified target market, and any anticipated expenses.
• Business models are important for both new and established
businesses. They help new, developing companies attract investment,
recruit talent, and motivate management and staff.
• Established businesses should regularly update their business model
or they'll fail to anticipate trends and challenges ahead
• Business models also help investors evaluate companies that interest
them and employees understand the future of a company they may
aspire to join.
IMPORTANCE OF A BUSINESS MODEL
• The business model helps to target the customer base for the
company.
• It helps in making marketing strategies,
• projection of revenues and expenses taking into account the type of
Business models and clienteles.
• it helps to get knowledge about the company’s competitive edge.
• Understanding the business model helps the investors to have a
better sense of financial data.
FIVE PRIMARY REVENUE MODELS
TYPES OF BUSINESS MODELS
Below are some common types of business models;

Retailer
• One of the more common business models most people interact with
regularly is the retailer model. A retailer is the last entity along a
supply chain. They often buy finished goods from manufacturers or
distributors and interface directly with customers.
Manufacturer
• A manufacturer is responsible for sourcing raw materials and
producing finished products by leveraging internal labor, machinery,
and equipment. A manufacturer may make custom goods or highly
replicated, mass produced products. A manufacturer can also sell
goods to distributors, retailers, or directly to customers.
Fee-for-Service
• Instead of selling products, fee-for-service business models are
centered around labor and providing services. A fee-for-service
business model may charge by an hourly rate or a fixed cost for a
specific agreement. Fee-for-service companies are often specialized,
offering insight that may not be common knowledge or may require
specific training.
Subscription
• Subscription-based business models strive to attract clients in the
hopes of luring them into long-time, loyal patrons. This is done by
offering a product that requires ongoing payment, usually in return
for a fixed duration of benefit. Though largely offered by digital
companies for access to software, subscription business models are
also popular for physical goods such as monthly reoccurring
agriculture/produce subscription box deliveries.
Freemium
• Freemium business models attract customers by introducing them to
basic, limited-scope products. Then, with the client using their
service, the company attempts to convert them to a more premium,
advance product that requires payment. Although a customer may
theoretically stay on freemium forever, a company tries to show the
benefit of what becoming an upgraded member can hold.
Marketplace
• Marketplaces are somewhat straight-forward: in exchange for hosting
a platform for business to be conducted, the marketplace receives
compensation. Although transactions could occur without a
marketplace, this business models attempts to make transacting
easier, safer, and faster.
Affiliate
• Affiliate business models are based on marketing and the broad reach
of a specific entity or person's platform. Companies pay an entity to
promote a good, and that entity often receives compensation in
exchange for their promotion. That compensation may be a fixed
payment, a percentage of sales derived from their promotion, or
both.
• Example: social media influencers 
Brokerage
• A brokerage business model connects buyers and sellers without
directly selling a good themselves. Brokerage companies often receive
a percentage of the amount paid when a deal is finalized. Most
common in real estate, brokers are also prominent in
construction/development or freight.
• ETC.
How to create a business model.
• When making a business model. Different professionals may suggest
taking different steps when creating a business and planning your business
model. Here are some broad steps one can take to create their plan
1. Identify your audience. Most business model plans will start with either
defining the problem or identifying your audience and target market. A
strong business model will understand who you are trying to target so you
can craft your product, messaging, and approach to connecting with that
audience.
2. Define the problem. In addition to understanding your audience, you
must know what problem you are trying to solve. A hardware company sells
products for home repairs. A restaurant feeds the community. Without a
problem or a need, your business may struggle to find its footing if there
isn't a demand for your services or products.
3.Understand your offerings. With your audience and problem in mind,
consider what you are able to offer. What products are you interested
in selling, and how does your expertise match that product? In this
stage of the business model, the product is tweaked to adapt to what
the market needs and what you're able to provide.
4.Document your needs. With your product selected, consider the
hurdles your company will face. This includes product-specific
challenges as well as operational difficulties. Make sure to document
each of these needs to assess whether you are ready to launch in the
future.
5.Find key partners. Most businesses will leverage other partners in
driving company success. For example, a wedding planner may forge
relationships with venues, caterers, florists, and tailors to enhance their
offering. For manufacturers, consider who will provide your materials
and how critical your relationship with that provider will be.
6.Set monetization solutions. Until now, we haven't talked about how
your company will make money. A business model isn't complete until
it identifies how it will make money. This includes selecting the strategy
or strategies above in determining your business model type. This
might have been a type you had in mind but after reviewing your
clients needs, a different type might now make more sense.
7.Test your model. When your full plan is in place, perform test surveys
or soft launches. Ask how people would feel paying your prices for your
services. Offer discounts to new customers in exchange for reviews and
feedback. You can always adjust your business model, but you should
always consider leveraging direct feedback from the market when
doing so.
Understand key business concepts and strategies applicable to E-
Commerce

• E-commerce business strategy refers to the tactics you plan

to use to promote your online store and get more sales.
The strategy is a long-term idea of where your ecommerce
business is going. It's based on your knowledge of the
market, trends, consumer research, brand values, and
product. This contributes to the success of the business.
• The following are the key business concepts and strategies
applicable to E-commerce;
BUSINESS MODEL CONCEPTS
BUSINESS MODEL STRATEGIES
What is a business Model Canvas

• Business Model a plan for the successful operation of a business,

identifying sources of revenue, the intended customer base, products,
and details of financing.
• A business model canvas is a strategic management template used for
developing new business models and documenting existing ones.
• Importance of Business Model Canvas
• The Business Model Canvas helps visualize what is important and
forces users to address key areas
• It can also be used by a team (employees and/or advisors) to
understand relationships and reach agreements.
KEY COMPONENTS OF BUSINESS
MODELS
MAJOR TYPES OF BUSINESS MODELS
• every business or companies make a plan for generating profits.
• Business to Business model (B2B)
• deal between two companies
• A B2B business Model is a business that sells, rents, or leases its
product to another business.
• used by companies to increase revenue, gain market share, and
enhance their brand.
• It has good market predictability and more market stability. Since
under B2B sale is made in bulk amount this model leads to lower cost
for the businesses.
Business to Consumer model (B2C)

• it’s a business that sell its products or services directly to the

customers who are the end users of the products or services
• Since direct contact is there with the customer’s so information is
shared with them directly and easily.
• Customers are given products at a low price compared to its
competitors for the business to run smoothly.

• Business to Government (B2G)

• Business to government (B2G) is when a company markets its
products and services directly to a government agency.
Business to Business to Consumer (B2B2C)

• In B2B2C ecommerce, a company sells products to another company

which are then sold to consumers. An example of a B2B2C
arrangement is when a wholesale distributor sells merchandise to
retail stores that then sell the merchandise to end users.
• There are several different ways the B2B2C model can be used in
eCommerce applications. For example, a company could partner with
another company to promote its products and services, giving the
partner a commission for each sale.
 Consumer to Business (C2B)

• In the C2B ecommerce business model, individuals sell goods and

services directly to companies. We see this most commonly in
websites that allow individuals (contractors or freelancers) to share
work or services they’re skilled in. Often, businesses will put in a
request or a bid for that person’s time and will pay the person
through that platform.
• Consumer to Consumer (C2C)
• In C2C ecommerce, consumers sell goods or services directly to other
consumers. This is most often made possible by third-party websites
Product-Based B2C Model

• In the product-based B2C model, businesses sell products to

consumers. The business may act as a supplier and sell customized
products to individuals either via their own physical or online stores.
• An example of a product-based B2C company would be a shoe brand
selling its shoes to its customers via its physical storefront. Adidas is a
great example of a B2C shoe company that produces and sells its
branded shoes to consumers and individuals via its online and
physically located stores as well as on ecommerce sites.
Service-Based B2C Model

• A company with a service-based B2C model functions exactly as its

namesake – it helps provide services to its consumers. A service-
based B2C company earns revenue by providing services instead of
selling physical products.
• An example of service-based B2C would be a lawn mowing business.
Software-Based B2C Model

• Software-based B2C companies can be placed under either “product”

or “service” based B2C model. While the latter deals with providing
software services to consumers, the former provides software
solutions and products.
• it is divided into;
• Product-focused software-based B2C model
• Service-focused software-based B2B model
Product-Focused Software-Based B2C model

• Adobe and Microsoft are great examples of product-focused software-based B2C

companies. They provide software products for editing and creation of media and
documents respectively to the consumers.

• Service-focused software-based B2B model

• Netflix and Spotify are great examples of a service-focused software-based B2C
companies. Both help provide video and music services to consumers via the use
of the software.
• These services are usually membership or subscription-based
Differences between the two
• B2B ecommerce tends to be more complex than B2C ecommerce. It involves
heavier research, more needs-based purchasing, and less marketing-driven
buying.
• In B2B the quantity of merchandise is large while in B2C the merchandise
quantity is small.
• B2B buyers have to consult with multiple departments before purchasing, while
B2C consumers only have to consider themselves.
• B2B buyers look at the long term, which means they spend more time
researching and sourcing recommendations. The B2C customer is more prone to
one time purchase.
• B2B buyers deal in high-value purchases, so any misstep is magnified
while B2C purchasing errors are much less impactful.
• The buying and selling cycle are lengthy in B2B model while in B2C the
buying and selling cycle is short.
• In the B2B buying decisions are planned and logically based on needs
while in B2C the buying decisions are based on want and desire.
• B2B focuses on relationship while B2C focuses on product.
Components of e-commerce business
models
• Value proposition

• how a company's product or service fulfills the needs of customers. Typical e-

commerce value propositions include personalization, customization,
convenience, and reduction of product search and price delivery costs.
• Revenue model

• how the company plans to make money from its operations. Major e-commerce
revenue models include the advertising model, subscription model, transaction
fee model, sales model, and affiliate model.
• Market opportunity

• the revenue potential within a company's intended marketspace. 

• Competitive environment

• the direct and indirect competitors doing business in the same market space,
including how many there are and how profitable they are.
• Competitive advantage

• the factors that differentiate the business from its competition, enabling it to
provide a superior product at a lower cost.
• Market strategy

• the plan a company develops that outlines how it will enter a market and attract
customers.
• Organizational development

• the process of defining all the functions within a business and the skills
necessary to perform each job, as well as the process of recruiting and hiring
strong employees.
• Management team

• the group of individuals retained to guide the company's growth and expansion.

• 
Describe the major B2C business models 
• Portal

• it is a platform that combines content (such as news, meteorological outlooks,

rates of currency etc.) and services (community forum, downloads, chat,
entertainment etc.) The owner gets profit due to advertising, subscription and
transaction payments.
• E-tailer

• is a web version of a traditional store. It can be like a virtual storefront that

provides only price lists or an online store that allows to choose and buy goods
via the online global network.
• Content provider

• a platform that contains digital content, such as music, video, photos etc. The
profit is gained by subscription commission, advertising or download payments.
•Transaction broker
• process online transactions usually conducted in person by phone
or e-mail. The owner gets profits via transaction payments.
•Market creator
•uses Internet technology to develop markets that connect buyers
and sellers. The revenue is got by transaction commissions. 
•Service provider
•provides services that save time, are convenient or cheaper
alternatives to common service providers. Owners get profit via
subscription fees, advertising, sales of services.
• Community provider
• it is a social network that brings together people with the same interests
and allows sharing content, communication etc. The profit is gained by
advertising payments, subscription commissions, sales revenues,
transaction fees, affiliate fees.
• Describe the major B2B business models 
• E-distributor.
• These are companies that provide goods and services directly to sole
businesses and make profits via this activity. These companies are run by a
firm that wants to work for many customers.
•E-procurement.
•These firms create and sell access to digital e-markets. They make
profits by transaction commissions, payments based on the number of
computers using the service or annual licensing payments and are
usually named as application service providers
•Exchanges (B2B hubs).
•This is an e-marketplace where providers of products and commercial
purchasers can do business. They get profits by charging a commission
fee that depends on the size of the transaction conducted among
business parties. 
 

• Single firm network.

• They are the most widespread and are run wholly by a one
large purchasing company. Joining in is by offering only to a
long-term supplier of direct inputs.
• Industry-wide network.
• These are networks controlled by a consortium of large
companies in a field
END