Friday, March 26, 2010

E-Commerce Models

Creating an e-commerce solution mainly involves creating and deploying an e-commerce site. The first step in the development of an e-commerce site is to identify the e-commerce model. Depending on the parties involved in the transaction, e-commerce can be classified into four models. These are:

§ Business-to-Business (B2B) model

§ Business-to-Consumer (B2C) model

§ Consumer-to-Consumer (C2C) model

§ Consumer-to-Business (C2B) model

Business-to-Business (B2B) Model

The B2B model involves electronic transactions for ordering, purchasing as well as other administrative tasks between two business houses. It includes trading goods, such as business subscriptions, professional services, manufacturing and wholesale dealings. Sometimes in the B2B model, business may exist between virtual companies, neither of which may have any physical existence. In such cases, business is conducted only through the internet.

Consider a hypothetical example, ABC Company sells automobile parts and XYZ Company assembles these parts and then sells the automobile to customers. XYZ Company comes across the Web site of ABC and finds it suitable. XYZ therefore, requests for more information about ABC and finally, decides to purchase automobile parts from ABC. To do this, XYZ places an order on the Website of ABC.

After ABC receives the order details, it validates the information. As soon as the order is confirmed, the payment procedures are settled. Finally, ABC sends an acknowledgement of payment to XYZ and delivers the goods as per the shipment details decided between the two organizations.

In this example, two business houses have conducted a commercial transaction with the help of the Internet. Therefore, as you can see the B2B model defines the e-commerce conducted between two or more business organizations.

The advantages of B2B model are:

Ø It can efficiently maintain the movement of the supply chain and the manufacturing and procuring processes.

Ø It can automate corporate processes to deliver the right products and services quickly and cost-effectively.

The B2B model has become the largest value sector of the industry within a few years. This is said to be the fastest growing sector of e-commerce.

Business-to-Consumer (B2C) Model

The B2C model involves transactions between business organizations and consumers. It applies to any business organization that sells its products or services to consumers over the internet. These sites display product information in an online catalog and store it in a database. The B2C model also includes services such as online banking, travel services and health information.

{image: B2C Business Model}

Consider a hypothetical example in which a transaction is conducted between a business organization and a consumer. A business house, LMN department store, displays and sells a range of products on their Web site, The detailed information of all their products is contained in the huge catalogs maintained by LMN Department Stores. Now, a consumer, Pankaj Chavan, wants to buy a gift for his wife. He therefore, logs on to the site of LMN Department Stores and selects a gift from the catalog. He also gets the detailed information about the gift such as, the price, availability, discounts, and so on from their catalog. Finally, when he decides to buy the gift, he places an order for the gift on their Web site. To place an order, he needs to specify his personal and credit card information on This information is then validated by LMN Department Stores and stored in their database. On verification of the information the order is processed. Therefore, as you can see, the B2C model involves transactions between a consumer and one or more business organizations.

The B2C model of e-commerce is more prone to the security threats because individual consumers provide their credit card and personal information on the site of a business organization. In addition, the consumer might doubt that his information is secured and used effectively by the business organization. This is the main reason why the B2C model is not very widely accepted. Therefore, it becomes very essential for the business organizations to provide robust security mechanisms that can guarantee a consumer for securing his information.

Consumer-to-Consumer (C2C) Model

The C2C model involves transaction between consumers. Here, a consumer sells directly to another consumer. eBay is a common example of online auction Web sites that provide a consumer to advertise and sell their products online to another consumer. However, it is essential that both the seller and the buyer must register with the auction site. While the seller needs to pay a fixed fee to the online auction house to sell their products, the buyer can bid without paying any fee. The site brings the buyer and seller together to conduct deals.

Let us now look at the previous figure with respect to eBay. When a customer plans to sell his products to other customers on the Web site of eBay, he first needs to interact with an eBay site, which in this case acts as a facilitator of the overall transaction. Then, the seller can host his products on, which in turn charges him for this. Any buyer can now browse the site of eBay to search for products he is interested in. If the buyer comes across such a product, he places an order for the same on the Web site of eBay. eBay now purchases the product from the seller and then, sells it to the buyer. In this way, though the transaction is between two customers, an organization acts as an interface between them.

Consumer-to-Business (C2B) Model

The C2B model involves a transaction that is conducted between a consumer and a business organization. It is similar to the B2C model, however, the difference is that in this case the consumer is the seller and the business organization is the buyer. In this kind of transaction, the consumers decide the price of a particular product rather than the supplier. This category includes individuals who sell products and services to organizations. For example, is a Web site on which a consumer can post his bio-data for the services he can offer. Any business organization that is interested in deploying the services of the consumer can contact him and then employ him, if suitable.

Another example of the C2B model.

Laxman Gulambe needs to buy an airline ticket for his journey from Mumbai to Bangalore. Laxman needs to travel immediately. Therefore, he searches a website for a ticket. The website offers bidding facility to people who want to buy tickets immediately. On the Web site, Laxman quotes the highest price and gets the ticket.

In addition to the models discussed so far, five new models are being worked on that involves transactions between the government and other entities, such as customer, business organizations and other governments. All these transactions that involve government as one entity are called e-governance. The various models in the e-governance scenario are:

  • Government-to-Government (G2G) model: This model involves transactions between two governments. For example, if the Indian government wants to buy oil from the Arabian government, the transactions involved are categorized in the G2G model.

  • Government-to-Consumer (G2C) model: In this model, the government transacts with an individual consumer. For example, a government can enforce laws pertaining to tax payments on individual consumers over the internet by using the G2C model.

  • Consumer-to-Government (C2G) model: In this model, an individual consumer interacts with the government. For example, a consumer can pay his income tax or house tax online. The transactions involved in this case are C2G transactions.

  • Government-to-Business (G2B) model: This model involves transactions between a government and business organizations. For example, the government plans to build a fly over. For this, the government requests for tenders from various contractors. Government can do this over the internet by using the G2B model.

  • Business-to-Government (B2G) model: In this model, the business houses transact with the government over the internet. For example, similar to an individual consumer, business houses can also pay their taxes on the internet.