E-Commerce Business Models ? The Competitive Edge | SCKL ...

Every day more and more companies, both large and small are attempting to capitalize on their existing capabilities through the use of the internet. This process of leveraging strengths and disturbing habits of the tried and true underlies the migration from ?market place to market space?.

There are many who still believe that there is no profitable business on the web. Value to the customer and company are the only two ways of beingsuccessful. This means a company must understand their customers within thetime frame and context to achieve their business objective. The internetgives companies a change to do what they have always done, but in a muchdifferent fashion, further adding value to the business and customer.

There are many business strategies that take advantage of the internet as aninteractive medium to reach many and emphasize communication and community.

Three business models that are working quite successfully for some companies are the auction model, portal model and storefront model.

This article will explore thethree business models. After reading this article, you should then be able to determine which business model is mostconducive for operating and growing your business.

The auction model has gained popularity since the inception of e-Bay.Auction models are those in which the participants bid for products orservices over the internet. The auction sites sometimes do not own theproducts on its site, but facilitates the process of listing and displayinggoods as an affiliate.

Auction models are a marketplace for individuals and businesses to auctionoff merchandise or service.?In English auctions, the initial price starts low and is bid up bysuccessive bidders with the highest bidder winning the bid. In a Dutchauction, multiple, identical items are offered in one auction, with allwinning bidders paying the same price, usually the highest price at which allitems will be sold. Most auctions online currently use the English method.? (Nissanoff, 2006)

The advantages of the auction business model include:

• No time constraints. Bidding and posting of items can be completed 24/7.
• No geographical constraints. Sellers and bidders can participate from anywhere in the world.
• The large number of bidders. The potential for low prices, numerous items and services available, easy access, and the social benefit draws a large number of bidders.
• Large number of sellers. The number of bidders brings a potential for high price and reduced selling costs making more sellers choose the auction model.
• Network economics. The more sellers, the more bidders and this cycle continue. The more the spiral operates, the larger the system becomes, making the business model more valuable for all participants.

The main source of revenue for the auction business model is throughcommissions from items sold on their site, advertising and postingmerchandise fees.

Generally speaking, the portal business model is an ?infomediary.? A portalbrings sellers and buyers together by providing content in the form of advice, services, or some other benefit.

A portal is the gateway for users when they connect to the internet. Portalbusiness models provide services such as: latest news, online directories,personalized advertisements, targeted e-mail newsletters of products andservices and a facility to create an individual company website within thepain portal making the portal a major commerce facilitator by adding a valueto a particular e-business transaction.

The revenues for portal business model is earned by personalized advertising,hosting websites, building, designing websites, sponsoring discussion forumsand negotiating a percentage of each transaction that takes place on themarketplace.

The store front business model is a shopping location that customers canbrowse and shop from the comfort of their homes, and where businesses canadvertise their products and services for a fraction of the cost of brick andmortar businesses.

The store is entered through a portal or the direct website and upon enteringthe store; the customer is shown graphic displays to give a person the chanceto see what the product looks like, just as if he/she were standing in the brick and mortar store. Once the purchase is made, a form is filled out that will transmit the financial information and issue a receipt to the customer.

Three types of storefront models are ?hard good, soft goods and services.? Hard goods are similar to operating catalog sales online. Selling soft goods or information based goods is perfect for the internet because everything canbe completed and received on the internet.

Some companies use the storefront models to sell goods, such as e-Bay, others use it toreduce costs through marketing and customer support, and then others use itto generate new sales.Companies that really benefit from a storefront model are those that sellunique products that are either hard to find or cannot be found in the localarea.

The advantages to a storefront model includes extended sales and marketing, reduced transaction costs, new product introduction and testing and theability to reach specialized markets.

With more than 90 million users on the web; the internet is a fascinatingplace to do business. There are vast variations of companies doing businesson the web. large, small, or in between, it doesn?t matter because it allcomes to customer commitment.

Tags: catalog sales online, new product, business.The auction model, E-Commerce Business Models, The main

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