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E-COMMERCE BUSINESS MODELS IN CAMBODIA

By: Norng Sokha
Centre for Research and Thesis Writing
ACLEDA INSTITUTE OF BUSINESS
Phnom Penh, December 27, 2021

I. INTRODUCTION

Globalization is a process by which people are incorporated into a single global society (Albrow & King, 1990). It removes the artificial barriers to the flows of goods, services, capital, knowledge, and people across borders (Stiglitz, 2004). Moreover, it represents a fundamental transformation of international commerce's structures, organization, and nature-based on advanced technologies (Totonchi & Manshady, 2012). This transaction has resulted in a new trend called E-commerce. According to Rosen (2002), E-commerce presents a wide range of online business activities for products and services.

Likewise, Cambodia has witnessed a rapid increase in e-commerce due to the pandemic of Covid 19. According to SUON Prasith (2017) remarked that E-Commerce and online shopping have been increasing remarkably in the past recent years, and the Internet users in Cambodia has been growing rapidly from 1.7 million users in 2011 to 7.16 million users in 2016; moreover, the users increase to 9.7 million in 2020 (Kemp, 2020). According to the report of the Telecommunication Regulator of Cambodia (TRC), mobile internet usage has increased up to 16.12 million subscribers in 2019 (Vireak, 2020); and it increased to 17.48 million users as of April 2021 due to the Covid-19 pandemic (Vanyuth, 2021).

Besides the growth of Internet users, there was a remarkable increase in social media users as well. According to (Seakleng, 2021), Facebook accounts and Instagram accounts rose from 7.9 million to 12.4 million, and from 692,000 to 1.9 million, respectively, between 2018 to 2021.

The growth of the Internet and social media users leads to the development of the supply sides as well. According to the report in 2016 of the Ministry of Posts and Telecommunications of Cambodia, there were 33 companies providing Internet Service Operators and nine companies providing Mobile Telephone Services. According to ESCAP of ADB, the rapid growth of the e-commerce market has attracted diverse stakeholders in Cambodia; however, there has not been a local high-profile e-commerce player that performs well in the market (ADB, 2018). Therefore, this article attempts to identify the types of E-business models in Cambodia.

II. Overview of Business Models in E-Commerce

According to Timmers (1998), a business model is defined as an architecture for the product, service, and information flows which include a description of the various business actors and their roles, a description of the potential benefits of the different business actors, and a description of the sources of revenues. Laudon & Traver (2017) defines a business model as “a set of planned activities designed to result in a profit in a marketplace.” (p.56)

The Business model has changed dramatically in the digital era, especially in relation to E-commerce. Zwass (1996) refers E-commerce to business-to-business e-commerce (B2B) and business-to-consumer e-commerce (B2C). Moreover, Goldman Sachs (1999) defines E-commerce as the exchange of products, services, or information between businesses via the Internet and extended e-commerce into consumer-to-business (C-to-B) or consumer-to-consumer (C-to-C) companies. Thus, the e-commerce business model attempts “to use and leverage the unique qualities of the Internet, the Web, and the mobile platform” and there are different types of e-commerce (Laudon & Traver, 2017).

2.1 Business to Business Ecommerce (B2B)

Business-to-business (B2B) is defined as the use of Web-based technologies to buy, sell, or exchange information between two or more companies. It occurs directly between companies or through a third party that helps match buyers and sellers (IBM, 2001). Moreover, B2B e-commerce refers to online business selling to other businesses (Laudon & Traver, 2017). This might match the value stream in which Mahadevan (2000) determines the value proposition for the buyers, sellers, and the market makers and portals in an Internet context. Laudon & Traver (2017) remarked that B2B is the biggest e-commerce type, generating revenue of around 6.7 trillion USD in transactions in the United States in 2016. Based on the U.S. Census Bureau, it was projected to grow about 9 trillion USD by 2020. The company falls into B2B, such as ExxonMobil Corporation and the Chevron Corporation, Boeing, Archer Daniel Midlands, and Alibaba B2B.

2.2 Business-to-Consumer E-Commerce (B2C)

Laudon & Traver (2017) defined B2C as an online business selling to individual consumers. This definition is in line with Oracle (2000), which describes B2C as the communication between businesses and consumers in selling goods and services. According to the U.S. Census Bureau in 2016, B2C is about ten times smaller than the size of B2B e-commerce in the United States. Mahadevan (2000) states that the revenue stream business model is a plan for assuring revenue generation for the business. He raised several examples of this type of business model, namely Amazon.com, Taples, Wal-Mart, Target, REI, and Gap.

2.3 Consumer-to-Consumer (C2C)

Makelainen (2006) describes Consumer-to-Consumer (C2C) as individuals who do business in an online environment, typically utilizing the Internet in one way or another. Laudon & Traver (2017) defines C2C as consumers selling to other consumers with the help of an online market maker.

[… In C2C e-commerce, the consumer prepares the product for the market, places the product for auction or sale, and relies on the market maker to provide a catalog, search engine, and transaction clearing capabilities so that products can be easily displayed, discovered, and paid for…]

Furthermore, DeMatas (2020) notes that C2C sites allow customers to trade, buy and sell items in exchange for a small commission paid to the site; and a good example of this type of business is eBay. Laudon & Traver (2017) remarks that eBay generated revenue of around 82 billion USD in gross merchandise in 2015.

2.4 Mobile E-Commerce (M-Commerce)

Laudon & Traver (2017) defines mobile e-commerce (m-commerce) as the use of mobile devices to do online transactions, and Abdelkarim & Nasereddin (2010) refers m-commerce to all wireless e-commerce, which uses mobile devices to do business on the Internet in either B2B or B2C market. It is the subset of e-commerce (Laudon & Traver, 2017); (Abdelkarim & Nasereddin, 2010). M-commerce allows the consumer to purchase products and services, make travel reservations, operate financial services, access online content, and so forth via mobile devices (Laudon & Traver, 2017), and it reduces transaction costs in e-commerce (Abdelkarim & Nasereddin, 2010). The sales of retail m-commerce increased to 123.13 billion USD in the United States in 2016 (eMarketer, 2016).

2.5 Social E-Commerce (S-Commerce)

With the growing popularity of social media, namely Facebook, the term social e-commerce has emerged. Laudon & Traver (2017) determines that e-commerce enabled by social networks and online social relationships is so-called social e-commerce. Turban et al. (2010) refer to social commerce as any e-commerce activities which were conducted via social networks and by using social software tools. Social e-commerce is still relatively small in the U.S. retail market. According to STATISTA, the sale of social commerce was around 27 billion USD in the United States in 2020 and is projected to grow to 79.6 billion USD in 2025 (Chevalier, 2021).

2.6 Local E-Commerce (L-Commerce)

With the growing demand for local services, there is an emerging of the term local e-commerce, which is defined as "a form of e-commerce that is focused on engaging the consumer based on his or her current geographic location" (Laudon & Traver, 2017, p.26). Local commerce, so-called hyper-local commerce, is a part of offline-to-online commerce (O2O), in which retailers with physical stores offer their inventory and sell to local online shoppers (Vasefi, 2019). Local e-commerce is comparatively as small as social e-commerce, and it is estimated to grow to 40 billion USD in 2016 (Laudon & Traver, 2017).

2.7 Consumer-to-Business (C-to-B)

DeMatas (2020) describes this online commerce business as a consumer who sells goods or services to businesses, and this is quite similar to a sole proprietorship serving a larger business. Moreover, a website study.com describes that C2B provides businesses with something they need or want from consumers, whether it is a press release written by an expert or valuable feedback on a new product. Freelance sites such as Fiverr, UpWork, and Google AdSense are examples of this type of business model.

2.8 Government/ Public Administration E-Commerce

Currently, there is another business model that involves government/public administration conducting transactions with businesses or consumers. There are two sub-categories of this model as B2G and C2G (DeMatas, 2020). B2G is the type of business model which provides goods and services to government agencies at the federal, state, and local levels. Boeing, which builds Air Force One, is an example of this type of business (KENTON, 2019). Another type of business model is C2G which consumers or members of the public offer value to the government or public administrative agencies. A state's tax agency that assists citizens in paying taxes is an example of this type of business model.

3. E-Commerce Business Models in Cambodia

According to ADB (2018), there are three key E-commerce business models in Cambodia: internet portals, bundlers of services, and manufacturers' agents. First of all, in the Internet Portals, there are two popular models: one of the models, which some products and services are given away to create high traffic and therefore advertising opportunity is called a free model; for example, FreeStuff.com gives samples of household items such as coffee and moisturizer; and another model, which entails the creating of helpful content, links, and services to attract visitors to generate advertising revenue is called a content sponsorship model; for instance, Khmer24 and Mall855 have currently followed this model.

Secondly, a company that provides products or services to attract relational-objective buyers is called the Bundlers of Services. In this model, the company offers the product or channel enrichment as a value-based objective. For example, Cambo Quick processes Amazon orders, receives goods to a U.S. address, and handles logistics and applicable duties.

Thirdly, the Manufacturers' Agents represent multiple sellers of specific types of products and sometimes an entire industry. Buyers are attracted because they can buy products from various manufacturers. For example, Shop168 helps established stores to put the product on its portal.

The three types of business models, namely the Internet Portals, the Bundlers of Services, and the Manufacturers' Agents in the e-commerce market in Cambodia, are mainly classified as B2C. Furthermore, hundreds of individuals (small businesses) currently sell their products or services online via Facebook Shops on a business Facebook Page (Janouchova, 2020). Last but not least, Xinhua News identified that there were about 20 business-to-business (B2B) sites in Cambodia in 2015 (Sovan, 2015).

III. CONCLUSION

All in all, the purpose of this article is to determine E-commerce business models in Cambodia. According to the previous studies, there are several kinds of business models, namely Business-to-business (B2B), Business-to-Consumer E-Commerce (B2C), Consumer-to-Consumer (C2C), Mobile E-Commerce (M-Commerce), Social E-Commerce (S-Commerce), Local E-Commerce (L-Commerce), Consumer-to-Business (C-to-B) and Government/ Public Administration E-Commerce. As in the context of Cambodia, all E-business models fall into B2C and B2B.

References

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