E-Commerce Business Models : Brokerage Model

Hello Friends

This is my first post of the series, which I am going to start on E-Commerce Business Models.

As one can’t ignore the very fact that E-Commerce is grabbing more and more market share daily and traditionally commerce is loosing the same to E-Commerce.

What is Business Model?

Business model refers to the core architecture of a firm, specifically how it deploys all relevant resources to create differentiated value for customers

What is E-Commerce?

As per Wikipedia, “Electronic commerce, commonly known as e-commerce or eCommerce, consists of the buying and selling of products or services over electronic systems such as the Internet and other computer networks”

So, there are number of E-Commerce models being used today. Here, I am writing on the Brokerage Model.


Brokerage Model

At the heart of this model are third parties known as brokers, who bring sellers and buyers of products and services together to engage in transactions. Normally, the broker charges a fee to at least one party involved in a transaction. While many brokers are involved in connecting consumers with retailers, they also may connect businesses with other businesses or consumers with other consumers. A wide variety of different scenarios or business configurations fall under the banner of a brokerage model. These include everything from Web sites posting simple online classified ads and Internet shopping malls (Web sites that sell products from a variety of different companies) to online marketplaces, online auctions, aggregators, and shopping bots.

This business model includes :

Marketplace Exchange – This offers a full variety of products and services and gives platform for negotiation and transaction fulfillment. Like http://www.icicidirect.com/ is a marketplace exchange for stocks in India. In this type of model, exchanges are independent. In the case of http://www.icicidirect.com/ the exchanges are BSE India (http://bseindia.com/) and NSE India (http://nseindia.com/)

Buy/Sell Fulfillment – This offers taking customer orders to buy or sell the product or service, including price, money transaction and delivery fulfillment. (http://www.autoindia.com/) is focusing on selling and buying cars.

Auction Broker – This service includes setting up an electronic auction process for sellers. The broker charges commission on the sale. (http://www.ebay.com/) provides marketplace for all legal selling and buying of products and services. It has recently acquired the Indian business based on similar business model (http://www.bazee.com/ and now http://www.ebay.in/)

Transaction Broker -- provides a third-party payment mechanism for buyers and sellers to settle a transaction. [PayPal, Escrow.com] provides payment mechanisms normally when a person tries to pay online via credit card.

Distributor -- is a catalog operation that connects a large number of product manufacturers with volume and retail buyers. Broker facilitates business transactions between franchised distributors and their trading partners. One example could be (http://www.amazon.com/) as it acts as a link between publishers and readers. And also it has diversified its base from only books to virtually everything.

Search Agent -- a software agent or "robot" used to search-out the price and availability for a good or service specified by the buyer, or to locate hard to find information. Auto Graphics Inc. provides such a service via its product A Gent SearchTM , which is focused on libraries. More information about it can be found on http://www4.auto-graphics.com/

Virtual Marketplace -- or virtual market, is a hosting service for online traders that charges setup, monthly listing, and/or transaction fees. May also provide automated transaction and CRM services. [zShops and Merchant Services at Amazon.com]

I have written this article by reading from various online sources. But, the compilation is my own effort. And I request, that if you have read this article then do comment on it, as it will motivate me to write more articles in the series.

So, friends wait for my next article in the series.