There are many ways through which a business can go online. This paper examines a few of the online business models and helps find out which among these business models best suits “Grandmas Treats”. Site types While there are many different types of online business models, there are three most common ones viz. auction, portal and storefront. “Auction models are those in which the participants bid for products or services over the internet. The auction sites sometimes do not own the products on its site, but facilitates the process of listing and displaying goods as an affiliate” (Kinsler, 2009)
Commissions are the main source of revenue in the auction business model. Advertising also forms a small portion of the revenue. In a portal business model, the so called portal website is like a gateway to the customers to various online stores. It provides personalized information to the users. A major portion of revenue in such a model is usually from personalized advertising. “The store front business model is a shopping location that customers can browse and shop from the comfort of their homes, and where businesses can advertise their products and services for a fraction of the cost of brick and mortar businesses” (Kinsler, 2009)
The store front shop can reach its customer either directly or through the portals such as Yahoo or Google. The store front business model is best suited for individual businesses which provide a unique product offering. Companies that use these business models Portal business model – Yahoo According to Deitel and Deitel: Sites such as yahoo. com provide users with a shopping page that links them to thousands of sites carrying a variety of products… Yahoo! provides consumer with shopping-cart capabilities… To improve the quality of its web searching capabilities, Yahoo! as partnered with Google. com search engine… Yahoo! is made more attractive for the user… As this model needs the user to register, the web page that opens after registration is a personalized one based on the information provided by the users. (Deitel and Deitel, 2000) Thus Yahoo’s portal model is convenient for customers who need to shop a variety of similar or dissimilar products. Say when a consumer is done shopping and is ready to check out, he can purchase all their items through the single portal (Yahoo! ) rather than purchasing at each store.
This simplifies the purchasing process and provides convenience to the customer. Auction business model – eBay Another type of business model is the auction model. Such websites act as forums through which internet users can be either a seller or bidder. Online auction off late has become a very popular and successful method of e-commerce. The leading company in this business is e-bay. It is one of the most profitable businesses. On eBay people are able to buy and sell almost everything. eBay has spawned a number of businesses that use the site as their means of selling products.
The main advantage that e-bay offers is that there are no overhead or upfront costs. The seller can sell his product without incurring any high costs as he does not need sales staff or distributors. There is also no need of any initial investment and most importantly the seller gets access to millions of online auctions from buying customers. And hence it has become a forum where there are no geographical constraints. Bidders and sellers from all over the world can come together and moreover there is no need to ship the products to a central location which reduces the costs and the seller’s minimum acceptable price.
Many businesses would prefer eBay as they can avoid losses on sale of items by setting the minimum bid price high enough to cover their cost. Advantages Yahoo which uses the portal business model has a lot advantages over its competitors. Many of the websites are viewed by the users mainly through the portals (through yahoo search, yahoo shopping etc…) thus Yahoo can leverage this to generate revenues. Similarly eBay offers many of the businesses a platform to showcase their products in its site.
Thus it could generate revenues by charging those businesses which benefit by utilizing the eBay auction system. Business model for “Grandmas Treats” “Grandmas Treats” has a specialty product i. e. low sugar bakery products which it needs to make available to its customers through the World Wide Web. Since Grandmas Treats has a unique product which it needs to take to its customers, it would be appropriate for it to make use of the storefront business model. It could also make use of the internet portals such as Yahoo or Google to direct more customers to its website.
Would dynamic pricing apply for “Grandmas Treats”? Grandmas Treats’ core product is low sugar baked products. The target customers for Grandmas Treats would be those who are calorie conscious and those who are with specific ailments such as diabetes. These customers usually prefer a low sugar food product as compared to the normal food products. Hence Grandmas Treats could expect to have more or less constant demand for its product in the market. Therefore “Grandmas Treats” need not have to use dynamic pricing.