E Commerce Business Model Example – The e-commerce space has never been so elastic and expansive before. Dealing with the recent rise in global business, technological advancements and people following online shopping, the digital space has opened up flexible ways to line up your e-commerce revenue model and reach your audience much more easily.
It’s only been 25 years since the internet brought the entire market to your fingertips. This has created a branching path for e-commerce by enabling people to get various deals over the internet that are categorized into broader aspects. But before we jump into our classification of e-commerce business models, let’s refresh our definition of an e-commerce business.
E Commerce Business Model Example
Simply put, eCommerce or electronic business refers to the sale, purchase or transaction over the Internet in a digital marketplace. Products or services are displayed through a website or mobile application through digital signage systems that are integrated with secure payment access that facilitates product purchases and financial transactions.
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The e-commerce revenue model is usually considered when classifying an e-commerce business because revenue refers to the total amount of money a company receives after trading its products or services with its customers. There are a number of monetization options, including advertising, affiliate marketing, subscriptions, and more.
The industry never limits the coming of any new way of generating income. Although we will stick to explaining the basic five e-commerce revenue models with possible variations of approach.
Generally, advertisers are always charged a commission for placing their advertisements on a well-known internet marketing platform. This is the classic principle followed for a business categorized for an advertising revenue model. They take advantage of the huge traffic that regularly visits the chosen platform to make a purchase, see an ad and be redirected to the actual site.
This can be related to the way of increasing potential clients for business. Payments are made to the hosting platform based on a fixed commission or are decided based on the density of traffic transferred to the business.
Uniqlo Business Model
Operating under an advertising revenue model is an indirect way of earning revenue through a digital platform, and conventional ad placement methods generally include a marketing display that includes super banner, background, skyscraper, or rectangular ads. They are paid according to the traffic that is driven from the platform through ads. The general revenue structure is based on invoices raised on a cost-per-click (CPC) or cost-per-action (CPA) basis. Apart from the regular display marketing strategies that aim to redirect the traffic coming to the eCommerce platform to the address where the ads are linked, affiliate marketing and search engine marketing are other popular ways.
Google Adwords and Adsense are among the most trusted and trusted options that allow you to place your ads through the Google search engine, allowing you to bring your business website to the top of search results when searched for related keywords. Similar platforms are Facebook and the New York Times that allow you to run ads on a cost per mile (CPM) basis.
You must have heard of Netflix, Amazon Prime, YouTube Premium, etc. which will allow you to enjoy their unlimited services. These e-commerce business models charge their users or subscribers based on a certain time interval (daily, monthly or yearly) for using their services.
The services offered by these companies mainly include music, videos, TV channels, magazines, special services, etc. which is offered to subscribers at a price to watch/listen or download the latest edition. Now, let me walk you through some examples of basic subscription business models.
Types Of Ecommerce Business Models You Need To Know (2019)
Content publishers and services: You’re familiar with Netflix, the New York Times, Spiegel Online, etc. These e-commerce business models ask for a subscription on a monthly or yearly basis to gain access to their content.
We all know that every e-commerce business has one thing in common and that is their payment gateway. These are companies like Paypal, VeriSign whose subscription price depends on the SSL certificate and service period.
Following the transaction fee revenue model, the e-commerce business charges a fee to the seller for each transaction made through them. These are payment companies that provide a payment gateway service to other business e-commerce platforms. Generally, profits are made through facilitating or executing transactions.
The operator provides the platform for the e-commerce market through which the transaction can be carried out. Now, the necessary steps include registering suppliers and operators to keep the identities intact which will later be required for business. The model is close to the affiliate market, but is somewhat different.
Types Of E Commerce
To explain it better, let’s take the example of PayPal. The company charges a transaction fee to product sellers after the transaction is completed. Similarly, eTrade receives a transaction fee each time a stock transaction is made with a customer. The amount paid to the operator is decided either on a percentage basis or a fixed amount with the seller. Amazon is another example of a transaction fee revenue business model.
This is the most commonly run e-commerce business model where wholesalers and retailers sell their products online with the intention of reaching a larger target audience. Also, more importantly, this model brings inconvenience to the customer and saves them time. And the hassle of walking to their physical store. There is an additional cost.
Prices are often competitive with the actual store price. Businesses that follow the online sales model often come with marketplaces as common entry points that allow them to deal with different product suppliers, allowing them to grow the market and therefore earn more.
In certain cases, sales are directly injected into the business where profits are not shared with anyone. Based on the size of the business and traffic at the point of sale, certain business functionalities are outsourced to third-party suppliers, mainly for logistics and supply chain.
Amazon Business Model
Examples can be given in terms of all companies that sell their brands online through their online platforms. This forms a dedicated way of selling and reaching a large number of customers. Amazon, Otto, etc. are examples of companies that follow such a model for their business based on a web catalog over the Internet. Also. Buy.com and Etsy are examples of such marketplaces, while blood, wow! guut.de are examples of live shopping marketplaces.
Next, on the list, we have an affiliate income model that deals with business that follows the principle of commission. Merchants and sellers partner with well-known e-commerce platforms to advertise and sell their products by giving them a percentage of the profits as commission.
Affiliate marketing is a well-known way of inviting as well as directing quality potential clients to their business. The process basically works as a link that is hyperlinked to an affiliate and archived on a host platform that generates regular traffic. Any user who clicks on the affiliate link is redirected to their website where the product or service is cataloged. The affiliate or merchant thus pays an agreed commission to the host operator carrying the link for each traffic generated.
Amazon and affiliate are well-known examples that allow you to link your products and increase traffic. For every lead brought to your website, you must pay a certain percentage to Amazon or the affiliate as their commission. Interestingly, this creates a win-win situation for both the merchant selling their product and the affiliate who advertised or advertised their product. Such e-commerce business model uses different variations like pay-per-click, banner exchange, and also revenue sharing programs that aim to drive audiences from one platform to another.
Business Model Examples
There are many other business models that are used today to make a profit from the online market. However, it is natural that e-commerce business and digital marketing go hand in hand while achieving a business goal. Today, the e-commerce business is estimated to be growing at 17% over last year and has the potential to skyrocket in the coming years.
Although physical shopping has not yet gone out of fashion, most businesses today find a way to rule both the physical and online markets. Therefore, there is always room for defining a new way of doing business via the Internet. This means that more business models are yet to be known for the online e-commerce market. Many people only know about e-commerce and its basics, but very few know the types of e-commerce business models, so in this post I will talk about them.
Let’s say we have a company and we want to sell our goods or services online through our website or any other online resource, then it can be called B2C model.
A great example of this is Amazon or eBay. We can call their business,
Key Components For Ecommerce Business Marketing Start Up Plan
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