E-Commerce Foundations and Business Model · Lesson 2

Business Models, Value Propositions and Channels

9 min read

Lesson objectives

Formulate a value proposition that connects a defined segment with a need and an observable benefit.
Distinguish a sales channel from a business model and revenue logic.
Compare common channels and models using trade-offs in control, reach, fees, and capabilities.

A channel is not the business model

Before choosing a platform, app, or marketplace, a team needs a logic that answers six connected questions: Who is the intended customer? What need or job are they trying to complete? What specific value do we offer? Through which channel will they discover, order, and receive service? How does revenue enter? What capabilities and costs are required to keep the promise? A **business model** is the relationship among these elements, not the name of the technology used. Two businesses may use the same platform while one sells inventory it owns and the other connects sellers and buyers for a fee; their risks, costs, and revenue logic are therefore different.

Compare patterns without searching for one universally “best” model

Pattern	Who typically owns the offer/inventory?	Simplified revenue logic	Typical trade-off
Direct sale of owned inventory	Seller	Selling price less related costs	More control over the offer, with inventory and fulfilment risk carried by the seller.
Marketplace intermediary	Often third-party sellers, depending on the arrangement	Fee, commission, or related services	Potential reach and assortment, with greater dependence on participant quality and marketplace rules.
Recurring subscription	Varies by product or service	Recurring fee for continuing value	Revenue may become more predictable if value remains ongoing; cancellation, renewal, and customer service become central.

Channel choice is a trade-off decision. A direct store may provide greater control over presentation, data, and post-purchase experience, but it requires the capability to attract traffic and operate the interface. A marketplace may provide access to an existing audience, while adding fees, rules, and dependence on another party’s ranking or policies. Selling through multiple channels can extend reach but adds difficulty in synchronising inventory, prices, orders, and service. There is no correct answer without assumptions; the decision should connect expected demand, service cost, need for control, and operating capability.

Exercise

Design an initial logic for a fictional store selling shelf-stable snacks to employees who want a monthly desk box. Write six lines: segment, need, value, channel, revenue logic, and two required operating capabilities. Then underline every assumption that needs testing rather than treating it as fact.

Check your answer

One possible guided answer: segment = employees who want a convenient recurring option; need = reduce the time spent reordering; value = a customisable recurring box with clear contents; channel = direct store for subscription and preference management; revenue = recurring subscription fee; capabilities = accurate renewal management and reliable recurring fulfilment. Assumptions to test include frequency of need, willingness to subscribe, shipping cost, and cancellation rate. This is not the only valid answer; quality lies in coherent elements and explicit assumptions.

Exercise

Compare two channels for a fictional new brand: a direct store and a marketplace. Assume the marketplace charges a higher variable fee but provides an existing audience, while the direct store has lower platform fees but requires spending and effort to acquire traffic. Write a three-sentence conditional decision: When would you start with the marketplace? When with direct? What data would you need before expanding the channel?

Check your answer

Guided answer: the marketplace may be a useful starting point when rapid access is the testing priority and order economics can absorb its fee; direct may be preferable when the value depends on education and journey control and the team has a realistic demand-acquisition path. Before expanding, observe acquisition cost, order contribution after variable costs, conversion, returns/cancellations, and fulfilment capability. The decision is not “marketplace good” or “direct good”; it is fit against measurable assumptions.

Lesson summary

A business model connects customer, value, channel, revenue, capabilities, and costs. The channel is one part of that logic, not a substitute for it, and a sound trade-off makes assumptions explicit and testable.