Online business
A Computer Science graduates wrote to me: “I am planning to start an on line business but people tell me that there are several business models and which model do I want to start. Now I am confused. Please help.
Answer: The internet is the “New economy” as people are doing business globally instead of locally. Before open an online business, you need to have a clear and well defined business model. The business model is the description in detail on how do you make money. Many people think online business is just set up a website and sell things but to succeed you need to clearly identify what you want to do and how do you make money. There are several types of Internet business models and you may need to clarify which one that you like to start:
E-Commerce business model: You sell products on line by set up a website consists a list of products that you want to sell. Customers can select these products and pay you using credit cards. Selling products over the Internet reduces the cost of having physical retail stores and sales person. This is the most popular and most simple model. It is similar to open a store to sell thing but you do it in the virtual world. Because it is easy to do, there are millions on line stores selling everything you can imagine so competition is fierce.
E-Brokerage business model: You set up website but allow other people to sell their products in your website in exchange for a percentage of the sales. Basically you bring buyers and sellers together via your website. This is more complex but it can draw more customers because your website has so many things to sell. It is similar to open a market and allow people to come and sell their things there. You are the market owner; sellers must pay you a percentage of their sales to use your virtual market. This is similar to what eBay and Amazon’s do. This is more complex model and requires more efforts and professional team of people to operate and support.
E-Auctions business model: You set up website and allow people to sell things there but instead of set a fix price, you allow buyers to bid on the merchandises. Seller and buyers can come from anywhere in the world to use your website, providing sellers can deliver things to customers in many places. Customer preferences and the prices they are willing to pay can be analyzed to provide high value insights. You also get a percentage of the sales. It is similar to the traditional auction business but you do it in the virtual world. This is much more complex and requires experienced people to operate and support.
There are several other models as the online business is still growing such as Web hosting, Content hosting, Social hosting. While Online business opportunities are huge and growing fast but competition is also fierce. You need to attract a large number of customers to your website. Most will go to your website to look and compare price but may not buy anything. That is why you will need a strategy to get people come to your website such as Search Engine Optimization (SEO), and develop successful strategies to help them buy and keep them coming back such as web scenario, ad campaign and special content to accommodate their buying habit.
You also need to identify whether you want to do business locally (Using your own language) or globally (Using English). On line business changes many things. For example, people can buy anything from their own home, using computer to reach million of online businesses by select merchandises and check prices.
Despite the internet being the “new economy,” the business rule still applies: the most successful businesses are those that satisfy their customers. The online business is to fill customer’s needs regardless of what it sells. You only succeed if you give customers what they want at the best price and deliver to them at the fastest way possible. Your website must have enough information for the customers to make decision quick as you want them to buy from you. You must be honest and provide clear description of each product along with its features and prices. The most important in online business is how to keep customer happy so they continue to go back and buy more.
Sources
- Blogs of Prof. John Vu, Carnegie Mellon University
