Business Models and Commerce
Encyclopedia of business model and commerce terms covering how companies structure their revenue models, distribute products and services, and engage with customers across digital and physical channels.
Business-to-Business (B2B)
Definition: Business-to-business (B2B) refers to commercial transactions or business conducted between two companies rather than between a company and individual consumers. B2B relationships are prevalent across industries, from raw material suppliers selling to manufacturers, to software companies selling enterprise solutions to corporations. B2B transactions typically involve larger order values, longer sales cycles, more complex contracts, and relationship-driven decision-making compared to business-to-consumer transactions.
In context: Anheuser-Busch InBev (ABI.BR, a European equity index) operates “BEES, a business-to-business digital commerce platform.” Woolworths Group (WOW.AX, an Asia-Pacific equity index) has an “Australian B2B segment” that “engages in procurement and distribution of food and related products for resale to other businesses.” SAP SE (SAP.DE, a European equity index) offers “SAP Business Network, a business-to-business collaboration platform.”
Real-world example: A beverage distributor uses AB InBev’s BEES platform to place bulk orders for cases of beer to stock in retail stores. The entire transaction — browsing the catalog, placing the order, paying the invoice — happens digitally between two businesses.
Related terms: Business-to-Consumer (B2C), E-Commerce, Platform Business Model, Wholesale Banking
Business-to-Consumer (B2C)
Definition: Business-to-consumer (B2C) refers to the process of selling products and services directly from businesses to end consumers who are the personal users of those products or services. B2C is the model behind most retail and consumer-facing businesses. The rise of the internet has dramatically transformed B2C commerce, enabling direct-to-consumer sales channels, subscription services, and digital marketplaces that bypass traditional retail intermediaries.
In context: TotalEnergies SE (TTE.PA, a European equity index) includes “B2B-B2C distribution of gas and electricity” in its Integrated Power segment. Fast Retailing (9983.T, an Asia-Pacific equity index) operates as an “apparel designer and retailer” selling directly to consumers through UNIQLO stores.
Real-world example: When you buy a shirt from the UNIQLO website and have it delivered to your home, that is a B2C transaction — the retailer is selling directly to you, the individual consumer.
Related terms: Business-to-Business (B2B), E-Commerce, Omnichannel, Subscription Model
E-Commerce
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“Get big fast — the internet rewards scale in ways that physical retail never could.”
— Jeff Bezos
Definition: E-commerce (electronic commerce) refers to the buying and selling of goods and services over the internet. It encompasses online retail stores, digital marketplaces, business-to-business trading platforms, and direct-to-consumer sales channels. E-commerce has transformed traditional retail by enabling businesses to reach global customers, operate 24/7, offer personalized shopping experiences, and reduce the overhead costs associated with physical stores. It includes various models such as B2C, B2B, C2C (consumer-to-consumer), and D2C (direct-to-consumer).
In context: Amazon.com (AMZN, a US equity index) “engages in the retail sale of consumer products, advertising, and subscriptions service through online and physical stores.” Prosus N.V. (PRX.AS, a European equity index) operates “internet platforms, such as classifieds, payments and fintech, food delivery, education technology, Etail.” Walmart (WMT, a US equity index) operates “eCommerce websites, and mobile applications” alongside physical stores.
Real-world example: A consumer in Germany uses Amazon’s website to browse thousands of products from sellers around the world, compares prices and reviews, purchases a kitchen appliance with one-click checkout, and receives it at home within two days through Amazon’s logistics network.
Related terms: Business-to-Consumer (B2C), Business-to-Business (B2B), Omnichannel, Digital Transformation, Platform Business Model, Marketplace
Franchise
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“In business, the idea of measuring what you are doing, picking the measurements that count, is one that applies to franchising.”
— Ray Kroc
Definition: A franchise is a business arrangement in which a company (the franchisor) grants another party (the franchisee) the right to operate a business using the franchisor’s brand name, trademarks, proprietary knowledge, and business systems. The franchisee typically pays an upfront franchise fee and ongoing royalties to the franchisor. Franchising enables rapid expansion with lower capital requirements for the franchisor while providing franchisees with a proven business model, brand recognition, and operational support. It is a common model in fast food, retail, hotels, and automotive dealerships.
In context: McDonald’s Corporation (MCD, a US equity index) “owns, operates, and franchises restaurants under the McDonald’s brand” through “conventional franchise, developmental license, or affiliate” structures. adidas AG (ADS.DE, a European equity index) sells through “mono-branded franchise stores.” Ferrari (RACE.MI, a European equity index) “operates franchised and owned Ferrari stores.”
Real-world example: An entrepreneur pays McDonald’s a franchise fee of USD 45,000 and agrees to pay 4% of monthly sales as royalties. In return, the franchisee receives the right to operate a McDonald’s restaurant, access to the brand and marketing materials, training programs, supply chain support, and ongoing operational guidance.
Related terms: Licensing, Royalties, Concessions, Licensing
Licensing
Definition: In a business model context, licensing refers to granting another party the rights to use a brand, technology, intellectual property, or content in exchange for fees or royalties. As a revenue model, licensing allows the licensor to monetize assets without direct involvement in production or distribution, while the licensee gains access to proven assets that accelerate their own market position. Licensing-based business models are common in software, entertainment, pharmaceuticals, consumer brands, and financial indices.
In context: Ferrari (RACE.MI, a European equity index) “licenses its Ferrari brand to various producers and retailers of luxury and lifestyle goods.” Apple Inc. (AAPL, a US equity index) “licenses its intellectual property.” Deutsche Boerse (DB1.DE, a European equity index) provides “index licensing” services for its proprietary index families. Exxon Mobil (XOM, a US equity index) offers “licensing services” for its refinery technologies.
Real-world example: A software company licenses its data analytics platform to 500 enterprise customers under annual subscription agreements. Each customer pays a license fee for the right to use the software, and the licensor earns recurring revenue without shipping physical goods or engaging in manufacturing.
Related terms: Licensing, Intellectual Property (IP), Royalties, Franchise, Subscription Model
Managed Services
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“Do what you do best and outsource the rest.”
— Peter Drucker
Definition: Managed services is a business model in which a provider takes on ongoing responsibility for managing a defined set of services, systems, or processes on behalf of a client, typically under a contract with defined service levels (SLAs). Common examples include managed IT services (where a provider monitors and maintains a client’s IT infrastructure), managed network services, managed security services, and managed payroll processing. The managed services model provides clients with predictable costs, specialist expertise, and freedom to focus on their core business, while providers earn recurring, subscription-like revenue.
In context: IBM (IBM, a US equity index) provides “managed infrastructure services” through its Infrastructure segment. Siemens AG (SIE.DE, a European equity index) offers “managed services” through its Digital Industries operations. Deutsche Telekom (DTE.DE, a European equity index) provides “ICT solutions for business and government customers” that include managed services contracts.
Real-world example: A mid-sized law firm outsources its entire IT infrastructure to a managed services provider. The provider monitors the firm’s servers 24/7, manages cybersecurity defenses, handles helpdesk calls from staff, performs software updates, and ensures backup and disaster recovery — all for a fixed monthly fee of USD 20,000.
Related terms: Subscription Model, SaaS (Software as a Service), White-Label Services, Cloud Computing
Marketplace
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“A platform is a business model that creates value by facilitating exchanges between two or more interdependent groups.”
— Alex Moazed, Modern Monopolies (2016)
Definition: A marketplace is a platform or venue that connects multiple buyers and sellers, enabling them to transact with one another. Unlike a traditional retailer that buys and resells goods, a marketplace earns revenue by facilitating transactions between third parties — typically through listing fees, transaction commissions, or subscription fees. Online marketplaces benefit from network effects: the more sellers offer products, the more buyers are attracted, which in turn attracts more sellers. Financial exchanges are a form of specialized marketplace for securities and derivatives.
In context: Amazon.com (AMZN, a US equity index) “offers programs that enable sellers to sell their products in its stores.” Uber Technologies (UBER, a US equity index) operates marketplaces connecting riders and drivers (Mobility) and businesses with freight carriers (Freight). Prosus N.V. (PRX.AS, a European equity index) operates “classifieds” marketplace platforms across multiple countries.
Real-world example: A small artisan furniture maker lists products on an online marketplace platform. The platform handles discovery, payment processing, and customer service infrastructure, charging the artisan a 12% commission on each sale. The artisan gains access to millions of potential buyers without building its own website or marketing operation.
Related terms: Platform Business Model, E-Commerce, Business-to-Business (B2B), Exchange (Stock/Futures)
Membership Warehouse
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“We are not in the business of selling things — we are in the business of renewing memberships.”
— Jim Sinegal
Definition: A membership warehouse (also called a membership club or warehouse club) is a retail business model in which customers pay an annual membership fee in exchange for access to a retail store offering a wide range of products at deeply discounted prices. The warehouse format features minimal store decoration, bulk packaging, and limited SKU selection compared to traditional supermarkets. The membership fee creates a predictable, high-margin revenue stream, while the club format drives high customer loyalty and repeat purchases. Costco is the most prominent global example.
In context: Walmart Inc. (WMT, a US equity index) operates Sam’s Club, described as “membership and warehouse clubs.” Costco Wholesale (COST, a US equity index) is itself a membership warehouse operator, offering “merchandise in self-service warehouse facilities.”
Real-world example: A family pays USD 65 per year for a Costco membership. In exchange, they can buy groceries, electronics, clothing, and gasoline at Costco’s deeply discounted prices. Costco sells memberships to millions of households, generating billions in recurring membership fee revenue that is almost pure profit, allowing it to price merchandise near cost.
Related terms: Subscription Model, Business-to-Consumer (B2C), Omnichannel
Omnichannel
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“The customer doesn’t care about channels — they just want a seamless experience.”
— Brendon Witcher
Definition: Omnichannel is a business strategy that provides customers with a seamless, integrated shopping experience across all channels — physical stores, websites, mobile apps, social media, call centers, and catalogs. Unlike multichannel (where each channel operates independently), omnichannel ensures that customer data, inventory, pricing, and promotions are synchronized across all touchpoints. A customer might browse products on a mobile app, visit a store to try them on, and complete the purchase online, with a consistent experience throughout.
In context: Visa (V, a US equity index) provides “acceptance solutions, an omnichannel payment integration with e-commerce platforms.” Verizon (VZ, a US equity index) distributes products through “company-operated stores, digital and omnichannel platforms.” Procter & Gamble (PG, a US equity index) sells through “social and e-commerce channels, grocery and specialty beauty stores, membership club stores” and other channels.
Real-world example: A customer sees a pair of shoes on a fashion brand’s Instagram page, clicks through to the brand’s website to check availability, reserves the shoes for in-store pickup, tries them on at the local store, and then receives a follow-up email with styling suggestions based on the purchase. All of these interactions are connected through the brand’s omnichannel platform.
Related terms: E-Commerce, Business-to-Consumer (B2C), Digital Transformation, Payments Processing
On-Demand Delivery
Definition: On-demand delivery is a business model in which products or services are delivered to customers at or near the time of request, rather than through scheduled or pre-planned logistics routes. Enabled by mobile apps, GPS tracking, and gig-economy labor marketplaces, on-demand delivery has expanded from food and grocery delivery to pharmaceuticals, retail goods, and professional services. On-demand delivery platforms typically connect customers directly with couriers or service providers, using surge pricing and dynamic routing to balance supply and demand in real time.
In context: Uber Technologies (UBER, a US equity index) operates Uber Eats for on-demand food delivery alongside its ride-hailing service. Amazon.com (AMZN, a US equity index) provides same-day and next-day delivery through its extensive logistics network, approximating on-demand fulfillment for Prime members. Prosus N.V. (PRX.AS, a European equity index) operates “food delivery” services through its internet platforms portfolio.
Real-world example: A consumer orders lunch through a food delivery app at 12:15 PM. The platform immediately matches the order with a nearby restaurant and assigns a courier through its algorithm. The food is picked up and delivered to the consumer’s office by 12:45 PM. The platform charges the consumer a delivery fee and takes a commission from the restaurant.
Related terms: Platform Business Model, Marketplace, Logistics, E-Commerce
Platform Business Model
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“The most scalable businesses are those that can grow without adding marginal cost for each new customer.”
— Sangeet Paul Choudary, Platform Revolution (2016)
Definition: A platform business model creates value by facilitating exchanges between two or more interdependent groups, typically consumers and producers. Unlike traditional linear business models where a company produces and sells a product, platform businesses act as intermediaries that connect participants and earn revenue through transaction fees, subscriptions, or advertising. Platform businesses benefit from network effects: the more users that join, the more valuable the platform becomes for all participants. Digital platforms have disrupted industries from transportation to hospitality to financial services.
In context: Adyen (ADYEN.AS, a European equity index) provides “Adyen for Platforms” connecting merchants with payment services. Uber (UBER, a US equity index) operates a “proprietary technology applications” platform connecting riders and drivers. Salesforce (CRM, a US equity index) provides a platform where “humans and agents work together” with AI. Amazon (AMZN, a US equity index) “offers programs that enable sellers to sell their products in its stores.”
Real-world example: Uber does not own vehicles but operates a platform that connects riders (consumers) with drivers (producers). The platform handles matching, pricing, payments, and quality assurance. Uber takes a commission on each ride, and as more drivers join, wait times decrease for riders, attracting more riders, which in turn attracts more drivers — a virtuous cycle.
Related terms: E-Commerce, SaaS (Software as a Service), Marketplace, Fintech, Subscription Model
Subscription Model
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“Recurring revenue is the key to building a company that has real, lasting value.”
— John Warrillow, Built to Sell (2011)
Definition: The subscription model is a business model where customers pay a recurring fee (monthly, quarterly, or annually) in exchange for continuous access to a product or service. This model provides companies with predictable, recurring revenue and builds long-term customer relationships. Subscriptions have expanded beyond traditional media (newspapers, magazines) to include software (SaaS), streaming entertainment, meal kits, beauty boxes, and even automobiles. The subscription model is valued by investors because it creates high visibility into future revenue and strong customer retention metrics.
In context: Apple (AAPL, a US equity index) offers “various subscription-based services, such as Apple Arcade, Apple Fitness+, Apple Music, Apple News+, Apple TV+.” Netflix (NFLX, a US equity index) provides subscription-based entertainment services. Microsoft (MSFT, a US equity index) offers “Microsoft 365 consumer subscriptions.” Mercedes-Benz (MBG.DE, a European equity index) offers “vehicle subscription” services.
Real-world example: A software company transitions from selling one-time licenses for USD 500 to offering monthly subscriptions at USD 25/month. While initial revenue per customer decreases, the company builds a stable base of recurring revenue, improves customer retention (since users can always access the latest version), and increases lifetime customer value.
Related terms: SaaS (Software as a Service), Platform Business Model, E-Commerce, Membership Warehouse
White-Label Services
Definition: White-label services (also called white-labeling or private-label services) are products or services produced by one company and rebranded and sold by another company under the buyer’s brand name. The company that produces the product (the white-label provider) remains invisible to the end customer, and the reselling company presents the product as its own. White-labeling allows businesses to offer a broader range of products quickly and cost-effectively, without investing in the development of the underlying capability. It is common in financial services, software, consumer goods, and telecommunications.
In context: Adyen (ADYEN.AS, a European equity index) provides white-label payment infrastructure that allows banks and platforms to offer payment services under their own brands. Visa (V, a US equity index) provides network infrastructure that banks use to issue branded credit and debit cards. Deutsche Telekom (DTE.DE, a European equity index) “sells mobile services to resellers and to companies that buys and markets network services to third parties” — effectively a white-label mobile network model.
Real-world example: A supermarket chain offers its customers a “store-brand” credit card with the supermarket’s logo. The card is actually issued and managed entirely by a major bank, which provides the credit scoring, fraud management, payment processing, and customer service infrastructure. The supermarket earns commission on transactions, and the bank acquires card customers under the supermarket’s brand.
Related terms: Licensing, Managed Services, Issuing (Payments), SaaS (Software as a Service)