Types of eCommerce Business Models Flashcards
What is a business model?
A business model is a set of planned activities designed to result in a profit in a marketplace.
What is an eCommerce business model?
An eCommerce business model is an online business that aims to use and leverage the qualities of the internet and mobile platforms through a set of planned activities designed to result in a profit in a marketplace.
List the 8 key components of a business model.
- Value Proposition
- Revenue Model
- Market Opportunity
- Competitive Environment
- Competitive Advantage
- Market Strategy
- Organizational Development
- Management Team
What defines a value proposition?
A value proposition defines how a company’s product or service fulfills the consumer needs.
What are some examples of successful eCommerce value propositions?
- Personalisation & customisation of products & user experiences
- Reduction of product search costs
- Reduction of price discovery costs
- Facilitation of transactions by managing product delivery
How did Amazon’s value proposition change consumer behavior?
Amazon made it possible to virtual shop for books from anywhere and anytime, offering unparalleled selection and convenience.
What is a revenue model?
A company’s revenue model describes how it will earn revenue and produce profits.
Name the 5 major eCommerce revenue models.
- Advertising Revenue Model
- Subscription Revenue Model
- Transaction Fee Revenue Model
- Affiliate Revenue Model
- Sales Revenue Model
What is the Advertising Revenue Model?
In this model, a company provides a place for advertisements and receives fees from advertisers.
What is the Subscription Revenue Model?
A company charges a subscription fee for access to some or all of its offerings such as content or services.
What is a freemium strategy?
A freemium strategy gives away a basic level of product or service for free but charges for higher tiers.
Describe the Transaction Fee Revenue Model.
In this model, a company receives a fee for enabling or executing an online transaction.
What is the Affiliate Revenue Model?
An affiliate refers consumers to an advertiser via an affiliate link and receives a referral fee from any resulting sales.
True or False: An affiliate revenue model can only operate through a website.
False
What is the Sales Revenue Model?
In the sales revenue model, a company derives revenue by selling goods, information, or services.
What is an affiliate in the context of business?
An affiliate is trusted as an authority by a large portion of the target audience.
What does the sales revenue model entail?
A company derives revenue by selling goods, information, or services.
How do differentiated goods and services impact revenue generation?
Companies providing differentiated goods/services tend to generate higher revenue than competitors.
What is a market opportunity?
The company’s intended marketspace and the overall potential financial opportunities of that marketspace.
What is the overall size of the education training market?
$56 billion.
What are the two segments of the education training market?
- Instructor-led ($39.2 billion) * Software-based ($16.8 billion)
What market segment does Apex Learners belong to?
Software-based market segment.
What is Apex Learners’ realistic market opportunity?
$4.8 billion dollars in the SME market.
What factors influence a company’s competitive environment?
- Number of active competitors * Size of competitors’ operations * Market share of competitors * Profitability of competitors * Pricing of competitors’ products
What is competitive advantage?
Achieved when a company produces a superior product or brings it to market at a lower price or faster speed.
What defines a first-mover competitive advantage?
Achieved by being the first to bring products/services to market, leading to a loyal following.
What is market strategy?
The plan detailing how companies intend to enter a new market and attract new customers.
Give an example of a market strategy used by Grab.
Promotions to drive trial by enticing new users to download the app.
What is organisational development in a business model?
Describes how the company organizes the work that needs to be accomplished.
What happens to work assignment as a company grows?
Work becomes more specialized, with multiple tasks assigned to different individuals.
What is the role of the management team in a business model?
Responsible for making the business model work and providing credibility to investors.
What are the 8 key components of a business model?
- Value Proposition * Revenue Model * Market Opportunity * Competitive Environment * Competitive Advantage * Market Strategy * Organizational Development * Management Team
What defines a business model?
A set of planned activities designed to result in a profit in a marketplace.
What are the 4 common B2C eCommerce business models?
- Direct Sellers * Online Intermediaries * Community-based * Fee-based
What is the characteristic of direct sellers in eCommerce?
They sell products or services directly to consumers without an intermediary.
Provide an example of a company that uses the direct seller model.
UNIQLO.
What criteria must a direct seller eCommerce business fulfill?
- Sell their products directly without an intermediary * An online business selling to an end consumer
What is B2C eCommerce?
Business to Consumer eCommerce, where businesses sell directly to end consumers.
What is the Sales model in B2C eCommerce?
A common revenue model where goods and services are sold directly to consumers.
What are Online Intermediaries?
Platforms that facilitate the exchange of goods or services between buyers and sellers without owning the products.
What revenue model do Online Intermediaries commonly use?
Transaction fee model and subscription model.
What is an example of an Online Intermediary?
Etsy, which provides a platform for creative artists and companies to sell handcrafted and vintage items.
What is a Community-Based eCommerce model?
A model where consumers with similar interests can transact, share, and communicate online.
What are some functions of Community-Based eCommerce?
- Transact (buy and sell goods) * Share interests, photos, and videos * Communicate with like-minded people * Receive interest-related information
What is a Fee-Based eCommerce model?
A model that charges fees to merchants for listing or to consumers for accessing content.
What is an example of a Fee-Based service?
Netflix, which charges a fee for consumers to access their content.
What is a key characteristic of the revenue model in eCommerce?
It is dynamic and can include a combination of various revenue models.
What are the four main types of B2C eCommerce business models?
- Direct Sellers * Online Intermediaries * Community-Based * Fee-Based
What is Product or Service Differentiation?
Making products or services unique to distinguish them from competitors.
What is Cost Competition in eCommerce?
Offering products and services at lower costs than competitors.
What does the Scope strategy entail?
Competing in all markets globally rather than just local or national markets.
What is a Focus strategy in eCommerce?
Competing within a narrow market segment or product segment.
What does Customer or Supplier Intimacy focus on?
Developing strong ties with customers to increase switching costs.
True or False: The Internet intensifies competition in eCommerce.
True
Fill in the blank: A _______ is a strategy to compete in all markets around the globe.
Scope strategy
What is an example of a company that uses a Focus strategy?
Etsy, which focuses on handcrafted and vintage products.
What are some common revenue models used in Community-Based eCommerce?
- Advertising * Subscription * Affiliate Referral Fees
What is the importance of understanding B2C eCommerce business models?
Key to generating profits in a highly competitive marketplace.
What role do the eight key components of a business model play in eCommerce?
They leverage the qualities of the Internet and mobile platform.
What is key to generate profits in a highly competitive marketplace?
Types of B2C eCommerce business models
Understanding the different models helps businesses find their niche and maximize profitability.
What is important in the development of an effective eCommerce business?
Application of appropriate business concepts and strategies
Strategies must align with market demands and business goals.
Name a component of the eCommerce business model.
Value Proposition
It defines the unique value a business offers to its customers.
What does the revenue model in an eCommerce business describe?
How a business generates income
This could include sales, subscriptions, or advertisement revenue.
What defines the market opportunity in an eCommerce context?
Potential for growth and sales in a specific market
Identifying gaps in the market can lead to new business opportunities.
What is meant by competitive environment in eCommerce?
The landscape of competing businesses and market dynamics
Understanding competitors helps in strategic positioning.
What gives a business a competitive advantage?
Unique attributes that allow it to outperform competitors
This could be superior technology, customer service, or pricing strategies.
What is market strategy in the context of eCommerce?
A plan to reach and engage target customers effectively
It includes marketing, sales, and customer service initiatives.
What is the role of organizational development in eCommerce?
Improving company structure and processes for efficiency
This may involve training, culture development, and performance management.
What is the importance of the management team in an eCommerce business?
Guiding the business strategy and operations
A strong management team can drive innovation and growth.
What are the types of B2C eCommerce business models?
- Direct Sellers
- Online intermediaries
- Community-based
- Fee-based
Each model has distinct characteristics and operational requirements.
What does differentiation refer to in business concepts?
Making a product or service stand out from competitors
This can involve unique features, branding, or customer experience.
What is cost competition?
Competing primarily on price
This strategy focuses on minimizing costs to offer lower prices.
Fill in the blank: _______ refers to focusing on a specific market segment.
Focus
This strategy allows businesses to tailor their offerings to meet the needs of a niche market.
What does customer intimacy mean in eCommerce?
Building strong relationships with customers to understand and meet their needs
This can lead to increased loyalty and repeat business.
