Business Models Used by E-Commerce Firms - Essay Example

?Introduction There are various business models used by e-commerce firms since the onset of the internet changed business environment in the past including industry structures, business strategies and firm operations. Generally, the internet is an open standards system accessible to all, which makes it easy for new competitors to venture into the marketplace and offer alternative channels of delivery or products. The internet intensifies competition by availing information to everyone thus shifting power to buyers who can determine the lowest-cost provider on the internet. Nevertheless, the internet offers numerous new opportunities for developing value, branding products at premium prices and enlarging powerful offline businesses like Wal-Mart or Sears. E-commerce alters some industry structures more compared to others in accordance with the nature of players within the industry. Business-to-consumer (B2C) model seeks to woo individual consumers; thus, it is the familiar form of e-commerce. Portals like Yahoo, Windows Live, Google and AOL provide users with powerful web research tools with integrated package of content as well as services like e-mail, news, shopping, video streaming and music download among others all in one place. Although there are many search engines the top five sites gather more than 95% of search engine traffic since they have superior brand recognition. Most of the top sites are among the first to emerge on the internet thus they have the first-mover advantages; thus, being first bestows advantage since customers eventually trust a reliable provider and customers bear switching costs if they shift to late arrivals (Nemcova, 2011; Angelo and Stefano, 2010). Online retail stores come in all sizes from the giant Amazon to small local stores that have websites. Though online retail stores or e-tailers are analogous to the brick-and-mortar stores, customers have to access the internet to check their inventory and place their order. Some online retail stores like Wal-Mart are “bricks-and-clicks” since they supplement already existing physical; however, others like Amazon and Drugstore.com function entirely on the virtual world. Internet users who tend to be time-starved require shopping solutions that eliminate the need to travel to malls or stores. However, this sector is highly competitive because the barriers or costs of entering the web e-tail market are few, which caused many small e-tail stores to come up on the internet. Becoming profitable and surviving is difficult for e-tailers without brand name or experience since they face the challenge of differentiating the business from the existing stores or websites. E-commerce start-ups that intend to earn money by offering content face difficulties unless they have unique sources other content providers cannot access since the traditional content providers dictate most of this business category. As well, competition among online transaction brokers has been fierce in the last few years with new entrants like E*Trade, Datek and Schwab offering more appealing offers to consumers. Market prospect for online market creators is vast for firms with financial resources and marketing plans for attracting adequate buyers and sellers to the marketplace. Thus, new firms desiring to create a market need aggressive branding and awareness programs to draw sufficient customers like large web-based firms like Amazon that leverage large customer base and start auction. The advantage of B2C is that it bases on reputable physical infrastructures, knowledge of consumer preferences, culture and language, brand recognition and trust (“E-commerce Business Models…”, 2009; Nemcova, 2011). Most of the revenue in e-commerce involve business-to-business (B2B) even though most public attention focus on B2C since most of B2B is unseen by average consumer. E-distributor companies like W.W. Grainger supply products and services to individual businesses thus e-distributors are owned by a company that seeks to serve various customers. More products and services in e-distributors sites make e-distributors more attractive to customers since a one-stop shop is preferable to visiting numerous sites finding a certain product or service. Moreover e-procurement firms like Ariba develop and sell access to digital electronic markets by use of software that aids huge firms organize procurement process through creation of mini-digital markets for one firm. Ariba creates custom integrated online catalogues for purchasing firms with the sell side of its software helping vendors sell to huge purchasers and handling catalogue creation, insurance, shipping and finance. B2B businesses make money through charges on transaction depending on workstations utilising the service or licensing fees per year. Thus, e-procurement firms provide large firms low cost software, which aid in achieving scale economies (“E-commerce Business Models…”, 2009). In B2B, exchanges that involve independent digital electronic marketplace in which hundreds of supplier encounter a small number of huge purchasers make it possible to collect information, explore suppliers, gather prices and get the latest happenings in one place. Besides, industry consortia are industry-owned marketplaces in certain industries like automobile, chemical or logging industries; thus, they serve small number of companies with certain services or products with the industry. Industry consortia tend to be successful compared to independent exchanges since they are sponsored by powerful, rich players that strengthen traditional purchasing performance instead of transforming it. Private industrial networks constitute a huge part of B2B expenditures in huge firms and they are designed to harmonize the flow of communication between businesses engaged in business. Global companies report great performance improvement from adoption of e-commerce with regard to efficiency, better chain coordination, improved sales and better competitive position (Ahmed, 2011; Hughes and Beukes, 2012). Consumer-to-consumer (C2C) venture like e Bay offer a means for consumers to sell to one another helped by online business. The introduction of online auctions meant than consumers no longer had to venture out in order to bid on items; therefore, when e Bay links like-minded buyers and sellers, then it takes a small commission. For consumers who do not favour auctions and want to locate used merchandise they can visit Half.com, which enables consumers to trade unwanted movies, books, music and games to consumers at fixed price. Moreover, the company takes commission on the sale from 5% to 15% in accordance with the sale price and the fraction of shipping fee charged, thus adoption of B2C improves sales (Zilber and Araujo, 2012). Conclusion When business discover fresh and efficient set of business processes give firms a competitive edge over their competitors because competition on based on cost is a short-lived affair and tricky. Thus, the internet offers a new way of competition with firms leveraging on the internet’s ubiquity which lowers the cost of ordering, leveraging global reach and a universal order entry system across the world and leverages richness and personalization through creation of customer profiles online that enable consideration of every customer differently. However, even though the internet provides powerful capabilities of intensifying competition, the technology is also accessible to competitors. Bibliography “E-commerce Business Models and Concepts” 2009. pp. 63-115. Ahmed, T. 2011, 'An Empirical-Based Model For Examing E-Purchasing Intention In Electronic Commerce At Developing Counties', International Journal Of Academic Research, 3, 3, pp. 683-688. di Angelo, L, & di Stefano, P 2010, 'Parametric cost analysis for web-based e-commerce of layer manufactured objects', International Journal Of Production Research, 48, 7, pp. 2127-2140. Hughes, S, & Beukes, C 2012, 'Growth And Implications Of Social E-Commerce And Group Buying Daily Deal Sites: The Case Of Group on And Living social', International Business & Economics Research Journal, 11, 8, pp. 921-934. Nemcova, Z, & Dvorak, J 2011, 'The Model Of E-Commerce Strategy Focused On Customers', Economics & Management, 16, pp. 1292-1297. Zilber, S, & de Araujo, J 2012, 'Small Companies Innovations in Emerging Countries: E-Business Adoption and its Business Model', Journal Of Technology Management & Innovation, 7, 2, pp. 102-115. Read More