Web Business Model: Product Sales

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But notice that some auction sites merely operate as intermediaries: They first purchase the excess inventory to be auctioned and then handle the financial transactions and delivery. Still others offer strict confidentiality to both buyers and sellers so that everything -- bidding, sale, payment, and delivery -- is done anonymously.

Establish what fees you'll charge. Some sites charge a transaction fee based on the product's selling price and volume. As volume increases, the seller pays a lower percentage. At other sites, buyers pay a fee that equals a percentage of the transaction. The auction host (that means you) might collect fees that run as high as 2.5% of the winning bid. Educate yourself on strategies for making sure you get paid!

Online businesses need some customer service expertise too. As with any business, there will be confusing shipping issues, questions about products, and problems with payments and returns. Make sure that you oversee customer service processes in order to give your customers the best support possible.

Costs. Building an auction Web site will cost you the fees of Web hosting and the price of auction software or a turnkey auction solution. Depending on what kind of auction format you decide on, you will also need to pay the fees for a payment processing service, and the price of security software to protect bidder information such as names, addresses, and credit card numbers.

Also, depending on the auction format you choose, there are the costs of distribution and shipping mechanisms. Ask yourself: Will I rent a warehouse to store the goods? Will I pay the shipping costs of the products? You may need to hire an order fulfillment house or drop shipper to fill your online orders.

Profits. Again, as the auction host, you can make a profit by collecting set fees or a percentage of the winning bids from the bidders or sellers.

Of course, your Web site itself can also be a source of income if you sell advertising space for banner ads, sell and manage e-zine advertising space, join an affiliate (or associate) program, or create your own affiliate program.

Examples: eBay, Pottery Auction, Buck-a-Bottle Auction.

Useful articles: "Attract Buyers for Your Auctioned Items," "Why Sell Goods in Online Auctions?"

Gathering Products into an Online Mall

In this model, a Web company offers a wide variety of goods to the customer, all from one site. Another term for this is "Web mall." A Web mall, like a physical mall, is a one-stop shopping place for various products. Della.com is a good example of such a site. There you can browse over and purchase items from many different online companies.

And there is one other type: the shopping group. The idea behind shopping group services, such as Mercata, is simple: Buyers join together to get discounted prices. Together, the group negotiates a deal with a vendor, which gives them the advantage of getting a bulk discount. The more buyers that join the group, the lower the prices go. The shopping group services have built-in incentives for shoppers to e-mail their friends and acquaintances and encourage them to join buying groups too.

Responsibilities. First, you'll need to decide which products you want to "gather" on your site. Contact the other merchants and agree to some kind of fee or commission model. After all, you are giving them a place to sell their products, and you can charge them for it. (It will help if you already know how to create your own affiliate program.)

Then, you'll have to plan what you'll feature in your product catalog and how you'll handle the online payments and fulfill online orders. Will you process the orders for all the merchants, or will each individual merchant handle its own?

Decide how goods will be distributed and shipped. You will need to set and fulfill expectations in the delivery process, and you may need to hire an order fulfillment house or drop shipper to fill your online orders.

Consider that you may need to create a content strategy to enhance the value of your site. You may want to include some articles about what kind of wool makes the best sweaters, for example. So decide which kinds of content you want on your site, such as articles, news, or chat. Then you'll have to either create your own content or acquire content from outside sources.

If you decide to go the shopping group route, you'll have to establish business relationships with other online merchants and agree to allow for bulk discounts. Then find software or a turnkey solution that will allow the prices of merchandise to go down as a result of the shopping group size.

Online businesses need some customer service expertise too. As with any business, there will be confusing shipping issues, questions about products, and problems with payments and returns. Make sure that you oversee customer service processes in order to give your customers the best support possible.

Costs. Building an auction Web site will cost you the fees of Web hosting and the price of e-commerce software or a turnkey solution, the fees of a payment processing service, and the price of security software to protect bidder information such as names, addresses, and credit card numbers.

If you decide to acquire content from outside sources instead of creating it yourself, that costs money too. Check out iSyndicate for an example of how content is bought and sold.

Profits. If you're one of the merchants in the gathering, you can, of course, make a profit from the sale of your products.

You can also charge the companies a fee for giving them an outlet to sell their products. It will also be wise to consider joining an affiliate (or associate) program and creating your own affiliate program. That way, you can also pick up commissions for the sales that you deliver for your affiliates. If you decide to do all of the order processing and fulfillment yourself, you might charge the merchants a transaction or service fee for it.

And you can make money from your site if you sell advertising space for banner ads, or if you sell and manage e-zine advertising space.

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