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Chapter 2, e-Business Models
Outline2.1 Introduction2.2 Storefront Model
2.2.1 Shopping-Cart Technology2.2.2 Online Shopping Malls
2.3 Auction Model2.4 Portal Model2.5 Dynamic-Pricing Model
2.5.1 Name-Your-Price Model2.5.2 Comparison-Pricing Model2.5.3 Demand-Sensitive Pricing Model2.5.4 Bartering Model2.5.5 Rebates2.5.6 Offering Free Products and Services
2.6 B2B e-Commerce and EDI2.7 Click-and-Mortar Businesses
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Introduction
In this chapter we explore the many business models currently being implemented on the Web Models include: The Storefront Model The Auction Model The Portal Model The Name-Your-Price Model The Comparison Pricing Model The Demand Sensitive Pricing model The B2B Exchange Model
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Introduction
e-Business A company that has an online presence
E-commerce businesses allow customers to sell, trade and barter over the Web
A company’s policy, operations, technology and ideology define its business model
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Storefront Model
Storefront model enables merchants to sell products on the Web What people hear most about e-business Transaction processing, security, online payment,
information storage E-commerce allows companies to conduct
business 24-by-7, all day everyday, worldwide An e-commerce storefront should include:
Online catalog of products Order processing Secure payment Timely order fulfillment
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Shopping Cart Technology
Shopping Cart An order-processing technology allowing
customers to accumulate lists of items they wish to buy as they continue to shop
Shopping cart is supported by Product catalog Merchant server Database technology
Combine a number of purchasing methods to give customers a wide array of options
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Online Shopping Malls
Wide selection of products and services Offers greater convenience than shopping at
multiple online shops Consumers can make multiple purchases in
one transaction
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Auction Model
Online auction sites Act as forums through which Internet users can
log-on and assume the role of either bidder or seller
Collect a commission on every successful auction Sellers post items they wish to sell and wait for
buyers to bid Reserve price
The minimum price a seller will accept in a given auction
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Auction Model
Reverse-auction model Lowest-unique-bid auction Allow the buyer to set a price as sellers compete
to match or even beat it If no bid meets the reverse price, the auction is
unsuccessful If a successful bid is made, the buyer and the
seller must commit Most auction sites do not involve themselves in
payment or delivery, except they can get revenue and profit
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Auction Model
Lowest-unique-bid auctions probably aren't auctions at all, but that's the common name for them. They work like this: The seller places a high-value item up for
"auction". Each buyer makes one or more sealed bids. Each bid costs the buyer some money (typically
the cost of a premium-rate SMS or phone call). The person who makes the lowest unique bid wins
the item for that price. So... as a buyer, what's the best approach? Bid low?
Big high? Multiple bids? Is there a "best" here at all, or is this a just a lottery
by any other name?
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Auction Model
eBay home page. (These materials have been reproduced by Prentice Hall withthe permission of eBay, Inc. COPYRIGHT© EBAY, INC. All Rights Reserved.)
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Portal ModelPortal Model
Portal sites Give visitors the chance to find almost
everything they are looking for in one place Horizontal portals
Portals that aggregate information on a broad range of topics
Yahoo!, AltaVista, Google Vertical portals
Portals that offer more specific information within a single area of interest
WebMD, IMDB, FirstGov
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Portal ModelPortal Model
Helps users collect information on an item for which they are looking for and allow users to browse independently owned storefronts
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Dynamic Pricing Models
In the past, bargain hunter had to search for deals by visiting numerous local retailers and wholesalers.
Ways to generate pricing for business in Internet Enable customers to name the prices they are willing
to pay for travel, homes, automobiles, consumer goods, etc. Find lower prices by joining with other buyers Offer products and services free by selling
advertising Join with other buyers to purchase products in
large quantities. Etc.
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Dynamic Pricing Models
The Web has changed the way products are priced and purchased
Comparison pricing model Allow customers to poll a variety of merchants
and find a desired product or service at the lowest price
Web sites using shopping bot technology to find the lowest price for a given item
Sites get revenue from partnerships with merchants
E.g. BottomDollar.com
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Dynamic Pricing Models
Demand-sensitive pricing model Group buying reduces price as volume of
sales increase Because pricing and products vary between
these and other, similar sites, customers should visit several such sites before making a purchase.
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Dynamic Pricing Models
Name-your-price model Name-your-price for products and services Empowers customers by allowing them to
state the price they are willing to pay for products and services
Use Intelligent agent Search and arrange large amounts of data and
report answers based on the data
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Dynamic Pricing Models
Bartering Model Individuals and business trade unneeded
items for items they desire Ubarter.com, isolve.com
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Dynamic Pricing Models
Rebate Model Sites offer rebates on product at leading online
retailers in return for commission or advertising revenues
pass discounts, e.g. Help attract customers to the sites
E.g., “everyday low prices”, “buy one get one free”
eBates Add value to a customer’s visit to build customer
satisfaction and loyalty
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Dynamic Pricing Models
Free offering model Use advertising-driven revenue streams Offer free products and services to generate
high traffic Obtain revenue from advertising Freemerchant, Start Sampling, FreeSamples.com
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B2B E-commerce and EDI
B2B e-business The electronic business relationship between two or
more companies Traditional EDI uses a value-added network or VAN
A closed network that includes all members of a production process
XML (eXtensible Markup Language) A development technology similar to HTML (Hypertext
Markup Language) Improves the compatibility between disparate systems,
creating new market opportunities
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B2B E-commerce and EDI
B2B e-commerce and the use of exchange sites allow businesses to reach their markets faster and more efficiently
Lead time The time it takes to receive a product from a
supplier after an order has been placed Long lead times increase inventory costs,
increase worker stress levels and strain relationships between the manufacturer and the supplier
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B2B E-commerce and EDI
JIT (just-in-time) inventory management Supplies arrive at the exact time they are
needed, thereby limiting any unnecessary inventory expense
Enterprise Application Integration (EAI) The process of integrating traditional EDI
systems with the Web
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B2B E-commerce and EDI
Business-to-business integrators (B2Bi) Companies that use XML and similar
technologies to help other companies integrate their current systems with the Web
www.excara.com, Webmethods.com, commerceone.com, tibco.com, Freemarkets.com, mercator.com
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Click-and-Mortar Businesses
Brick-and-mortar Companies that operate solely offline with
traditional business practices Click-and-mortar
Companies operating with both an online and offline presence
Click and mortar companies have brand recognition, and an established customer base Barnesandnoble.com Bestbuy.com
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Click-and-Mortar Businesses
Key benefits to automotive industry Combined supplier base Connects automobile manufacturers, dealers
and consumers in a single marketplace Decreases lead time and production costs
Key benefits to electronics industry Provides access to thousands of components
from hundreds of electronic suppliers Provides ability to search by part number,
product type or manufacturer Increases competitive pricing
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Click-and-Mortar Businesses
Key benefits to energy industry Provides real time pricing data on energy
commodities Provides access to hundreds of energy
commodities Allows regional energy providers to gain
access to a worldwide market Key benefits to food industry
Reduced lead time preserves perishables Provides access to real time pricing data Online auction technology allows for
alternative pricing
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Click-and-Mortar Businesses
Benefits to chemical industry Access to millions of chemical products from
thousands of suppliers Integrated supply chains provide faster, more
reliable transactions Benefits to construction industry
Contracting and subcontracting are made simpler by online bidding
Construction companies can find raw materials from suppliers worldwide