Cost structure: digital advantage?

In 2005, Alexander Osterwalder and Yves Pigneur published the matrix of the 9 blocks of the economic model, also known as Business Model Canvas. The model detailed 9 blocks for the creation or documentation of an economic system: "customer segments, value propositions, channels (communication, sales, or distribution), customer relationships, revenue streams, key resources, key activities, key partnerships, and finally the cost structure ".

Since 2005, the growth of the digital economy has completely changed our economy and challenged some of these basic theories. But the 9-block matrix model applies to both the digital economy and the real economy and therefore remains relevant. While the nature of an economic, physical or digital activity can impact each of the 9 blocks of the model differently, offering certain competitive advantages depending on the industry, it is particularly interesting to take a detailed look at the cost structure. 

The cost structure

Traditionally, companies list two types of costs. Les coûts fixes, nécessaires à l’existence même de l’entreprise, tels les loyers ou les salaires du personnel. Et les coûts variables qui augmentent parallèlement avec la quantité produite ou vendue par l’entreprise, comme les coûts des matières premières ou de l’énergie. Toute entreprise, en ligne ou physique, a la responsabilité de contrôler sa structure de coûts et il est évident que la nature de l’activité a une conséquence directe et inévitable sur cette structure. Au sein d’une même industrie, une entreprise peut faire face à une structure bien différente si elle opère en ligne plutôt que de façon physique. Cette différence est particulièrement ressentie au sein des coûts fixes, où les entreprises traditionnelles paient souvent un premium immobilier considérable pour un emplacement commercial compétitif par rapport à leur équivalent digital. Aussi, ces entreprises font souvent face à une masse salariale autrement plus élevée que leur concurrent en ligne qui profitent de l’automatisation de leurs procédés et ainsi d’un certain avantage concurrentiel. 

The digital revolution

This advantage is such that digital competition has completely changed the landscape of certain activities. This is particularly the case with travel agencies, once ubiquitous in the streets and shopping centers, which handicapped by their need for locations with high pedestrian traffic and staff, are now more scarce in favor of online agencies. In the gaming industry, online casinos have much lower fixed costs than brick and mortar casinos. Although some of them like the online casino Casino777 offer live casino options with croupiers at the tables, they enjoy considerably lower payrolls. Bookstores and record stores are other examples of physical stores finding it increasingly difficult to compete online, as the fashion industry sees online sales gain more and more market share every year. on physical sales.

Every year, the world's population increasingly favors online shopping.Of course, the digital economy has many advantages other than the cost structure and it would be far too easy to reduce the success of companies operating online to the minimum of their fixed costs.But this structure has an undeniable advantage which should continue to promote the development of this sales channel.While this change in consumption model is increasingly difficult for physical businesses in many sectors, it could have a positive effect in our everyday life.As online commerce requires fewer resources than physical commerce, we can see a more sustainable consumption system and why not a reorganization of urban space, monopolized for too long by commercial activity alone. 

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