We can classify e-commerce businesses in several ways. General classifications look at three primary categories:
- B2B or business-to-business, where therefore a business sells to another company.
- B2C or business-to-consumer, where a business sells to a final consumer.
- C2C or consumer-to-consume, or more peer-to-peer where consumers sell to each other.
Rather than getting bogged down in too many classifications, we’ll very practically look at the revenue streams of several successful e-commerce businesses, and see if we can borrow any of those elements and apply them back to our e-commerce business model.
Business Model | Explanation |
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1. Business-to-Consumer (B2C) | In the B2C model, businesses sell products or services directly to individual consumers. This is the most common e-commerce model, with online retailers like Amazon, Walmart, and eBay as prime examples. |
2. Business-to-Business (B2B) | B2B e-commerce involves businesses selling products or services to other businesses. It includes online marketplaces, procurement portals, and wholesale distributors. Examples include Alibaba and SAP Ariba. |
3. Consumer-to-Consumer (C2C) | C2C e-commerce enables individual consumers to sell products or services to other consumers. Online marketplaces like eBay and Craigslist facilitate these transactions, where users act both as buyers and sellers. |
4. Consumer-to-Business (C2B) | C2B e-commerce reverses the traditional model, with individual consumers offering products or services to businesses. Examples include freelance platforms like Upwork and influencer marketing. |
5. Peer-to-Peer (P2P) | P2P e-commerce platforms connect individuals who want to rent, share, or trade goods and services directly with each other. Companies like Airbnb and Uber operate on this model. |
6. Subscription-Based | Subscription-based e-commerce offers products or services on a recurring payment basis. Subscription boxes, streaming services (e.g., Netflix), and software as a service (SaaS) are prominent examples. |
7. Dropshipping | In this model, online retailers don’t maintain inventory. Instead, they partner with suppliers who ship products directly to customers. Dropshippers manage the storefront and marketing. |
8. Marketplace | Marketplace e-commerce platforms bring together multiple sellers and buyers, offering a wide range of products. Examples include Etsy, Taobao, and Shopify’s marketplace feature. |
9. Direct-to-Consumer (D2C) | D2C brands skip traditional retail channels to sell their products directly to consumers. They often focus on creating unique, high-quality products and building strong online brands. |
10. Omnichannel | Omnichannel e-commerce integrates various sales channels, such as physical stores, websites, mobile apps, and social media, to provide a seamless shopping experience for customers. |
11. Social Commerce | Social commerce leverages social media platforms to facilitate buying and selling. It includes features like shoppable posts on Instagram and Facebook Marketplace. |
12. Niche-Specific | Some e-commerce businesses focus on niche markets, catering to specific interests or product categories. These businesses often target a highly defined customer base. |
13. Flash Sales | Flash sale e-commerce models offer limited-time discounts on products, creating a sense of urgency and exclusivity to drive sales. Groupon and Zulily are examples. |
14. White Labeling | White labeling involves selling generic or unbranded products that other companies can rebrand and sell as their own. It’s common in industries like cosmetics and electronics. |
15. Crowdfunding | Crowdfunding platforms like Kickstarter and Indiegogo allow entrepreneurs and creators to raise funds by pre-selling products or services to backers. |
16. Auction-Based | Auction-based e-commerce platforms enable buyers to bid on products, with the highest bidder winning the item. eBay is a well-known example. |
17. Digital Products | E-commerce businesses can sell digital goods like e-books, software, music, and online courses. These products can be downloaded or accessed online. |
18. Green E-commerce | Green e-commerce emphasizes eco-friendly products and sustainable practices. Brands in this category focus on environmental and ethical considerations. |
19. Cross-Border E-commerce | Cross-border e-commerce involves selling products internationally, often requiring localized websites, payment options, and shipping solutions. |
20. Collaborative Commerce | Collaborative commerce platforms enable individuals and businesses to collaborate on product creation and distribution. |
21. Direct Selling | Direct selling companies recruit independent representatives (often called consultants or distributors) who sell products directly to consumers through personal interactions. Companies like Amway and Avon use this model. |
Amazon hybrid model
What can we learn from Amazon? Amazon is an interesting example, as it had the time to evolve over two decades.
So from Amazon, we can get what worked and see if that might work in building up our own e-commerce platform.
Amazon e-commerce, is structured around few lines, that make it solid:
Sell your own products to kick off the e-commerce
You might not know, but Amazon also sells a wide variety of brands that are owned by Amazon.
Therefore, over the years, the company internalized some of the successful products on the platform so it could gain better control over sourcing and perhaps customer experience.
Therefore, if you’re kicking off e-commerce, think of some simple products you can develop and start to sell to kick off the platform. And from there expand on third-party products
Host other physical stores that need a digital presence
In addition to that, Amazon hosts a wide variety of third-party products. Therefore, Amazon is an e-commerce platform, hosting other small e-commerce brands.
Here it’s important to offer a great hosting platform that works out well, and it’s smooth. And from there, you can build other revenue streams.
Transaction-based: Most of Amazon’s earnings as e-commerce is based on getting a commission on the transaction happening on the platform.
At the same time, Amazon also offers some related services. Thus, once the e-commerce has been kicked off, you can start offering some related services.
Build services on top of your e-commerce
Over the years, Amazon developed its fulfillment part, which comprises an inventory of products for third-party sellers, and shipping. When third-party e-commerce jin into Amazon fulfillment services, they don’t have any more inventory and delivery expenses, as they outsource them to Amazon.
However, they give up a good chunk of revenues, as Amazon will collect more from. the transaction.
When kicking off the e-commerce platform, and you have a critical mass of sellers, think of all the ways you can make their life easier (analytical tools, shipping tools, and so forth).
This will make them stick longer, and perhaps also create an additional revenue stream for your business.
Build membership services to abate shipping costs for customers
Building up also a related subscription-based service, on top of e-commerce, can be a great idea, to increase repeat customers, by making it more convenient to shop on e-commerce, by, for instance, abating the shipping costs.
That is what Amazon achieved with Prime, by offering a playlist of movies and entertainment (similar to Netflix).
You don’t have to go that far. All you need to do is to create a membership program, that gives access to special discounts and perhaps free delivery (we’ll see how Walmart has successfully implemented that).
Offer premium listings, or paid visibility
Once you do have kicked off the e-commerce you can also have it, in part subsidized, by other businesses selling their products. For instance, you can sell more visibility on e-commerce just like Amazon does. Indeed, Amazon e-commerce also has a successful advertising line, that enables better product placement and visibility.
eBay complex fee-based model
eBay is also a great example, as the company makes money primarily through fees collected on successfully closed sales on eBay and StubHub.
In addition to that, eBay also built a classified ads platform and a few other seller services.
eBay is a classic example of an e-commerce platform, that enables people to sell any sorts of things. The company has a compelling value proposition, which the company expresses in:
- Easy listing, with a quick and simple set up.
- Free listing, as sellers, can have up to 50 items for free every month, and only pay when they sell.
In addition, eBay counts over 170 million buyers and a stable and secure platform.
eBay collects fees in four ways:
Insertion fees as an entry-point
As explained on eBay:
When you list and sell items on eBay, we charge selling fees. There are two main types of selling fees: an insertion fee when you create a listing, and a final value fee when your item sells.
Therefore, the seller has 50 free per month products to feature, and beyond that, the fee for listing in mostly $0.35, but it can vary.
Final value fees to make it compelling to selers to join
In final value fees, the e-commerce platform only makes money if the transaction is closed. On the eBay case, those fees can be 10% or lower.
Listing upgrades as additional option
With optional upgrades like international site visibility, larger photos, bold character, more space to images, and more, listing upgrades can be a great option for sellers and a good way for the e-commerce platform also to subsidize it.
Fees in selected categories and based on selling-volume
Fees are different for certain categories and depending on whether the seller is a low or high volume. Therefore, eBay has a more complex fee structure, built over the years, also based on its experience.
Etsy simple fee model
Etsy is an incredible example of a two-sided e-commerce platform, also called a marketplace, as it enables smooth interactions between creative and buyers.
Etsy has a solid mechanism of category-suggestion when sellers are entering their items on the platform.
Etsy also has a very simple fee structure:
Etsy made its fee structure straightforward, and broken down in:
- Listing fee.
- Transaction and payment processing fee.
- Offsite ads fee (only. for those who opt-in to Etsy offsite advertising program).
Etsy also offers seller tools to make their presence on the platform more valuable:
GrubHub bidding system
GrubHub has an interesting business model, comprised of several brands. There are a couple of things worth exploring for GrubHub:
- The pre-order commissions charged to restaurants as soon as diners place an order on the platform. Therefore, the company generates revenues primarily when diners place an order; this commission is born by restaurants.
- Bidding revenues: restaurants can choose their level of commission rate, at or above the base rate. A restaurant that pays a higher rate will have a higher prominence and exposure to diners on the platform.
Shopify subscription-based service
Shopify is an e-commerce platform, that hosts other sellers’ websites. As such, it has a very simple pricing structure, made of three tiers:
Those pricing tiers are made of a few key elements:
- Store’s features: store features comprise things like product uploads, support, SSL certificates, professional reports, and more.
- Shipping: it comprises discounts which are higher for those with the more advanced plans.
- Payment: fraud analysis, credit card rates that decrease with higher-priced packages.
Additional Case Studies
Walmart Online Marketplace Model:
- Own Products and Third-party Vendors: Similar to Amazon, Walmart sells its own products and also allows third-party vendors to list and sell their products on its platform.
- Subscription Service – Walmart+ : A subscription service that offers members free shipping on eligible items with no order minimum, free grocery delivery, and more.
- Pick Up In-Store: Customers can order online and pick up their items at a local Walmart store, often getting discounts for choosing this option.
- Advertising: Walmart offers an advertising platform for vendors to promote their products within the marketplace.
Zalando Hybrid Model:
- Fashion-focused E-commerce: Zalando started as an e-commerce platform focused on shoes but quickly expanded to a full range of fashion products.
- Partner Program: Brands can join Zalando and sell their products directly, with Zalando handling logistics.
- Zalando Lounge: A members-only shopping club for flash sales.
- Pre-owned Section: Allows customers to buy and sell pre-owned fashion.
ASOS Marketplace:
- Fashion Resale: ASOS Marketplace is a platform for selling vintage clothing and independent brands.
- Boutique Fees: Independent boutiques pay a monthly fee to list on the marketplace and a commission on sales.
- Advertising: Boutiques can pay for additional advertising and promotions on the platform.
Instacart Grocery Delivery Model:
- Delivery Fees: Customers pay a delivery fee for each order or can subscribe to Instacart Express for unlimited free deliveries.
- Partner Grocers: Instacart partners with grocery stores and earns a commission on each order.
- Advertising: Brands can pay for premium placement and advertising within the app.
Dropbox Prosumer Model:
- Freemium Model: Dropbox offers a free version with limited storage and a paid version with more storage and features.
- Business Subscriptions: For enterprises and teams with additional collaboration tools.
- Third-party Integrations: Dropbox integrates with third-party apps and can earn referral fees or commissions.
Rakuten E-commerce Model:
- Online Marketplace: Rakuten operates an online marketplace where third-party sellers can list and sell their products.
- Rakuten Points: A loyalty program where customers earn points for purchases that can be used for discounts on future purchases.
- Rakuten Advertising: Brands can advertise their products for increased visibility.
- Additional Services: Rakuten also offers fintech services, digital content, and more.
Redbubble Artist Marketplace:
- Artist Sales: Artists can list their designs on products like t-shirts, stickers, and more. When a product sells, Redbubble handles production and shipping, and the artist gets a commission.
- Promoted Listings: Artists can pay for better visibility in search results.
- Licensing: Redbubble partners with brands for licensed merchandise, allowing artists to create designs for popular franchises.
Key Highlights
- Amazon Hybrid Model:
- Sell Your Own Products to Kick Off E-commerce: Amazon sells its own products alongside third-party products to gain better control over sourcing and customer experience.
- Host Other Physical Stores That Need a Digital Presence: Amazon hosts third-party brands on its platform, offering a smooth hosting experience and building additional revenue streams.
- Transaction-Based Revenue: Amazon’s primary earnings come from getting a commission on transactions that occur on its platform.
- Build Services on Top of E-commerce: Amazon developed fulfillment services for third-party sellers, offering tools to make their lives easier and creating additional revenue streams.
- Build Membership Services to Abate Shipping Costs: Amazon’s Prime subscription offers convenient shopping with free shipping and access to movies and entertainment, increasing repeat customers.
- Offer Premium Listings or Paid Visibility: Amazon offers advertising services to sellers for better product placement and visibility.
- eBay Complex Fee-Based Model:
- Insertion Fees as an Entry-Point: eBay charges sellers an insertion fee when they create a listing on the platform.
- Final Value Fees to Make It Compelling for Sellers to Join: eBay earns money through final value fees, collecting a percentage of the transaction when it is successfully closed.
- Listing Upgrades as Additional Options: Optional upgrades like international visibility or larger photos provide additional revenue opportunities for eBay.
- Fees in Selected Categories and Based on Selling Volume: eBay’s fee structure varies depending on the category and the seller’s volume.
- Etsy Simple Fee Model:
- Listing Fee: Etsy charges sellers a fee for listing their items on the platform.
- Transaction and Payment Processing Fee: Etsy earns money through a commission on each transaction and payment processing fees.
- Offsite Ads Fee: Sellers who opt-in to Etsy’s offsite advertising program pay an additional fee for promoted listings.
- GrubHub Bidding System:
- Pre-order Commissions: GrubHub charges restaurants a pre-order commission when diners place an order on its platform.
- Bidding Revenues: Restaurants can choose their commission rate, and a higher rate offers more prominence and exposure to diners on the platform.
- Shopify Subscription-Based Service:
- Subscription Tiers: Shopify offers different pricing tiers with varying features for merchants to commercialize their products.
- Store Features: The subscription includes store features like product uploads, support, SSL certificates, and professional reports.
- Shipping: Shopify offers shipping discounts, with higher-tier plans receiving better rates.
- Payment: Fraud analysis and credit card rates are included, with lower rates for higher-priced packages.
Related Concepts | Description | When to Apply |
---|---|---|
E-Commerce Business Model | The E-Commerce Business Model refers to the framework and strategy employed by online businesses to generate revenue and conduct transactions over the internet. E-commerce business models encompass various approaches, such as Business-to-Consumer (B2C), Business-to-Business (B2B), and Consumer-to-Consumer (C2C) models, each tailored to specific markets, customer segments, and value propositions. E-commerce business models may include online retailing, subscription-based services, digital marketplaces, and peer-to-peer platforms, leveraging technology and digital channels to facilitate sales, payments, and customer interactions. E-commerce business models aim to capitalize on the growing trend of online shopping, expand market reach, and enhance customer convenience and experience in digital commerce environments. | – When launching an online business or developing an e-commerce strategy for selling products or services online. – Particularly in situations where traditional retail channels are complemented or replaced by digital channels, or where there is a need to leverage technology and digital platforms to reach customers, drive sales, and expand market reach. Understanding e-commerce business models enables organizations to identify opportunities, select appropriate strategies, and develop business models that align with market dynamics, customer preferences, and organizational capabilities in digital transformation, e-commerce development, and online retailing initiatives. |
Subscription-Based Model | The Subscription-Based Model is an e-commerce business model where customers pay a recurring fee at regular intervals, such as monthly or annually, to access products or services provided by the subscription-based platform. Subscription-based models offer customers ongoing value, convenience, and access to exclusive content, features, or benefits in exchange for recurring payments. Examples of subscription-based businesses include streaming services, software-as-a-service (SaaS) platforms, and subscription boxes, which leverage recurring revenue streams and customer loyalty to drive profitability and growth. Subscription-based models focus on customer retention, engagement, and lifetime value, offering tailored subscription plans and personalized experiences to meet customer needs and preferences. | – When offering digital services or recurring products with ongoing value to customers. – Particularly in situations where there is a demand for subscription-based services, or where organizations seek to establish predictable revenue streams, build customer relationships, and enhance customer lifetime value. Implementing a subscription-based model enables organizations to monetize digital content or services, retain customers over the long term, and generate recurring revenue through subscription renewals and upsell opportunities in digital media, software, and online services initiatives. |
Online Marketplace | An Online Marketplace is an e-commerce platform that connects buyers and sellers, allowing them to transact and exchange goods or services over the internet. Online marketplaces facilitate peer-to-peer transactions, enabling individual sellers or businesses to list products or services for sale and buyers to browse, compare, and purchase items from multiple sellers within the marketplace ecosystem. Examples of online marketplaces include Amazon, eBay, and Etsy, which provide a wide range of products, seller tools, and payment processing services to facilitate transactions and foster a competitive marketplace environment. Online marketplaces offer scalability, reach, and convenience to sellers and buyers, leveraging network effects and platform economies to drive transaction volume and value for all participants. | – When creating a platform for multi-vendor sales or peer-to-peer transactions online. – Particularly in situations where there is a need to facilitate online commerce between multiple sellers and buyers, or where organizations seek to leverage network effects and platform economies to scale their business and expand market reach. Establishing an online marketplace enables organizations to provide a centralized platform for sellers and buyers, facilitate transactions, and monetize transactional fees or commissions in online retailing, e-commerce platforms, and digital marketplace initiatives. |
Direct-to-Consumer (D2C) Model | The Direct-to-Consumer (D2C) Model is an e-commerce business model where brands or manufacturers sell products directly to consumers, bypassing traditional retail channels or intermediaries. D2C brands leverage digital channels, such as websites, social media, and online advertising, to build brand awareness, engage customers, and sell products directly to end-users. Examples of D2C brands include Warby Parker, Casper, and Dollar Shave Club, which disrupt traditional retail models and offer unique value propositions, pricing, and customer experiences to differentiate themselves in the market. D2C models focus on brand control, customer relationships, and data-driven insights, enabling brands to capture market share, increase margins, and gain competitive advantage in digital commerce ecosystems. | – When selling products directly to end-consumers or building brand presence online. – Particularly in situations where brands seek to establish direct relationships with customers, control brand messaging, or differentiate themselves from competitors. Adopting a Direct-to-Consumer model enables brands to gain market insights, capture customer data, and tailor product offerings and marketing strategies to meet customer preferences and needs in digital marketing, brand management, and online retailing initiatives. |
Freemium Model | The Freemium Model is a pricing strategy used by e-commerce businesses where basic features or services are offered to users for free, while premium features or advanced functionality are available through paid subscriptions or upgrades. Freemium models aim to attract a large user base with free offerings and upsell premium features or additional services to a subset of users willing to pay for enhanced value or capabilities. Examples of freemium products include software applications, mobile apps, and online platforms, which offer free versions with limited functionality and premium versions with additional features or benefits. Freemium models focus on user acquisition, engagement, and conversion, leveraging free offerings to drive user adoption and monetize premium offerings through subscription or pay-per-use models. | – When monetizing digital products or services with a combination of free and paid offerings. – Particularly in situations where there is a need to attract users, drive adoption, or upsell premium features or functionality to a subset of users. Implementing a freemium model enables organizations to acquire customers at a low cost, establish product-market fit, and monetize user engagement through subscription upgrades, premium features, or in-app purchases in digital product development, software-as-a-service (SaaS), and mobile app monetization initiatives. |
Crowdfunding Platform | A Crowdfunding Platform is an online platform that enables individuals or organizations to raise funds for projects, ventures, or charitable causes by soliciting contributions from a large number of individuals, investors, or donors. Crowdfunding platforms provide a digital marketplace for creators to showcase their projects, set fundraising goals, and attract financial support from backers who contribute varying amounts in exchange for rewards, equity, or social impact. Examples of crowdfunding platforms include Kickstarter, Indiegogo, and GoFundMe, which offer diverse funding models, such as reward-based crowdfunding, equity crowdfunding, and donation-based crowdfunding, to support creative, entrepreneurial, or social initiatives. Crowdfunding platforms democratize access to capital, empower creators, and foster community engagement, enabling individuals or organizations to validate ideas, raise capital, and launch projects with the support of a global audience. | – When raising funds or validating ideas for projects or ventures through online crowdfunding campaigns. – Particularly in situations where traditional funding sources are limited or where there is a need to leverage community support, validate market demand, or finance creative, entrepreneurial, or social initiatives. Using a crowdfunding platform enables creators to access capital, build a supportive community, and test the viability of their ideas or projects before launching them in crowdfunding, entrepreneurship, and fundraising initiatives. |
Dropshipping Business Model | The Dropshipping Business Model is an e-commerce fulfillment method where retailers or sellers market and sell products to customers without holding inventory or managing product fulfillment. Dropshipping businesses partner with suppliers or manufacturers who ship products directly to customers on behalf of the retailer, eliminating the need for inventory storage, order fulfillment, and upfront investment in merchandise. Dropshipping models enable retailers to focus on marketing, sales, and customer service while outsourcing product sourcing, warehousing, and logistics to third-party suppliers. Examples of dropshipping businesses include e-commerce stores, online marketplaces, and affiliate marketing platforms, which leverage supplier networks and digital channels to offer a wide range of products to customers without inventory overhead or fulfillment complexity. Dropshipping models emphasize scalability, flexibility, and low operational costs, enabling entrepreneurs to start and scale e-commerce businesses with minimal upfront investment. | – When launching an online store or selling products without inventory management or order fulfillment. – Particularly in situations where entrepreneurs seek to start an e-commerce business with minimal upfront investment or where there is a need to focus on marketing, sales, and customer service rather than inventory management and logistics. Adopting a dropshipping model enables entrepreneurs to enter the e-commerce market quickly, test product demand, and scale their business without the complexities of inventory management, warehousing, or fulfillment in online retailing, entrepreneurship, and digital commerce initiatives. |
Brick-and-Click Model | The Brick-and-Click Model is an e-commerce business model that integrates both physical retail stores (brick-and-mortar) and online digital channels (clicks) to offer customers a seamless omnichannel shopping experience. Brick-and-click businesses leverage a combination of offline and online sales channels to reach customers, drive sales, and provide convenience and flexibility in shopping. Examples of brick-and-click retailers include omnichannel retailers, department stores, and franchise businesses that operate physical stores while offering online ordering, delivery, or in-store pickup options to customers. Brick-and-click models bridge the gap between traditional retail and e-commerce, allowing businesses to leverage the strengths of both channels and meet evolving customer preferences and expectations in a digital-first retail landscape. | – When integrating online and offline sales channels to offer omnichannel shopping experiences to customers. – Particularly in situations where traditional retailers seek to expand their market reach, enhance customer convenience, or adapt to changing consumer behaviors. Adopting a brick-and-click model enables retailers to leverage the advantages of physical stores and digital platforms, provide seamless shopping experiences, and meet customer expectations across multiple touchpoints in retail strategy, digital transformation, and customer experience initiatives. |
Social Commerce Platform | A Social Commerce Platform is an e-commerce platform that integrates social media functionalities and features to enable buying, selling, or transacting within social networking environments. Social commerce platforms leverage social media channels, such as Facebook, Instagram, and Pinterest, to facilitate product discovery, shopping, and transactions directly within the social network interface. Examples of social commerce platforms include Instagram Shopping, Facebook Marketplace, and Pinterest Buyable Pins, which enable businesses to showcase products, engage customers, and drive sales through social media engagement and interaction. Social commerce platforms blur the lines between social networking and online shopping, enabling businesses to capitalize on social influence, user-generated content, and peer recommendations to drive purchasing decisions and enhance the shopping experience. | – When leveraging social media channels to facilitate product discovery and drive sales through social engagement. – Particularly in situations where businesses seek to capitalize on social influence, user-generated content, or peer recommendations to reach customers and drive purchase intent. Adopting a social commerce platform enables businesses to integrate shopping functionalities into social media channels, engage customers, and monetize social interactions to drive sales and conversions in social media marketing, e-commerce strategy, and digital retailing initiatives. |
Mobile Commerce (M-Commerce) | Mobile Commerce (M-Commerce) refers to the buying and selling of goods and services through mobile devices, such as smartphones and tablets, using mobile-optimized websites or applications. M-commerce enables users to browse products, place orders, and make payments conveniently from their mobile devices, anytime and anywhere with internet connectivity. Examples of mobile commerce include mobile shopping apps, mobile wallets, and mobile ticketing services, which leverage mobile technology and location-based services to offer personalized, on-the-go shopping experiences to users. M-commerce platforms focus on usability, speed, and security, providing frictionless transactions and seamless integration with mobile devices to enhance the mobile shopping experience and drive mobile sales and conversions. | – When optimizing online shopping experiences or facilitating transactions through mobile devices and applications. – Particularly in situations where there is a growing trend of mobile usage, or where businesses seek to reach and engage customers on mobile platforms. Embracing mobile commerce enables businesses to cater to mobile-savvy consumers, provide convenient shopping experiences, and capitalize on the increasing adoption of smartphones and mobile technology in digital marketing, e-commerce development, and mobile app monetization initiatives. |
Connected Business Model Types And Frameworks
Attention Merchant Business Model
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