Evolution of business models in B2C E-commerce: The case of fabmall

Abstract

The meteoric rise of B2C E-commerce firms during the late 90s and the subsequent bursting of the dotcom bubble have left several questions unanswered in the minds of practitioners about the viability of Internet ventures and the need for appropriate business models. What are we to learn from the Internet firms that have survived this transition? What are the transformations these firms have gone through in their business model? Professors K Kumar and B Mahadevan discuss these issues in conversation with V S Sudhakar, Managing Director of Fabmall.

Fabmart, a pureplay Internet retail platform, was set up in 1999 at the height of the dotcom boom. Four years later, the startup transformed itself into Fabmall, a multi-channel retail business, with six physical stores, and a significant presence in cyber space. During the course of the conversation, Sudhakar shows how the transition of a pureplay Internet firm into a multi channel retailing organisation signals the importance of changing the business model in line with market developments.

The experience of Sudhakar and his team in bringing about this transition has many distinctive features that other organisations could learn from. Having substantial clarity on the role of the Internet could well be an important element of success - Sudhakar explains that from the beginning the promoters were very clear that the primary nature of the business was retailing, and the Internet was merely a channel. Further, the ability to select and focus unambiguously on customer segments could differentiate an e-tailer and influence several elements of the business model. Fabmall initially decided to focus on the serious shopper, which meant a need driven buying model rather than the impulse driven model of portals like Indiatimes or Rediff. A successful business also requires that there is a willingness on the part of the management to change several operational features of the business model from time to time. Moreover evolution of business models requires the management to be passionate and yet objectively review the business assumptions periodically.