Understanding the E-commerce business models via the impact of COVID-19
2020 is not an ordinary year as COVID-19 has impacted the whole world greatly in many ways. With the requirement of quarantine and social-distance, COVID-19 has made our world turns into digital mode. People study, work, purchase, and almost did anything online after the breakout. According to CNBC’s news (August 2020), online sales of the United States have jumped up more than 31% in the second quarter and the online retail industry has grown a lot since then.
By reading this news, some people will say: COVID-19 has created a big E-commerce opportunity!
Yes, but there is also something wrong.
Indeed, the online retail industry may be one of the most representative business models of E-commerce today. If you type keywords like “top 5 E-commerce companies” in the search box of Google, you will probably find Amazon, which is the biggest online retailer in the world, appears in every result.
However, the online retail store is just one type of business model of E-commerce as mentioned. According to the definition, E-commerce is the commercial transaction that is conducted digitally between organizations and individuals (Laudon and Traver, 2018). To be general, anything that involves using the Internet, the Web, and the mobile device to conduct value exchange can be considered as E-commerce. Therefore, Uber is an E-commerce company example as well. The truth is that Uber is a new type of E-commerce business model called on-demand service providers (Laudon and Traver, 2018).
Back to the topic that COVID-19 provides an E-commerce opportunity. It is reported that Uber’s revenue has fallen 29% in the second quarter compared from a year ago (The New York Times, August 2020) and Uber has to lay off 3,000 employees due to the impact of COVID-19 (The Verge, May 2020). In this case, can we still say that COVID-19 positively influences E-commerce?
The key purpose of the above discussion is to illustrate that E-commerce does not only have an online retailer model. Besides online retailers and service providers, the E-commerce business model also contains community provider, content creator, portal, transaction broker, etc. These are the B-to-C models. On the other hand, E-commerce also has B-to-B models, C-to-C models. What’s more, it is possible for companies to use multiple business models and the types of business models are keep developing.
Although the categorization of the E-commerce business model is complicated, the 8 key elements of the business model will stay unchanged and they are the key factors that lead to a successful business model.
In the case study of Pandora (Laudon and Traver), the freemium business model help Pandora got survived after the failure of the free-offering model because the freemium model meets users’ needs which means it has a better value proposition. This example suggests that the business model is not unchangeable once decided and the most important thing is to address these 8 key elements no matter which type of business model is chosen.
In today’s situation, many companies have chosen to shift to an online business model when facing the impact of COVID-19 (The Washington Post, June 2020), which can be a good example of applying this lesson in my opinion.
