Types of eCommerce Business Models
An eCommerce business model bears similarities to traditional business models. One of the major features of an eCommerce model is how a company will maintain security in online transactions and protect user information. Another feature is that an eCommerce business model will include defining relationships between customers, providers and intermediaries. Before choosing a business model, an entrepreneur must consider how to meet the challenges of security in eCommerce.
An auction business model serves as a brokerage between buyers and sellers. According to DigitalEnterprise.org, three types of transactions may occur between buyers and sellers in a web marketplace: business-to-business, business-to-consumer and consumer-to-consumer.
In one example, eBay is a massive auction site in which consumers find products using a bidding process. The eBay business includes all three types of transactions. As a brokerage, a site like eBay charges a fee--to buyers, sellers or both--to cover the cost of bringing buyers and sellers together.
An advertising model involves posting web ads onto websites. These ads are targeted for consumers. For example, DoubleClick's DART for Advertisers provides a way to manage online advertising, serving and reporting. A business uses DART for Advertisers to manage multiple digital advertising campaigns, such as targeting a campaign to publish ads through channels like Yahoo. Serving refers to a server that posts ads in appropriate locations, and reporting refers to providing performance information back to an advertiser. With reports, an advertiser can decide which ads are having the most success, such as getting clicked on the most by online consumers.
An affiliate business model is a model in which websites work as partners. For example, a pay-per-click model means a merchant will receive compensation when one of its customers clicks on the website of an affiliate (or partner). When a customer clicks that ad, he will be taken to the affiliate's website, meaning the merchant will get paid for the click-through.
The affiliate relationship may also work the other way around. If a customer follows a link on an affiliate's website and ends up at a merchant's website, the affiliate will receive compensation for that click-through.
As partners, both affiliates benefit in this relationship. They are reaching wider audiences on two websites.
A merchant model is perhaps easiest to understand. A business such as Barnes & Noble operates its own website to sell products or services to customers. In this example, Barnes & Noble is a bookseller that operates traditional stores, and it uses its website to sell more books. Other merchants may not be storefronts, but they have another type of business model. For example, a mail-order catalog or a winery could open its own online store and sell directly to customers. There is no intermediary (or go-between) in this business model.