Unlocking Revenue: Exploring 5 Cross-Border E-Commerce Business Models in IT for Easy Monetization

This blog offers valuable support for professionals focused on their core business activities (research, development, sales, service, staff work, etc.) within the corporate sector. It helps them address the need to navigate marketing, particularly IT-related monetization and business models, enabling a seamless integration with their primary business endeavors.

In this series, we will explain the five key player areas and their respective business models for monetizing thier company’s products (including goods, services, technology, licensed content, and everything else that can be the object of transactions) in “cross-border e-commerce,” a symbolic business of the IT age.The following is an easy-to-understand explanation of the five key player areas and their respective business models.By learning about them from a bird’s eye view, it will be useful to find out where your company stands, where you should go, and the best way to get there.

In this blog, “business model” is defined as “a mechanism to generate revenue by providing value,” and “monetization” is the “monetization” part at the core of the business model.For example, Google’s “business model” can be seen as consisting of “value provision” of “search services” and “monetization (revenue mechanism)” of “ad-linked services. Naturally, no business can exist or continue with only one of the two, and it can be said that the ideal corporate activity is to find the optimal path while keeping a balance between the two.

1. 5 business model areas for earning from cross-border EC

This section provides an overview of the five representative business model areas in which companies and sole proprietors participate in cross-border EC as players and their respective characteristics (1. definition, 2. monetization, 3. value provided, and 4. participation).Some players are involved in multiple areas and have business models that double their monetization. You can also check which area your current or future product is in and how well it meets each condition, and then, based on the current situation, check how best to collaborate with other players in the chapters that follow.

1.1 Distributors

This group encompasses a wide range of companies, from renowned manufacturers and trading firms to individual entrepreneurs, regardless of their scale, who produce goods and independently sell them (including resale).

1. Definition: Involves directly offering products as manufacturers or distributors and selling them across various markets.
2. Monetization: Generating profit through the sale of offered products, including licensing agreements.
3. Value Proposition: They offer value through their brand reputation and the quality of their offerings.
4. Participation Method: Engaging in the e-commerce market through their own e-commerce sites or by selling as vendors on marketplaces.

1.2 Marketplace

　This group comprises platforms that function as markets for diverse goods and services, catering to global and local markets across various industries. These platforms operate independently from the manufacturing and direct selling processes.

1. Definition: These platforms function through websites that connect sellers (distributors) and buyers (customers).
2. Revenue Generation: Earnings come from product listing fees, transaction fees, and advertising fees.
3. Value Proposition: They provide value by offering a conducive environment for matches, leveraging our strengths in product management and information provision.
4. Participation Form: Marketplace owners primarily involve sales-related entities (stores) and information-based businesses (SNS) that leverage their expertise and knowledge.

1.3 Platform Provider

This group is responsible for the IT infrastructure of cross-border EC.The range of technologies is diverse, ranging from telecommunications to networking, security, and multimedia, all of which are used to support the IT elements of the cross-border EC ecosystem.

1. As an IT technology company, we provide a platform for cross-border e-commerce.
2. We generate revenue through platform usage fees, commissions, and maintenance support.
3. We provide the technical value to operate the marketplace efficiently.
4. We participate in the service side from the application layer to the general-purpose infrastructure layer in our respective fields of expertise.

1.4 Logistics Providers

Cross-border EC requires a global network, but of course it is impossible to deliver globally on your own, so you can also develop your own business locally or in cooperation with providers in other areas.

1. We act as an international transporter and warehousing company for cross-border deliveries.
2. We generate revenue through management fees and transportation costs.
3. We provide value to complete the value of each product with delivery.
4. Participate in logistics in our area of expertise (area and industry).

1.5 Finance Providers

In cross-border EC, the group places more emphasis on collaboration with IT platform providers in 1.3 than in other areas.Since cross-border EC is a world where payment flow is a bottleneck, and where transactions are dropped at the initial stage, there are cases where players from other domains are joining as players in this domain in order to complete their own business models.

1. Provide payment and financial services between different countries and regions.
2. Profit from each service usage fee and transaction fee.
3. Provides value in facilitating, simplifying, and securing international payments.
4. Participates as an intermediary in the coordination and integration of the services of each player.

Summary: 5 players in cross-border e-commerce

　In order to maximize your revenue from your current and future possible value offerings, which areas should you participate in and in what form should you collaborate with which areas? It is useful to keep in mind the existence of these five areas and their business models (value provided and monetization methods) as you make your decision.

1. Distributor
2. Marketplace Owner
3. Platform (PF) Providers
4. Logistics Providers
5. Finance Providers

2.earning conditions for the 5 domains business model

This section lists the conditions for earning money from each player’s business model. By checking the degree of achievement of each condition for your company, you can explore the direction in which you should build your own business model by considering the balance of investment (time, cost, and human resources) and which players in other areas you should collaborate with to monetize your business model.

2.1 Distributors

Evaluate the capabilities of your company (products and services) in light of each condition and reflect them in your cross-border EC strategy.

1. Business potential of the target market (profitability, future potential, etc.)
   • Potential of the target market (size, growth rate, competition, consumer purchasing power, etc.)
2. Regulatory and legal requirements
   • Satisfy domestic and international regulations (tariffs, import restrictions, export controls, taxes, consumer protection, intellectual property protection, etc.) and local legal requirements (certifications, licenses, product quality, safety standards required for sales)
3. Logistics and delivery systems
   • The company has the time and cost capacity to handle international transportation of goods and related procedures (transport customs procedures, return and exchange processing, etc.), as well as the necessary logistics partners and systems.
4. Payment and currency support
   • Ability to meet payment and currency challenges, such as handling different currencies for international transactions, foreign exchange risks, credit card processing, and online payment platforms.
5. Customer Service and Localization
   • Able to handle customer service levels (common sense based on culture and customs, legal customer obligations (support, cancellation, returns processing, etc.)
6. Platforms
   • Able to balance the advantages, disadvantages, and risks of operating your own e-commerce site and becoming a marketplace seller.
7. Marketing
   • Marketing based on target market conditions (local consumer trends, local e-commerce competition, etc.)

Summary: Requirements to earn money as a distributor

How well can you achieve each of these requirements now and in the future? What are your resource (human, material, and financial) expectations to achieve your goals? Based on this, how will you collaborate with players in the market?

1. Business potential of the market
2. Regulatory and legal requirements
3. Logistics and delivery
4. Payment and currency
5. Customer service and localization
6. Platforms
7. Marketing

2.2 Marketplace

Scale commensurate with your own planning and collaboration skills, not the product performance of individual products.

1. IT infrastructure environment:
   • Match between your marketplace strategy (your areas of expertise, target markets, and operating policies) and platform specifications (availability, scalability, security, etc.).
2. Local Regulations and Laws:.
   • Ensure necessary compliance with the different regulations and laws of each country or region.
3. International Payment Systems:.
   • Offer a variety of payment options (different currencies, payment methods, partnerships with international providers) based on country-specific currencies, national regulations, and local consumer convenience and preferences.
4. Logistics and Distribution:.
   • Efficient logistics network, taking into account the risks and costs associated with international logistics (delivery times, shipping costs, tariffs, custom procedures, etc.).
5. Market Demand and Competitive Landscape.
   • Marketing activities based on local market demand and competition, market potential, local customer buying patterns, preferences, cultural differences, etc.
6. Language and Cultural Adaptation.
   • Implement product strategies tailored to local language and regional cultural needs and preferences.
7. Customer support and after-sales service.
   • Establish systems (24-hour, multilingual support, localization, etc.) based on the level of customer support and after-sales service required in each country.

Summary: Requirements to make money in the marketplace

What are your planning and collaboration skills? What are your resource (human, material, and financial) expectations to achieve your goals? Based on that, how do you collaborate with players in the marketplace?

1. IT infrastructure environment
2. Local regulations and laws
3. International payment systems
4. Logistics and distribution
5. Language and cultural adaptation
6. Market demand and competition
7. Customer support and after-sales service

2.3 Platform (PF) Providers

Basically, the core technology area is essential, but it is almost impossible to independently secure and maintain the ever-evolving IT area, so here too, the ability to collaborate and a certain scale to avoid being swallowed up further is necessary.

1. Platform Business Model and Scale:.
   • The platform’s business model must have the necessary growth rate, number of users, and transaction volume.
2. Cost structure of the platform:.
   • There is the platform’s cost recovery method and revenue model.
3. License negotiation and contract terms:.
   • The basic requirements of the platform offer (license fee, profit sharing terms, contract term, termination terms, etc.) and the procedural requirements of the license negotiation (internal approval steps, compromise level).
4. Method of technology provision:.
   • The method of providing platform technology (provision of APIs, platform-specific tools, use of software, etc.), methods of integration or collaboration with other companies’ technology, and compatibility with the company’s IT infrastructure can be ensured.
5. Security and data privacy:.
   • Security measures for data handled by the platform (e.g., customer data) and policies regarding data privacy.
6. Support and Customer Service:.
   • Quality requirements for platform support and customer service are met.

Summary: Requirements for PF providers to earn money

Can you secure a monetizable domain with your IT skills? What are your resource (human, material, and financial) expectations to achieve your goals? Based on this, which domain players will you collaborate with and how?

1. What is the business model and scale of your platform?
2. Cost structure of the platform
3. Licensing negotiations and terms
4. Technology delivery methods
5. Security and data privacy
6. Support and customer service

2.4 Logistics (logistics) providers

　This group is more dependent on human resources than other areas of cross-border EC, so it is necessary to evaluate each condition based on the risk of not being able to stand alone in terms of planning and marketing capabilities.

1. Profitability:.
   • The company must have a business area that is expected to be profitable based on profitability, market size, demand forecasts, and competitors in the market.
2. Risk Management
   • The company should be able to handle legal and regulatory risks associated with cross-border e-commerce, logistics risks due to lost or damaged cargo, and currency exchange risks.
3. Expertise in international logistics:.
   • Experience in international logistics (international transportation, customs procedures, import regulations, etc.)
4. Global Networks:.
   • Efficient transportation routes and partnerships in the global logistics network market are expected.
5. Customer Support:
   • Customer support is a key component of our business. Quality level of customer support and ability to handle customer inquiries and complaints.
6. Technology Infrastructure.
   • The ability to modify and implement the necessary technical infrastructure and logistics systems (inventory management, tracking, order processing, etc.) to be integrated into an efficient logistics process.
7. Partnerships and Networks:.
   • Based on the partnerships and networks in each distribution area, there are procedures for establishing relationships with the necessary parties (local distribution companies, customs brokers, local law firms, etc.).

Summary: Requirements to earn money as a logistics provider

How good are your planning skills, especially in terms of collaboration? What are your expectations for resources (human, material, and financial) to achieve your goals, especially taking into account future manpower shortages? Based on this, which players in the field do you want to collaborate with and how?

1. Profitability
2. Risk management
3. International logistics expertise
4. Global network
5. Customer support
6. Technology Infrastructure
7. Partnerships and Networks

2.5 Finance Providers

　This group requires the ability to conceptualize and quickly act in order to build a larger network of alliances. Once the power structure is established, it is more difficult to overturn it than competitive relationships in other areas.

1. Transaction-ready Solutions
   • Solutions can be provided to facilitate transactions between countries with different currencies and legal systems. (international payment processors, payment gateways, intermediary payment providers, financial institutions, etc.)
2. Monetization methods:.
   • Business models can be established using different monetization methods (transaction fees, currency exchange fees, etc.). (transaction fees, currency exchange fees, interest income, subscription models)
3. Facilitation of international payments.
   • Act as an intermediary to simplify and facilitate transactions between countries using different currencies and payment methods.
4. Expand payment options
   • Can offer different payment methods and payment instruments in different countries and regions, providing customers with more choices.
5. Reliability and Security
   • Provide secure payment processes and protection of customer information to ensure customer trust. (e.g., implementing encryption technology and fraud detection systems, adhering to security protocols, etc.)
6. Expanded financial services:.
   • Provide financial services in the cross-border e-commerce market, such as financing, credit, and insurance, to meet the business needs of sellers and buyers.
7. Customer Support:.
   • Facilitate the transaction process and financial procedures by providing professional support and advice to customers.

Summary: Requirements to make money as a finance provider

　How conceptual, collaborative, and responsive are you? What are your resource (human, material, and financial) expectations to achieve your goals? With which players in which areas will you collaborate to rewrite the current organizational chart?

1. Transaction-oriented solutions
2. Monetization methods
3. Facilitate international payments
4. Expansion of payment options
5. Reliability and security
6. Expanded Financial Services
7. Customer Support

Summary: Five Business Models for Earning from Cross-border EC and Their Requirements

These are the five main areas of cross-border EC business models and their respective revenue requirements. The theme of this report is the entry point from a macro perspective, but the details of each industry will be explained in detail in a separate theme.

Takeawy: Take home items this time

• There are five main business models for earning money from cross-border EC.
• In order to establish a business model in each of these five areas (players), it is necessary to fulfill the profitability requirements for each of them.
• The status of achievement of each condition can be confirmed based on the company’s current and future products and target areas.
• Based on the results of the evaluation, the company should be able to consider the most appropriate destination, partner, and balance of collaboration.

Thank you 🔶 Afterword

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