Chapter 2: E-commerce Business Models and Concepts

Before starting online business in e-commerce through website keep in mind the following
things.

Business Model
Business model a set of planned activities designed to result in a profit in a marketplace.

Business Plan
Business plan a document that describes a firm’s business model.

E-commerce business model

E-commerce business model a business model that aims to use and leverage the unique
qualities of the Internet, the Web, and the mobile platform.

Eight key elements of a business model

If you hope to develop a successful business model in any arena, not just e-commerce, you
must make sure that the model effectively addresses the eight elements listed in figure.

Value proposition
Value proposition defines how a company’s product or service fulfills the needs of customers.
Revenue Model
A firm’s revenue model describes how the firm will earn revenue, generate profits, and produce
a superior return on invested capital. We use the terms revenue model and financial model
interchangeably. The function of business organizations is both to generate profits and to
produce returns on invested capital that exceed alternative investments.

Advertising revenue model

In the advertising revenue model, a company that offers content, services, and/or products also
provides a forum for advertisements and receives fees from advertisers.

Subscription revenue model

Subscription revenue model a company offers its users content or services and charges a
subscription fee for access to some or all of its offerings.

Example of Subscription revenue model

Scribd (e-books) • Unlimited access to “Scribd Select” books and audiobooks, plus 3 books and
1 audiobook of the user’s choice each month for $8.99/month (over 1 million e-books, audio
books, and comic books from which to choose)

Freemium strategy
Freemium strategy companies give away a certain level of product or services for free, but then
charge a subscription fee for premium levels of the product or service.

Transaction fee revenue model

Transaction fee revenue model, a company receives a fee for enabling or executing a
transaction. For example, eBay provides an auction marketplace and receives a small
transaction fee from a seller if the seller is successful in selling the item. E*Trade, a financial
services provider, receives transaction fees each time it executes a stock transaction on behalf
of a customer.

Sales revenue model

Sales revenue model, companies derive revenue by selling goods, content, or services to
customers. Companies such as Amazon, L.L.Bean, and Gap all have sales revenue models.

Affiliate revenue model

Affiliate revenue model a company steers business to an affiliate and receives a referral fee or
percentage of the revenue from any resulting sales.

Eight Key Element of Business Model

Before finalize our business model keep in mind the following key elements of business model.
Unique features of E commerce business
Following are the unique features of e-commerce business that is not available in physical
market that’s why we start our online business through website.
A lay men who don’t know about e-commerce or website by reading and clearing the above
concept like what is business model how we plan our business model in online business, what is
business plan and which type of business plan is successful in online business and which are the
features of online business model that is not available in physical business. After that we plan
how we built our site through which we run our business which things that are included in site
by working on all these things we run online business through website.