Chapter 2

Types of E-commerce and Business

Models
 Types of E-Commerce
• Business - to - Business (B2B)
• Business - to - Consumer (B2C)
• Consumer - to - Consumer (C2C)
• Consumer - to - Business (C2B)
• Business - to - Government (B2G)
• Government - to - Business (G2B)
• Government - to - Citizen (G2C)
• Peer to Peer
• M-Commerce
02/04/21 Organised By Betsinat G 2
 Business - to - Business (B2B)

• Website following B2B business model sells its

product to an intermediate buyer who then
sells the product to the final customer. As an
example, a wholesaler places an order from a
company's website and after receiving the
consignment, sells the end product to final
customer who comes to buy the product at
wholesaler's retail outlet.

02/04/21 Organised By Betsinat G 3

 B2B

02/04/21 Organised By Betsinat G 4

02/04/21 Organised By Betsinat G 5
 E-distributor
•Companies that supply products and services directly to individual
businesses are e-distributors.
• W.W. Grainger, for example, is the largest distributor of maintenance,
repair, and operations (MRO) supplies.
• MRO supplies are thought of as indirect inputs to the production process
—as opposed to direct inputs. In the past, Grainger relied on catalog sales
and physical distribution centers in metropolitan areas.
•Its catalog of equipment went online in 1995 at Grainger.com, giving
businesses access to more than 1 million items.
•Company purchasing agents can search by type of product, such as
motors, HVAC, or fluids, or by specific brand name

02/04/21 Organised By Betsinat G 6

02/04/21 Organised By Betsinat G 7
 E-procurement
• Just as e-distributors provide products to other companies, e-
procurement firms create and sell access to digital electronic markets.
• Firms such as Ariba, for instance, have created software that helps
large firms organize their procurement process by creating mini-digital
markets for a single firm.
•Ariba creates custom-integrated online catalogs (where supplier firms
can list their offerings) for purchasing firms.
•On the sell side, Ariba helps vendors sell to large purchasers by
providing software to handle catalog creation, shipping, insurance, and
finance.
• Both the buy and sell side software is referred to generically as
“value chain management” software

02/04/21 Organised By Betsinat G 8

 Exchanges
•Exchanges have garnered most of the B2B attention and early
funding because of their potential market size even though today
they are a small part of the overall B2B picture.
• An exchange is an independent digital electronic marketplace
where hundreds of suppliers meet a smaller number of very large
commercial purchasers (Kaplan and Sawhney, 2000).
• Exchanges are owned by independent, usually entrepreneurial
start-up firms whose business is making a market, and they
generate revenue by charging a commission or fee based on the
size of the transactions conducted among trading parties.
• They usually serve a single vertical industry such as steel,
polymers, or aluminum, and focus on the exchange of direct
inputs to production and short-term contracts or spot purchasing

02/04/21 Organised By Betsinat G 9

 Industry Consortia
• Industry consortia are industry-owned vertical marketplaces that
serve specific industries, such as the automobile, aerospace,
chemical, floral, or logging industries.
• In contrast, horizontal marketplaces sell specific products and
services to a wide range of companies.
•Vertical marketplaces supply a smaller number of companies with
products and services of specific interest to their industry, while
horizontal marketplaces supply companies in different industries with
a particular type of product and service, such as marketing-related,
financial, or computing services

02/04/21 Organised By Betsinat G 10

 Private Industrial Networks
• Private industrial networks constitute about 75% of all B2B expenditures by
large firms and far exceed the expenditures for all forms of Net marketplaces.
• A private industrial network (sometimes referred to as a private trading
exchange or PTX)
•is a digital network (often but not always Internet-based) designed to
coordinate the flow of communications among firms engaged in business
together.
•The network is owned by a single large purchasing firm. Participation is by
invitation only to trusted long-term suppliers of direct inputs.
•These networks typically evolve out of a firm’s own enterprise resource
planning (ERP) system, and are an effort to include key suppliers in the firm’s
own business decision making.
• For instance, Walmart operates one of the largest private industrial networks
in the world for its suppliers, who on a daily basis use Walmart’s network to
monitor the sales of their goods, the status of shipments, and the actual
inventory level of their goods.

02/04/21 Organised By Betsinat G 11

 B2B

02/04/21 Organised By Betsinat G 12

02/04/21 Organised By Betsinat G 13
 Business - to - Consumer(B2C)

• Website following B2C business model sells its

product directly to a customer. A customer
can view products shown on the website of
business organization. The customer can
choose a product and order the same.
Website will send a notification to the
business organization via email and
organization will dispatch the product/goods
to the customer.
02/04/21 Organised By Betsinat G 14
 B2C

02/04/21 Organised By Betsinat G 15

02/04/21 Organised By Betsinat G 16
E-tailer

• Online retail stores, often called e-tailers, come in all sizes, from giant Amazon to
tiny local stores that have Web sites.
• E-tailers are similar to the typical bricks-and-mortar storefront, except that
customers only have to connect to the Internet or use their smartphone to place an
order.
• Some e-tailers, which are referred to as “bricks-and clicks,” are subsidiaries or
divisions of existing physical stores and carry the same products.
•This sector, however, is extremely competitive. Since barriers to entry (the total
cost of entering a new marketplace) into the e-tail market are low, tens of
thousands of small e-tail shops have sprung up.
• Becoming profitable and surviving is very difficult, however, for e-tailers with no
prior brand name or experience. The e-tailer’s challenge is differentiating its
business from existing competitors.

02/04/21 Organised By Betsinat G 17

Community Provider
•Although community providers are not a new phenomenon, the Internet has
made such sites for like-minded individuals to meet and converse much easier,
without the limitations of geography and time to hinder participation.
•Community providers create an online environment where people with similar
interests can transact (buy and sell goods); share interests, photos, videos;
communicate with like-minded people; receive interest-related information; and
even play out fantasies by adopting online personalities called avatars.
• The social network sites Facebook, LinkedIn, Twitter, and Pinterest, and
hundreds of other smaller, niche sites all offer users community-building tools
and services.
• The basic value proposition of community providers is to create a fast,
convenient, one-stop site where users can focus on their most important
concerns and interests, share the experience with friends, and learn more about
their own interests.
• Community providers typically rely on a hybrid revenue model that includes
subscription fees, sales revenues, transaction fees, affiliate fees, and
advertising fees from other firms that are attracted by a tightly focused audience.

02/04/21 Organised By Betsinat G 18

Content Provider
•Content providers distribute information content, such as digital video,
music, photos, text, and artwork.
•Content providers make money by charging a subscription fee.
• For instance, in the case of Rhapsody.com, a monthly subscription fee
provides users with access to thousands of music tracks.
• Other content providers, such as WSJ.com (the Wall Street Journal online
newspaper), Harvard Business Review, and many others, charge customers
for content downloads in addition to, or in place of, a subscription fee

02/04/21 Organised By Betsinat G 19

02/04/21 Organised By Betsinat G 20
 Portal
•Portals such as Yahoo, MSN, and AOL offer users powerful search tools
as well as an integrated package of content and services, such as news, e-
mail, instant messaging, calendars, shopping, music downloads, video
streaming, and more, all in one place.
• Initially, portals sought to be viewed as “gateways” to the Internet. Today,
however, the portal business model is to be a destination site.
•They are marketed as places where consumers will hopefully stay a long
time to read news, find entertainment, and meet other people (think of
destination resorts).
• Portals do not sell anything directly—or so it seems—and in that sense
they can present themselves as unbiased

02/04/21 Organised By Betsinat G 21

 Transaction Broker

•Companies that process transactions for consumers normally

handled in person, by phone, or by mail are transaction brokers.
• The largest industries using this model are financial services, travel
services, and job placement services.
• The online transaction broker’s primary value propositions are
savings of money and time.
• In addition, most transaction brokers provide timely information and
opinions.
•Companies such as Monster.com offer job searchers a national
marketplace for their talents and employers a national resource for
that talent.
•Both employers and job seekers are attracted by the convenience
and currency of information

02/04/21 Organised By Betsinat G 22

 Market Creator
• Market creators build a digital environment in which buyers and sellers
can meet, display products, search for products, and establish prices.
• Prior to the Internet and the Web, market creators relied on physical
places to establish a market.
•Beginning with the medieval marketplace and extending to today’s New
York Stock Exchange, a market has meant a physical space for transacting
business.
•There were few private digital network marketplaces prior to the Web. The
Web changed this by making it possible to separate markets from physical
space.
• Prime examples are Priceline, which allows consumers to set the price
they are willing to pay for various travel accommodations and other
products (sometimes referred to as a reverse auction), and eBay, the online
auction site utilized by both businesses and consumers.

02/04/21 Organised By Betsinat G 23

 Service Provider
•While e-tailers sell products online, service providers offer services
online.
•There’s been an explosion in online services that is often
unrecognized.
•Web 2.0 applications such as photo sharing, video sharing, and
user-generated content (in blogs and social network sites) are all
services provided to customers.
•Google has led the way in developing online applications such as
Google Maps, Google Docs, and Gmail.
•Other personal services such as online medical bill management,
financial and pension planning, and travel recommendation are
showing strong growth.
•Service providers use a variety of revenue models. Some charge a
fee, or monthly subscriptions, while others generate revenue from
other sources, such as through advertising and by collecting
personal information that is useful in direct marketing

02/04/21 Organised By Betsinat G 24

 B2C

02/04/21 Organised By Betsinat G 25

 Consumer - to - Consumer (C2C)

• Website following C2C business model helps

consumer to sell their assets like residential
property, cars, motorcycles etc. or rent a room
by publishing their information on the website.
• Website may or may not charge the consumer
for its services.
• Another consumer may opt to buy the product of
the first customer by viewing the
post/advertisement on the website.
02/04/21 Organised By Betsinat G 26
 C2C

02/04/21 Organised By Betsinat G 27

 C2C

02/04/21 Organised By Betsinat G 28

 Consumer - to - Business (C2B)

• In this model, a consumer approaches website

showing multiple business organizations for a
particular service.
• Consumer places an estimate of amount he/she
wants to spend for a particular service. For
example, comparison of interest rates of
personal loan/ car loan provided by various banks
via website.
• Business organization who fulfills the consumer's
requirement within specified budget approaches
the customer and provides its services.

02/04/21 Organised By Betsinat G 29

 C2B

02/04/21 Organised By Betsinat G 30

 C2B

02/04/21 Organised By Betsinat G 31

 C2B

02/04/21 Organised By Betsinat G 32

 C2B

02/04/21 Organised By Betsinat G 33

 Business - to - Government (B2G)

• B2G model is a variant of B2B model. Such

websites are used by government to trade
and exchange information with various
business organizations.
• Such websites are accredited by the
government and provide a medium to
businesses to submit application forms to the
government.

02/04/21 Organised By Betsinat G 34

 B2G

02/04/21 Organised By Betsinat G 35

 B2G

02/04/21 Organised By Betsinat G 36

 Government - to - Business (G2B)

• Government uses B2G model website to

approach business organizations. Such
websites support auctions, tenders and
application submission functionalities.

02/04/21 Organised By Betsinat G 37

 G2B

02/04/21 Organised By Betsinat G 38

 G2B

02/04/21 Organised By Betsinat G 39

 Government - to - Citizen (G2C)

• Government uses G2C model website to

approach citizen in general.
• Such websites support auctions of vehicles,
machinery or any other material.
• Such website also provides services like
registration for birth, marriage or death
certificates.
• Main objectives of G2C website are to reduce
average time for fulfilling people requests for
various government services.
02/04/21 Organised By Betsinat G 40
 G2C

02/04/21 Organised By Betsinat G 41

 G2C

02/04/21 Organised By Betsinat G 42

 Peer–to-Peer Network (P-to-P)
• This is the communications model in which
each party has the same capabilities and
either party can initiate a communication
session.
• In recent usage, peer-to-peer has come to
describe applications in which users can use
the Internet to exchange files with each other
directly or through a mediating server

02/04/21 Organised By Betsinat G 43

 P2P

02/04/21 Organised By Betsinat G 44

 M-commerce:
– Mobile commerce is the use of wireless handheld devices
such as cellular phones and laptops to conduct
commercial transactions online.
– Mobile commerce transactions continues to grow, and the
term includes the purchase and sale of a wide range of
goods and services, online banking, bill payment,
information delivery and so on. Also known as m-
commerce.

02/04/21 Organised By Betsinat G 45

 M-commerce

02/04/21 Organised By Betsinat G 46

02/04/21 Organised By Betsinat G 47
02/04/21 Organised By Betsinat G 48
02/04/21 Organised By Betsinat G 49
 8 Key Elements of a Business Model
1. Value proposition
2. Revenue model
3. Market opportunity
4. Competitive environment
5. Competitive advantage
6. Market strategy
7. Organizational development
8. Management team
Slide 2-50
Organised By Betsinat G
02/04/21
 1. Value Proposition
• Why should the customer buy from you?
• Successful e-commerce value propositions:
– Personalization/customization
– Reduction of product search, price discovery costs
– Facilitation of transactions by managing product delivery

Organised By Betsinat G
02/04/21 Slide 2-51
 2. Revenue Model
• How will the firm earn revenue, generate
profits, and produce a superior return on
invested capital?
• Major types:
– Advertising revenue model
– Subscription revenue model
– Transaction fee revenue model
– Sales revenue model
– Affiliate revenue model
Organised By Betsinat G
02/04/21 Slide 2-52
 3. Market Opportunity
• What marketspace do you intend to serve and
what is its size?
– Marketspace: Area of actual or potential commercial
value in which company intends to operate
– Realistic market opportunity: Defined by revenue
potential in each of market niches in which company
hopes to compete
• Market opportunity typically divided into
smaller niches

Organised By Betsinat G
02/04/21 Slide 2-53
 4. Competitive Environment
• Who else occupies your intended
marketspace?
– Other companies selling similar products in the same
marketspace
– Includes both direct and indirect competitors

• Influenced by:
– Number and size of active competitors
– Each competitor’s market share
– Competitors’ profitability
– Competitors’ pricing

Organised By Betsinat G
02/04/21 Slide 2-54
 5. Competitive Advantage
• What special advantages does your firm bring
to the marketspace?
– Achieved when firm produces superior product or
can bring product to market at lower price than
competitors
• Important concepts:
– Asymmetries
– First-mover advantage
– Unfair competitive advantage
– Leverage
Organised By Betsinat G
02/04/21 Slide 2-55
 E-commerce Enablers:
• The Gold Rush Model Of the nearly 500,000 miners who descended on California
in the Gold Rush of 1849, less than 1% ever achieved significant wealth.
• However, the banking firms, shipping companies, hardware companies, real estate
speculators, and clothing companies such as Levi Strauss built long-lasting
fortunes.
• Likewise in e-commerce. No discussion of e-commerce business models would be
complete without mention of a group of companies whose business model is
focused on providing the infrastructure necessary for e-commerce companies to
exist, grow, and prosper.
• These are the e-commerce enablers:
• the Internet infrastructure companies.
• They provide the hardware, operating system software, networks and
communications technology, applications software, Web design, consulting
services, and other tools that make e-commerce (see Table 2.5 ).
• While these firms may not be conducting e-commerce, as a group they have
perhaps profited the most from the development of e-commerce.

02/04/21 Organised By Betsinat G 56

02/04/21 Organised By Betsinat G 57
 Assignment 1
1. How are e-commerce technologies similar to or different from other technologies that
have changed commerce in the past?
2. Describe the three different stages in the evolution of e-commerce.
3.Define disintermediation and explain the benefits to Internet users of such a
phenomenon. How does disintermediation impact friction-free commerce?
4.What is a business model? How does it differ from a business plan?
5.Discuss the ways in which the early years of e-commerce can be considered?
6.What are the eight key components of an effective business model?
7.What are Amazon’s primary customer value propositions?
8.Describe the five primary revenue models used by e-commerce firms.
9.Why is targeting a market niche generally smarter for a community provider than
targeting a large market segment?
10.Would you say that Amazon and eBay are direct or indirect competitors? (You may have
to visit the Web sites to answer.)
11.What are some of the specific ways that a company can obtain a competitive
advantage?
12.Besides advertising and product sampling, what are some other market strategies a
company might pursue?
13.How do venture capitalists differ from angel investors?

02/04/21 Organised By Betsinat G 58