Types of Business Models for Electronic Commerce

As e-commerce continues to grow globally, launching an online business becomes a more attractive option to aspiring entrepreneurs. Online retail spending in the first quarter of 2010 neared $34 billion, showing a 10 percent increase over 2009 first-quarter statistics, according to comScore. The business model used in e-commerce depends upon the industry in which an entrepreneur specializes.

  1. Affiliate Model

    • An affiliate business model allows customers to conveniently purchase products via websites they frequently visit. As an affiliate partner, you will have a website or blog that contains content relevant to the products promoted. The website visitor--if interested--clicks on the product and purchases it through your affiliate merchant. This pay-for-performance model allows for easy setup, as you have no inventory responsibilities, only marketing and promotion duties.

    Merchant Model

    • If you lack the startup funding needed to launch a traditional brick-and-mortar retail store, setting up a click-and-mortar store is the next best thing. Within this model, a website visitor purchases products directly from your site, allowing you to keep all profit from sales. Unlike the affiliate model, however, you handle all inventory responsibilities.

    Advertising Model

    • The online advertising model has similarities to traditional media practices. For instance, a radio station sells advertising time-slots to businesses promoting their products. In the cyber world, your website serves as the radio station and the content acts as the music. If your site generates high traffic numbers, businesses will pay you for space on the website, in the form of banner ads. You base the one-time banner ad placement fee on your website's accumulation of page impressions--the number of times Internet users view your website. You then negotiate a CPM, or cost per thousand impressions, fee-based payment structure with the advertiser. For example, if your website attracts 1000 visitors daily, a typical fee would be $3 per 1000 impressions, with payment to occur monthly.

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