Revenue Models for E-Commerce and Impact on the Supply Chain
The aspect of understanding the concept of business operations within the online environment serves as the main purpose of this paper. E-commerce is the evolution of traditional businesses since the internet and technology have changed the ways commerce operations take place. Just like any other business form, E-commerce needs to create a framework that supports its sustainability through the use of revenue models and organisational strategies. These factors facilitates a more in-depth evaluation of revenue models within an online business. A revenue model acts as a strategy that should impact a supply chain positively. The above paragraph sums up the primary purpose of this report.
Differences between Online Business and Traditional Business
Several differences exist in the relationship between online and traditional businesses. The first differences are on the overhead costs. Online businesses possess lower operational and start-up cost compared to traditional business models. It eliminates issues related to rent, employees, and utilities. Online business is convenient for customers than traditional business. The experience by online businesses to customers is greater than a traditional business. One of the common advantages of traditional business is that customers have the opportunity to establish a live shopping experience through traditional business than when using online businesses. When it comes to online business, it is hard to relate with a product when purchasing it until one acquires it physically. In addition, traditional businesses allow one to shop and feel the product by touching them during the purchase process. The above factor eliminates issues such as manipulation of customers, distorting quality, and online theft. However, online business has facilitated the development of a platform for potential customers and suppliers to benefit from a mutually agreed trade (Jahanshahi et al., 2011). The road towards the creation of a successful online business may be challenging if one does not obey the various principles associated with its development. Therefore, market research allows one to have an improved online business and grow it to the final status. Any investor with an urge to start an online business should comprehend guidelines and create a plan to build a successful business. The process of carrying out the transactions taken by E-Commerce creates a significant level of competition and benefits over traditional methods. Effective online business implementation influences faster transactions of business. They reduce the cost undertaken to maintain business operations. It additionally acts as a sustainable and convenient way of handling business than selling and buying services and products.
Operations of Online Business
Online business environment comprises many procedures and processes in the business industry. E-commerce serves as a term that means electronic business. As said above, it describes commercial transactions that involve information transfer using the internet. E-commerce comprises of a diverse range of businesses across the market. Electronic transactions have existed for many decades as Electronic Data Interchange (EDI) (Fang et al., 2014). Electronic Data change involves the establishment of dedicated data links between the suppliers and the customers. The transactions provide companies and suppliers with the opportunity to create multiple links. The businesses include retail sites, music auction sites, bond and stocks market sites, and service sites. E-commerce is the fastest growing type of business platform in the global world, due to the exponential growth of globalisation in the 21st century. Opening up of local businesses via the internet makes it possible for international business operations (movement of goods and services to and from countries).
Furthermore, the above brings us to the point that E-commerce serves as a platform that allows the exchange of goods and services electronically. The platform allows the exchange of goods and services to take place without any barrier such as time and distance. The growth of electronic business has occurred rapidly in the last half a decade. The technology world still predicts the growth to double in the next coming decade. In the near future, electronic commerce will have blurred boundaries between electronic and conventional commerce (Maity & Dass, 2014). To elaborate more this means that businesses will leave their physical dimensions on to the internet. Most of the businesses will take place online. There are several types of E-commerce. The most common discussed type of E-commerce includes business to consumer (B2C) in which online business are connected to consumers. Another form includes business to business (B2B) where business engage in selling to other businesses. B2B business serves as a platform which connects thousands of businesses. It brings together customers and suppliers for mutual benefits of transacting their desired business operations. Last but not least, Consumer to consumer (C2C) is the use of platforms to help consumers to sell to other consumers (Laudon & Traver, 2016).
Online Business and Revenue Models
Online business is very unique in their development and operations. To add more, it is up to the business owner to think of a possible way to impose efficient strategies and revenue models. Online business owners should know the needs and potential of their businesses to influence and increase financial growth. One of the models used in running an online business includes the product sales model. It involves the process of selling a product and people purchasing it online. It only takes the presentation of a physical product or service and presenting it to the customers through online business platforms (Hamilton & Webster, 2015). For instance, an example of that would be a website such as Alibaba (Alibaba.com) connecting suppliers and manufacturers to customers. It is the role of the suppliers and the manufacturers to add products using their websites and write a short description about the product features, delivery time, and ways to order. The customers that visit the website have different varieties of desired products and can make comparisons in terms of price and quality. The websites have images regarding millions of products. Customers acquire the opportunity to customize their profiles to meet their needs. A customer may only put five tabs in their profile as compared to another who may only want three. A customer may either pick to have notifications regarding new products if they subscribe to their supplier or manufacturer updates. The model enables suppliers and manufacturers to track their sales and know their potential revenues they can make from future sales through the money wallet embedded that connects them to their customers.
The second business model includes affiliate marketing. Affiliate marketing raises revenue through advertising products and selling through a site (Morganti et al., 2014). An online business may sell products of another company through their website. An example includes setting up an affiliate account and placing a direct link to a product on the Amazon website. The affiliation will make a person doing that to earn a percentage from the made sales. Many companies dealing with sales have a strategy that allows them to build huge customer basis by using affiliates from different countries. The affiliates are able to earn commissions that sustain their operations. Affiliated marketing may also involve selling products on behalf of a company. An affiliate acts as a middleman between a customer and a company. However, the company holds the power to acquire the largest percentage of product sales. An affiliate may quote own price but with a realistic status. Affiliate marketing involves the affiliate setting their own platforms and connecting them to the websites of the companies they represent. This enables them to communicate with customers and companies at the same time in terms of delivering the products to them.
Online advertising is among the most popular revenue models. It involves online business owners receiving requests from considerable companies to purchase space from them to market products and services. Companies may request website owners to design photos and written messages of products and services which are posted on the websites. Pay-per-view and pay-per-click serve as the two primary forms of online advertising. They determine the number of times advertisers will have to pay for their advertisements (Bryman & Bell, 2015). Companies may pay online business owners for the number of clicks made on a link by visitors. An online business with more traffic leads to more clicks. The above factor means that the business may have a high internet ranking to generate more revenue derived from advertisements. Online advertisement may also be involved using Google ads as a way to create more viewers. Online businesses earn from Google ads if they lead them to their websites.
The last online business model may comprise of transaction fees model. In the business model, companies pay to access services. An example includes a business owner selling a product on e-Bay. The above situation sees such a business owner having a fixed price for posting the product for sale. If customers purchase a product from the site, a business owner may have to pay a small purchase fee. The main reason is that such a site as e-Bay undertakes marketing related activities for the products which need compensation.
Role of E-Commerce in Organisational Strategy
One of the most important challenges of being successful for an online business involves developing possible ways to compete with other E-commerce platforms worldwide. A common challenge in dealing with the other challenges includes the aspect of evaluating E-commerce from a technical perspective. Most online business owners forget that they need to look at their business from a marketing and strategic perspective. Online business creates many technical advantages than traditional businesses. The strategy involves establishing a clear business path for customers and suppliers to meet and engage in business transactions (Awa, Ojiabo, & Emecheta, 2015). Since online businesses lack face-to-face interactions, they need to run smoothly and daily. The above situation calls for the presentation of relevant information about products and services by suppliers to their customers.
Information about products and services should focus on the manufacturer, manufacture expire date, delivery, and weight per units. Online businesses and their suppliers should also establish links that would motivate efficient transferring and delivery of goods and services (Kwadwo et al., 2016). Suppliers need to establish long lasting relationships with their customers to motivate continuous business developments on their websites and mobile business applications and maintain customer loyalty. Suppliers should also evaluate transactions made on their online platforms. Easy and fast transactions maintain lasting relationships with the customers. Suppliers and online business owners should provide buyers with the best experience for them to continue to visit their websites and purchase their products.
One of the most common strategies for online businesses is the use of online security expertise to detect fraud over the internet. They have employed experts with the knowledge to ensure that they have enough firewalls and anti virus frameworks to eliminate warms and suspicious viruses. Online businesses know that they operate on environments with many hackers and criminals who focus on breaching and attacking their sites (Maity & Dass, 2014). To avoid expensive costs of fraud being on the rise, the businesses have ensured that they build frameworks that are relevant to the new hacking scenarios in the international community.
Omni-channel strategy involves online businesses using a multichannel strategy to provide their customers with smoother shopping experience. The flexibility of online businesses has enabled customers to order and review products using either their phones, desktop, or telephone (Fang et al., 2014). It influences business development from all levels as customers have the opportunity to have their products at their will. An example of Omni-channel strategy would be Starbucks, customers receive reward points via an app or card every time they purchase an order. Nevertheless, customers can check the menu, send gifts, order beforehand and top up their cards at any time whether through website, mobile and coffeeshop.
Online businesses have also identified possible strategies of strengthening their relationships with their customers. They reward their customers repetitively and motivate them to remain loyal. An example of a loyalty program may comprise of the point system. In the program, customers have to spend more to get more. If a customer buys a product from a site such as Amazon, it results in acquiring points depending on the number of products they purchase (Jahanshahi, Khaksar, Paghaleh, & Pitamber, 2011). The second loyalty strategy includes the tier system which recognizes loyalty among customers and rewarding those who are the have the highest level of loyalty. The third loyalty strategy includes the value related program. It structures its business on the values of the customers which motivates them to become loyal. An example may include e-Bay defining its values by identifying their likes. E-Bay may create a program with points associated with the values of the customers. The value may be a toy. When one purchases many toys, then the surplus may be donated to charity. This means that customers will participate in the program to raise money for charity.
Impact of E-Commerce on the Supply Chain
Supply chain logistics includes the suppliers, manufacturers and distributors involved in the process of bringing the products to consumers (Frazelle, 2002). E-commerce has changed the traditional supply chain models. E-commerce comes with many advantages in its development and implementation. The first advantage revolves around increasing supplies due to the demand created by suppliers in the market. E-commerce offers customers with a virtual platform that they visit using either their phones or personal computers. E-commerce platforms provide customers with a variety of products and services for their use. Their structures and frameworks support the aspect of creating more visits and having large volumes of products and services given to the market within the shortest period possible (Hair et al., 2015). Supply chain has been influencing suppliers to experience the reduced cost of production and also has been attracting many new customers. In addition, supply chain E-commerce has shortened the time required to demand products from the suppliers. For instance, e-Bay uses a Pull supply chain model where customers make a demand within a few clicks on an online platform and have their order delivered to them from the supplier. Due to their flexible status, a customer may order for a product from a market such as China and receive it in the United Kingdom within a week depending on the urgency of delivery. Customers are able to track their orders and have feedback on the products in the reviews section. Online business platforms also continue to provide diverse services to customers through ensuring quality. Therefore, using E-commerce serves as an advantage for any supplier who wants to create value in his business.
In summary, E-commerce is a growing phenomenon with diverse benefits in influencing positivity in many businesses across the globe. Suppliers and online business owners should be strategic in their establishment of online businesses. They should consider customer value as the central influencing factor in their business. They should provide the market with quality products and the needed information about their products and services. With the above information in mind, they should formulate favourite revenue models such as advertisement and affiliate marketing as a way to sustain their businesses.
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