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the  three different types of businesses
Business formats

Business Formats

Highlighted here are three types of popular online business methods:

Pure online business

Electronic commerce (commonly known as eCommerce) is best described as businesses that focus on selling goods or services from their own website. The main feature of a pure online business is that it shortens the distribution channel by eliminating the intermediary (retailer or wholesaler). To function as a pure online business, these businesses will have installed a shopping cart and a way for people to order and pay from anywhere in the world.

Example:
</br>Kim offers a unique range of products catering to people with food intolerances or food allergies. Kim does not operate a physical store, but has a lot of customers from all over the world. Her customers buy her products from the purely online business she operates; and she then delivers to their door.

Selling through an online marketplace

An online marketplace is where buyers and sellers are brought together online to trade. Some popular and well known examples of online marketplaces are Amazon, Etsy and eBay.

Online marketplaces can be useful as a lot of the work is done for you. Some advantages of doing business in an online marketplace are that they do a lot of the marketing (bringing the customer to the store), set up the site, the shopping cart, payment options and take care of the security.

However, there can be some downsides to an online marketplace as well. They need to charge fees to cover the services they provide, some can restrict branding and direct potential customer contact making it hard to establish your brand or customer relationships. One of the major risks is that you may have your product idea copied and sold by a competitor.

Example:
</br>Donata loves arts and crafts and likes to create homemade items for birthdays and special occasions. She sells her products on Etsy and Shop Handmade. Donata’s customers use an online marketplace to purchase handmade goods as gifts for friends.

A physical business or shopfront/storefront with an online presence

If you own a business with a physical office or a shopfront, chances are you will also use the internet in some form, either to market and sell or conduct internal or external processes.

The business might use the internet to manage a number of aspects of trading, such as inventory, finance, human resource management; or it might conduct part of the business activities such as production, resourcing and procurement, distributing their products or services, sales and payment, inventory management such as fulfillment and restocking, or marketing online.

Example:
</br>Joe runs a local grocery store and knows that his customers are time poor. He provides customers with the opportunity to purchase all their groceries online and he delivers to their door. Joe’s customers are using the online service he offers.

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This article is from the free online course:

Online Business: Planning for Success

RMIT University

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