Unit 2.1
Unit 2: E-commerce Business Models
Chapter Objectives
By the end of this session, you will be able to:
- ✅ Identify and describe the 8 key elements of a business model.
- ✅ Identify and describe the major B2C business models.
- ✅ Identify and describe the major B2B business models.
- ✅ Understand how these models are applied by e-commerce businesses in Nepal.
What is a Business Model?
Definition: A set of planned activities designed to result in a profit in a marketplace.
Think of it as the story of how your business works and makes money.
A successful model answers the fundamental questions of who your customer is, what you offer, and how you do it profitably.
💵 Five Ways to Earn Revenue
Sales: sell a product or service.
Subscription: charge for continuing access.
Advertising: charge advertisers for attention.
Transaction fee: charge for facilitating an exchange.
Affiliate: earn a referral fee when a referred customer buys.
An online magazine sells subscriptions and advertising. Does it have one revenue model or two?
Two revenue streams; one wider business model also explains its audience, value, costs and capabilities.
The 8 Key Elements of a Business Model 📊
1. Value Proposition
Why should the customer buy from you?
2. Revenue Model
How will you earn money? (Sales, ads, subscription)
3. Market Opportunity
Who are you selling to and how big is the market?
4. Competitive Environment
Who are your rivals?
The 8 Key Elements (Continued) 📊
5. Competitive Advantage ⚡
What makes you better? (Superior product, lower price)
6. Market Strategy
How will you attract customers?
7. Organizational Development
How is your company structured for success?
8. Management Team
Who is leading the charge?
🧩 Worked Model: A Refill Delivery Startup
Hypothetical Copenhagen startup delivering household refills; assumptions to test, not proven facts.
Value: convenient refills, less packaging.
Revenue: product sales plus a delivery subscription.
Opportunity: households in one dense district.
Rivals: supermarkets and existing delivery services.
Advantage: reusable-container collection on each route.
Strategy: partner with apartment managers.
Organization: packing, routing and customer support.
Team: logistics and retail experience.
Discuss: would a scattered rural target market support the same delivery promise? The elements must reinforce each other.
🏗️ Builder: Design Your Business Model Canvas
Note: competitive options now use Daraz/HamroBazar and Pathao; Sastodeal and Tootle are closed/discontinued.
Design your Nepal startup — select an option for each of the 8 elements:
🎬 Watch: What a Business Model Really Is
🎯 Market Opportunity: Start with Reachable Buyers
Illustrative district: 10,000 households; 20% fit the target segment. A startup expects to reach 10% of those households in year one.
At €15 monthly spending per customer, what annual sales could this plan support?
- Target segment: 10,000 × 20% = 2,000 households.
- Reachable first-year customers: 2,000 × 10% = 200.
- Annual sales: 200 × €15 × 12 = €36,000, assuming a full year of buying.
This is a scenario, not a forecast: acquisition timing, retention and capacity can reduce the result.
Major B2C Business Models 🛒
Models where businesses sell directly to individual customers.
E-tailer
Online retail stores.
Ex: Amazon, Daraz
Content Provider
Distributes digital content.
Ex: Netflix, Onlinekhabar
Market Creator
Builds a digital marketplace.
Ex: eBay, Hamrobazar
More B2C Business Models 🛒
Community Provider
Connects people with similar interests.
Ex: Facebook
Portal
Web search + integrated services.
Ex: Google, Yahoo
Transaction Broker
Processes online transactions for consumers.
Ex: Expedia
Service Provider
Provides online-to-offline services.
Ex: Foodmandu, Pathao
🔍 Match: B2C Model Explorer (1/3)
Note: Nepal examples updated — Sastodeal closed; Tootle discontinued (use Pathao).
E-tailer
Nepal Example: Daraz.com.np (Sastodeal closed)
Revenue: Product sales margin
Community Provider
Nepal Example: Sajha.com, Nepal-focused Facebook Groups
Revenue: Advertising, premium membership fees
Content Provider
Nepal Example: Onlinekhabar, Ratopati, Setopati
Revenue: Advertising, subscription
🔍 Match: B2C Model Explorer (2/3)
Note: Nepal examples updated — Sastodeal closed; Tootle discontinued (use Pathao).
Portal
Nepal Example: Nepal.com (directory portal), Google Nepal
Revenue: Advertising, featured listings
Transaction Broker
Nepal Example: eSewa, Khalti (payments), Yatri.com (bus booking)
Revenue: Per-transaction fee or commission
🔍 Match: B2C Model Explorer (3/3)
Note: Nepal examples updated — Sastodeal closed; Tootle discontinued (use Pathao).
Market Creator
Nepal Example: Hamrobazar, OldIsGold Nepal
Revenue: Listing fees, featured ad placement
Service Provider
Nepal Example: Foodmandu, Pathao
Revenue: Service/delivery fees and restaurant commission
🔍 B2C in Practice: Foodmandu
Discussion Question
What is the business model of Foodmandu? Which category does it fall into, and what are its key elements?
- Category: B2C Service Provider
- Value Proposition: Convenient food delivery from a wide variety of local restaurants.
- Revenue Model: Transaction fees (commission from restaurants) and delivery fees from customers.
💰 Revenue Model Calculator
Select a business model then adjust the sliders to see projected revenue:
🧮 GMV, Revenue and Profit Are Different
Hypothetical marketplace in Spain; illustrative monthly figures, not company data.
| Step | Calculation / answer |
|---|---|
| 1,000 orders × €20 | €20,000 GMV: goods sold through the platform |
| Platform commission: 10% | €2,000 platform revenue |
| Payment/support costs: €500 | €1,500 contribution before fixed costs |
| Fixed operating costs: €2,000 | €500 operating loss in this simplified example |
A growing transaction volume can coexist with losses. A retailer's product margin is not the same as its sales revenue.
🎬 Watch: GMV Is Not Revenue
Shifting Gears: B2B Business Models 🏭
Models focused on businesses selling products or services to other businesses.
Key Difference: B2B often involves larger transaction volumes, longer sales cycles, and a focus on building long-term relationships.
Major B2B Business Models
E-distributor
Supplies products and services directly to other businesses (e.g., office supplies).
Ex: Grainger
Exchange
A digital marketplace where many suppliers meet a smaller number of large commercial buyers.
E-procurement
Creates and sells access to digital markets, connecting businesses.
Nepal Ex: Aayo (connects manufacturers to retailers)
Industry Consortium
Industry-owned vertical markets that serve the specific needs of that industry.
⚖️ Compare: B2C vs B2B Business Model
🎬 Watch: How Businesses Buy
E-commerce in Nepal: B2C vs. B2B 🇳🇵
B2C Landscape
Highly visible and mature.
- E-tailers: Daraz (Sastodeal closed)
- Market Creators: Hamrobazar
- Service Providers: Foodmandu, Pathao
B2B Landscape
Developing but growing rapidly.
- Focus on digitizing traditional supply chains.
- E-procurement Example: Aayo
- Huge opportunity for growth in this sector.
Street Delivery
🧪 Activity: Test the Riskiest Assumption
A hypothetical wholesaler promises next-day restocking to small shops. It plans to build an expensive app immediately.
Pairs: identify one assumption and a low-cost test. Take 90 seconds, then share one measurable decision rule.
Possible test: recruit 10 shops, accept orders manually for two weeks, and record repeat orders and on-time deliveries.
Illustrative decision rule: proceed only if at least 6 shops reorder and 90% of deliveries meet the promise. These thresholds are choices, not industry standards.
🎯 Quiz: Identify the Business Model (1/3)
🎯 Quiz: Identify the Business Model (2/3)
🎯 Quiz: Identify the Business Model (3/3)
💬 Exit Challenge: A Website Is Not a Model
“We will copy a successful shopping app and charge less.” Is this a complete business model?
Work in pairs: name two missing elements and one risk. Use the eight-element framework.
Possible answer: it lacks a clear target market and a defensible advantage. Lower prices may leave too little contribution to cover delivery and support.
A strong answer connects value, revenue, costs and the capabilities needed to deliver the promise.
🎯 Chapter Summary & Key Takeaways
- A business model is a blueprint for profitability, built on 8 key elements from value proposition to management team.
- Major B2C models (E-tailer, Service Provider) are highly visible in Nepal with players like Daraz and Pathao.
- Major B2B models (E-distributor, E-procurement) focus on streamlining business supply chains, with platforms like Aayo emerging locally.
- Understanding these models is crucial for identifying market opportunities and building a competitive advantage.
Exam Practice 📝
Short answer
- What is a business model?
- List the eight key elements of a business model.
- Distinguish between the advertising and subscription revenue models.
Exam Practice 📝 (continued)
Long answer
- Explain the eight key elements of a business model with reference to an e-commerce firm in Nepal.
- Describe the major e-commerce revenue models with examples.
Revise the answers in the full note.
Image & Video Credits
Images
- Packing a parcel: Meanwell Packaging, CC BY 2.0 (Wikimedia Commons)
- Team meeting: Foreign and Commonwealth Office, OGL v1.0 (Wikimedia Commons)
- Amazon BRS2 fulfilment centre: Auledas, CC BY 4.0 (Wikimedia Commons)
- Takeaway delivery: Meanwell Packaging, CC BY 2.0 (Wikimedia Commons)
- Industrial warehouse: Castle Hills AS, CC BY-SA 4.0 (Wikimedia Commons)
- Street delivery of soft drinks: Bigkotech, CC BY-SA 4.0 (Wikimedia Commons)
Videos (YouTube)
- Harvard Business Review, "The Explainer: What is a Business Model?" (13–60 s)
- Eric Andrews Clips, "How to measure marketplace size using GMV" (3–90 s); figures are the speaker's rough estimates
- Educationleaves, "Explained Procurement vs Purchasing in 2 min!" (35–119 s)
Thank You
Any Questions?
Next Topic: Unit 2.2: B2C Business Models in E-commerce