E-commerce Business Models and Advantages

Differences Between E-commerce and Traditional Commerce

• Ubiquitous Nature:
  • E-commerce is accessible almost anywhere on the planet.
  • Technology works the same internationally across different markets simultaneously.
  • Small organizations can establish a presence in many countries and offer e-commerce services to many customers at the same time.
• Standardization:
  • Many platforms run on standardized software across multiple retailers, reducing costs for organizations.
  • E-commerce is relatively cheap and fast to establish compared to bricks and mortar retailers, which have high setup costs.
• Rich Data and Interaction:
  • E-commerce technology allows for rich data collection and diverse customer interactions.
• Social Interaction:
  • E-commerce involves social technology and networking.
  • Customers are often asked to share their experiences and rate products, creating a more engaging experience.

Ways Firms Make Money Using E-commerce

• Advertising:
  • Websites generate revenue by displaying adverts.
  • Organizations receive a small fee for each advert shown, with a higher fee if the customer clicks through.
  • Example: Google makes most of its money through advertising revenue.
  • A website with millions of customers can generate significant revenue through small advertising fees.
• Selling Products:
  • Firms can advertise and sell products, collect orders, and distribute products cost-effectively over the Internet.
  • Reaches a wide number of potential customers.
• Subscription Services:
  • Customers pay a regular fee to access services.
  • Example: Netflix.
• Freemium Services:
  • Part of the service is free, and part is paid for (premium).
  • Basic level of information is free, while real-time or pushed information requires a premium fee.
  • Captures new customers through free services and generates revenue through premium fees.
• Transactional Fees:
  • Platforms earn money through transactional fees.
  • Example: PayPal takes a small percentage of each transaction, funding operations and generating profits.

Combination of Models

• Many organizations use multiple models in combination to generate revenue.