eCommerce Business Models
About 2 min read
Since e-commerce consists of doing business online or electronically, the business or revenue models are somewhat different than that of a “brick and mortar” business. Common e-commerce models are direct online sales, selling online advertising space, and online commissions.
Questions you may have include:
- What is the direct online sales model?
- What is the online advertising space model?
- What is the online commission model?
This lesson will answer those questions. There is a mini-quiz near the end of the lesson.
Direct online sales
Direct sales consists of a customer coming to your “store” to make a purchase of a product or even service that you have to offer. You can either handle the complete sale from your site or work through a distributor.
Complete sale
You can establish your website as your place of business and directly sell to those entering your “store” to make a purchase. Since delivery is often by mail, this is similar to customers buying from a mail order catalog.
Amazon.com is a good example of a business using the direct sales model to gain revenue.
Software products, e-books, music and video files can be delivered to the customer through the downloading process, while standard products or hardware is shipped through the mail or via services such as UPS or FedEx.
Working through distributor
You can sell products from your website by using distributors, who will make or get the product and then ship it for you.
For example, CafePress will print out t-shirts of you design and handle the payment and shipping for you.
This method is effective for individuals or those starting a small business through their website.
Providing online advertising space
Just as television and radio stations gain revenue from advertisements, related to the reach or number of viewers they have, so too can popular websites charge for the number of viewers seeing an ad. A better method is to count the number of viewers that click on an ad, taking them to the company’s website.
Many sites use Google Adsense ads to generate revenue.
You can also sell or rent our ad space on your website, dealing directly with advertisers.
Referrals for a commission
Individuals and companies can also be established as affiliates, where they gain a commission for sales made through a company using the direct online sales model.
Online companies such as eBay and PayPal charge a commission for their services. Google gains a commission for ads placed on others’ websites.
Being an affiliate means you are essentially referring a customer to a company’s website. You get a commission for what the person buys,
Summary
eCommerce consists of doing business online or electronically. The online business or revenue models are somewhat different than that of a “brick and mortar” business. Common models are direct online sales, selling online advertising space, and online commissions.
See side menu for more eCommerce topics
Know how to make money
Resources
The following are resources on this subject.
Websites
Mini-quiz to check your understanding
Self-check your understanding
What is an advantage of online music sales?
Why do companies prefer to pay more for click-through ads than those just viewed?
For what service does eBay charge a commission?
Pick an answer to see instant feedback. Re-read the lesson if you miss one.
If you got all three correct, you are on your way to becoming a Champion in eCommerce. If you had problems, you had better look over the material again.
What do you think?
Do you have any questions, comments, or opinions on this subject? If so, send an email with your feedback. We will try to get back to you as soon as possible.
Also see Answers to Readers’ Questions.