E-Commerce
Term V, MBA
Dr. Anupriya Khan
Information Systems & Business Analytics Area
Indian Institute of Management Ranchi
B2C Business Models
10/7/2024 Session 5 2
Major B2C Business Models
▪ E-tailer
▪ Community provider
▪ Content provider
▪ Portal
▪ Transaction Broker
▪ Service provider
10/7/2024 Session 5 3
B2C Business Models
▪ E-tailer
▪ Online retail stores
▪ Extremely competitive sector
▪ Low barriers to entry
▪ Becoming profitable and surviving is very difficult
10/7/2024 Session 5 4
B2C Business Models
▪ Community provider
▪ Creates 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
• even play out fantasies
10/7/2024 Session 5 5
B2C Business Models
▪ Content provider
▪ Distributes information content, such as digital video, music, photos,
text, and artwork
▪ The Wall Street Journal online newspaper, Harvard Business Review
• Charge customers for content downloads
▪ Many news sites
• Accessing news and information free of cost
• Make money through advertising and partner promotions
10/7/2024 Session 5 6
B2C Business Models
▪ Content provider
▪ Some own content and charge high prices
▪ Some aggregate and distribute content produced by others
• Shopzilla collects information on the prices of thousands of goods online,
analyzes the information, and presents users with tables showing the
range of prices and links to the sites where the products can be purchased
• Adds value to content it aggregates, and resells this value to advertisers
who advertise on its site
10/7/2024 Session 5 7
B2C Business Models
▪ Portal
▪ Offers users powerful search tools as well as an integrated package of
content and services all in one place
• News, e-mail, instant messaging, calendars, shopping, music downloads,
video streaming
▪ Generates revenue primarily by charging advertisers for ad placement,
collecting referral fees for steering customers to other sites, and
charging for premium services
10/7/2024 Session 5 8
B2C Business Models
▪ Transaction brokers
▪ Process transactions for consumers
▪ financial services, travel services, and job placement services
• E.g., Monster- Both employers and job seekers are attracted by the
convenience and currency of information
10/7/2024 Session 5 9
B2C Business Models
▪ Market creators
▪ Build a digital environment in which buyers and sellers can meet,
display and search for products and services, and establish prices
▪ Priceline: It allows consumers to set the price they are willing to pay
for various travel accommodations and other products
▪ eBay: online auction
▪ Make money by either charging a percentage of every transaction
made or charging merchants for access to the market
10/7/2024 Session 5 10
B2C Business Models
▪ Service providers
▪ Offer services online
• Photo sharing, video sharing, user-generated content, online medical bill
management, financial and pension planning, and travel recommendation
• 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, even freemium
revenue model
▪ The basic value proposition of service providers is that they offer consumers
valuable, convenient, time-saving, and low-cost alternatives
10/7/2024 Session 5 11
E-tailers
▪ Virtual merchants
▪ Omni-channel merchandisers (bricks-and-clicks or clicks-and-
bricks)
▪ Catalog merchants
▪ Manufacturer-direct firms
10/7/2024 Session 5 12
Virtual merchants
▪ Single-channel e-commerce firms that generate almost all
their revenue from online sales
▪ Mostly adopt low-cost and convenience strategies
▪ Extremely effective and efficient fulfillment processes to ensure
customers receive what they ordered as fast as possible
10/7/2024 Session 5 13
Virtual merchants
▪ Strategic challenges
▪ Build a business and brand name from scratch
▪ Face large costs in building and maintaining an e-commerce presence,
building an order fulfillment infrastructure, and developing a brand
name
▪ High customer acquisition costs
▪ Steep learning curve
▪ Low gross margin
10/7/2024 Session 5 14
Omni-channel merchants
▪ Companies that have a network of physical stores as their
primary retail channel, but they also have online offerings
▪ High costs of physical buildings and large sales staff
▪ Advantages such as a brand name, a national customer base,
warehouses, large scale (giving them leverage with suppliers), and a
trained staff
▪ Acquiring customers is less expensive
10/7/2024 Session 5 15
Omni-channel merchants
▪ Challenges in
▪ Coordinating prices across channels
▪ Handling returns of Web purchases at their retail outlets
▪ Leveraging their strengths and assets to the Web
▪ Building a credible Web site
▪ Hiring new skilled staff
▪ Building rapid-response order entry and fulfillment systems
10/7/2024 Session 5 16
Catalog merchants
▪ Established companies that have a national offline catalog
operation that is their largest retail channel but who have also
developed online capabilities
▪ High costs for printing and mailing millions of catalogs each year
▪ Typically have centralized fulfillment and call centers, efficient order
entry, and extraordinary service
10/7/2024 Session 5 17
Catalog merchants
▪ Challenges in
▪ Leveraging their existing assets and competencies to the Web
▪ Building a credible Web presence
▪ Hiring new skilled staff
See LandsEnd.com
10/7/2024 Session 5 18
Manufacturer-direct
▪ Single- or multi-channel manufacturers that sell directly
online to consumers without the intervention of retailers
▪ India’s D2C market is likely to reach a size of $100 Bn by 2025
▪ Computer hardware, such as Apple, Dell, and Hewlett-Packard
▪ Apparel manufacturers, such as Ralph Lauren, Nike, Under Armour,
Bewakoof, Zivame, etc.
10/7/2024 Session 5 19
▪ Channel conflict challenges
▪ When retailers of products must compete on price and currency of
inventory directly against the manufacturer, who does not face the
cost of maintaining inventory, physical stores, or sales staff
▪ Other challenges of firms with no prior direct marketing experience
▪ Developing a fast-response online order and fulfillment system
▪ Acquiring customers
▪ Coordinating supply chains with market demand
▪ Switching from a supply-push model to a demand-pull model
10/7/2024 Session 5 20
Manufacturer-direct
▪ Advantages
▪ A lower cost structure
▪ Faster inventory turnover and reduced component and finished goods
inventory levels in case of build-to-order manufacturing process
▪ No need to support a wholesale and retail sales network
▪ Complete control over its customer database
▪ Additional advantages of already established companies
• An established national brand name
• An existing large customer base
10/7/2024 Session 5 21
The path to success
▪ The path to success Don’t
▪ Having a central location to attract • Lower prices below the total
a larger number of shoppers costs of goods and operations
▪ Charging high enough prices to • Fail to develop efficient business
cover the costs of goods as well as processes
marketing • Fail to attract a large enough
audience to your Web sites
▪ Developing highly efficient • Spend far too much on
inventory and fulfillment systems customer acquisition and
to offer goods at lower costs than marketing
competitors and still make a profit
10/7/2024 Session 5 22
▪ Disintermediation has not occurred
▪ The retail middleman has not disappeared
▪ Manufacturers—with the exception of electronic goods—have used
the Web primarily as an informational resource
▪ Leaving Amazon aside, the most significant online growth has been
that of offline general merchandiser giant intermediaries such as
Walmart, Sears, Costco, JCPenney, Macy’s, Target, and Nordstrom
10/7/2024 Session 5 23
The path to success
▪ To succeed, online established retailers need to
▪ Create an integrated shopping environment that combines their
catalog, store, and online experiences into one
▪ Extend their brands
▪ Provide incentives to consumers to use the online channel
▪ Avoid channel conflict
▪ Build advertising campaigns using online search engines such as
Google, Yahoo, and Bing, and shopping comparison sites
10/7/2024 Session 5 24
Business Variations Examples Description Revenue
Model Models
Virtual Amazon Online version of retail store, where Sales of
E-tailer customers can shop at any hour of
Merchant Blue Nile goods
the day or night without leaving
their home or office
Bricks-and- Walmart Online distribution channel for a
Clicks Sears company that also has physical
stores
Catalog L.L.Bean Online version of direct mail catalog
Merchant LillianVernon
Manufacturer- Dell Manufacturer uses online channel
Direct (D2C) Mattel to sell direct to customer
10/7/2024 Session 5 25
Business Variati Examples Description Revenue
Model ons Models
Facebook Sites where individuals with Advertising,
Community LinkedIn particular interests, hobbies, subscription,
Provider Twitter common experiences, or affiliate
Pinterest social networks can come referral
together and “meet” online fees
Wall Street Information and Advertising,
Content Journal entertainment providers such subscription,
Provider Apple iTunes as newspapers, sports sites, sales of
CNN and other online sources that digital
ESPN offer customers up-to-date goods
Rhapsody news and special interest
how-to guidance and tips
and/or information sales
10/7/2024 Session 5 26
Business Variations Examples Description Revenue
Model Models
Horizontal/ Yahoo Offers an integrated package Advertising,
Portal General AOL of content, content-search, subscription,
MSN and social network services: transaction
Facebook news, e-mail, chat, music fees
downloads, video streaming,
calendars, etc. Seeks to be a
Vertical/ user’s home base Advertising,
Specialized subscription,
(Vortal) Sailnet Offers services and products transaction
to specialized Marketplace fees
Search Google Focuses primarily on offering Advertising,
Bing search Services affiliate
Ask referral
10/7/2024 Session 5 27
Business Variati Examples Description Revenue
Model ons Models
E*Trade Processors of online sales Transaction
Transaction
Expedia transactions, such as fees
Broker
Monster stockbrokers and travel agents,
Travelocity that increase customers’
Orbitz productivity by helping them
get things done faster and
more cheaply
Market eBay Businesses that use Internet Transaction
Creator Etsy technology to create markets fees
Amazon that bring buyers and sellers
Priceline together
Service VisaNow Companies that make money Sales of
provider Wave by selling users a service, services
RocketLawyer rather than a product
10/7/2024 Session 5 28
The Service Sector
▪ Service sector:
▪ Largest and most rapidly expanding part of economies of advanced
industrial nations
▪ Concerned with performing tasks in and around households, business
firms, and institutions
• Includes doctors, lawyers, accountants, business consultants, and
so on
▪ Employs 4 out of 5 U.S. workers
10/7/2024 Session 5 29
Service Industries
▪ Major service industry groups:
▪ Finance
▪ Insurance
▪ Real estate
▪ Travel
▪ Professional services—legal, accounting
▪ Business services—consulting, advertising, marketing, and so on
▪ Health services
▪ Educational services
10/7/2024 Session 5 30
▪ Within these service industry groups, companies can be
further categorized into
▪ Those that involve transaction brokering (acting as an intermediary to
facilitate a transaction)
▪ Those that involve providing a “hands-on” service
10/7/2024 Session 5 31
▪ Transaction brokers
▪ Stockbrokers who act as the middle person in a transaction between
buyers and sellers
▪ Online mortgage companies such as LendingTree refer customers to
mortgage companies that actually issue the mortgage
▪ Employment agencies put a seller of labor in contact with a buyer of
labor
▪ The service involved in all these examples is brokering a transaction
10/7/2024 Session 5 32
▪ “Hands-on” service
▪ Some need to interact directly and personally with the “client”
• Health check-up
• Opportunities for e-commerce are somewhat different
• The Internet can assist their services by providing consumers with
information, knowledge
10/7/2024 Session 5 33
Service Industries
▪ The most important feature of service industries is that they
are knowledge- and information-intense
▪ Employ a highly skilled, educated workforce
▪ Some services (legal, medical, and accounting services) require
extensive personalization
▪ Others (financial services) benefit from customization by allowing
individuals to choose from a restricted menu
▪ This is the reason behind the rapid growth of e-commerce services
10/7/2024 Session 5 34
