Chapter 2, e-Business Models Outline 2.1 Introduction 2.2 Storefront Model 2.2.1 Shopping-Cart Technology 2.2.2 Online Shopping Malls 2.3 Auction Model 2.4 Portal Model 2.5 Dynamic-Pricing Model 2.5.1 Name-Your-Price Model 2.5.2 Comparison-Pricing Model 2.5.3 Demand-Sensitive Pricing Model 2.5.4 Bartering Model 2.5.5 Rebates 2.5.6 Offering Free Products and Services 2.6 B2B e-Commerce and EDI 2.7 Click-and-Mortar Businesses

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

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

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

Shopping Cart Technology 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

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

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

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

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?

Auction Model eBay home page. (These materials have been reproduced by Prentice Hall with the permission of eBay, Inc. COPYRIGHT© EBAY, INC. All Rights Reserved.)

Portal Model Portal sites Horizontal portals Vertical portals 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

Portal Model Helps users collect information on an item for which they are looking for and allow users to browse independently owned storefronts

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.

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

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.

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

Dynamic Pricing Models Bartering Model Individuals and business trade unneeded items for items they desire Ubarter.com, isolve.com

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

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

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

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

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

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

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

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

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

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