E-commerce is a process of buying and selling online goods. E-Commerce models are your online shopping resources. Everything from Amazon to the eBay reseller is an eCommerce model for business. Some business owners may actually hold inventory that they sell, while others use drop shipping methods to avoid the overhead of buying and warehousing products
BUSINESS MODELS RELATED TO E-COMMERCE
INTERNET BASED BUSINESS
The access provider ensures (technical) access to the Internet. We should have in mind, that
somebody has to pay the access provider so that we can get access to the Internet. Who
pays? We or somebody else? In many (most?) areas of the world it is a totally privatized
business, though sometimes in the political arena the access to the Internet is declared as
a modern human right. Obviously there is a similarity to telephone network(s). However,
it (normally) works in this privatized form.
Traditional business models, which are somehow similar to the business of an access provider,
are operators of a technical infrastructure, e.g. telephone networks, car highways, or railways.
Search engines are the most used software in the Internet. They are the starting step for
many Internet-based activities, not only but, of course, also if somebody is looking for a
business opportunity. Again we must ask: Who pays? The one, who wants to find something
or someone? Or the one, who wants to be found?
A traditional and similar business model is given by the so-called “yellow pages”, where
firms are listed and grouped according to branches and locations.
An online shop is a website, where you can buy products or services, e.g. books or
Traditional and similar business models are direct mail selling (no shop facility, offering
of goods via a printed catalogue, ordering by letters or telephone calls) and factory outlets
(producer has own shop facility, does not sell his products via merchants).
Content providers offer content, a completely digital good, e.g. information, news, documents,
music. A specific variant of a content provider is the information broker, who is a trader
Again the following question has to be put: Who pays? The one, who wants to have access
to an information? The one, who wants to provide an information?
Traditional business models in this area are newspaper publishers, magazine publishers, radio
and television broadcasting services or publishing companies.
A portal is a website, which provides a set of services to the user so that he/she sometimes
thinks that he/she is using a single but very complex software system. Portals are often used
in big organizations to control the access of employees to the different ICT systems; each
employee gets a specific menu of “his”/“her” applications. Also content providers use portals,
though in the narrow sense that they only deliver content and no application systems.
Online marketplace/electronic mall
An online marketplace is a website, where suppliers and potential customers can come
together like on a real marketplace in a small town. An E-Mall is a set of online shops,
which can be found on one website.
Examples of traditional and similar business models are shopping centers, omnibus orders
(One person is customer of the shop and buys for a group of people), marketplaces and
A virtual community is a platform for communication and exchange of experience. It is
similar to a virtual club or association. We always should ask: Who is the owner? Who is
the person or organization behind the platform? Who pays? The members or the visitors?
The community operator?
An information broker collects, aggregates and provides information, e.g. information with
respect to products, prices, availabilities or market data, economical data, technical information.
A transaction broker is a person or an organization to execute sales transactions. Sometimes
those brokers are used to hide the real customer to the supplier. A transaction broker is an
agent who is an expert in a specific area and can take over parts of a business.
A similar traditional business model is the free salesman.
ADVANTAGES AND DISADVANTAGES
E-Commerce has a lot of advantages. But as we know it from every area of our life, there
is “no free lunch”. Of course, E-Commerce has some disadvantages.
• Flexible shopping hours (7∙24h)
• No waiting queues (if net is available and
software appropriately designed)
• Shopping at home (we don’t have to
leave our apartment, refuel our car or
buy a subway ticket, look for a parking
• Individual needs can be covered (if
customization is offered)
• Global offers, more competition, pressure
• Better customer service can be offered
• Fast communication with customer
• New customer potential through
• No (traditional) intermediaries, who
take away margins
• Security risks:
Data theft (e.g. stealing account or
credit card numbers)
Identity theft (acting under our name
or user identity)
Abuse (e.g. third person orders goods
with our identity, gets them delivered
and we have to pay for it)
Bogus firm (firm does not really exist)
Fraud (e.g. order is confirmed, invoice
has to be paid, but goods are never
• Uncertain legal status (if something goes
wrong, can we accuse the provider?)
• Higher logistics cost (goods have to
be sent to the customer’s location)
• Anonymity of customers (how to
make targeted advertisements?)
ACTORS AND STAKEHOLDERS
E-Commerce is driven by different groups of actors and stakeholders.
First we have persons, abbreviated by “C”, where “C” stands for (potential) consumers or
citizens, according to the specific context, which is to be considered.
Secondly we have business organizations, abbreviated by “B”, where “B” stands for producers
and suppliers, trade organisations or merchants, banks, insurance companies or other financial
service providers, logistics & transportation firms or forwarding agencies and last but not
least several intermediaries (making business with and on the Internet.
о Proceeding for digital goods:
Send goods to the customer via the net or provide for download: by the supplier,
Protect goods against unauthorized access (see chapter 6 of this book): by
Accept delivery or confirm successful download: by the customer,
Approve contract fulfilment to authorize billing: by the customer.
Proceeding for physical services:
Build and maintain service fulfilment capability: by the supplier,
Come together physically because customer must be an active part in service
delivery: by the supplier and the customer,
Define service levels: by the supplier, possibly after a negotiation with
Add service level agreement to contract: by the supplier,
Accept service fulfilment: by the customer,
Approve contract fulfilment to authorize billing: by the customer.