2.1 E-marketplaces and their components. 2.2 Types of E-marketplaces and their features.

1. TOPIC 2:E-marketplaces:Economics, Competition and Competitive Advantage Strategies 2.1 E-marketplaces and their components. 2.2 Types of E-marketplaces and their features. 2.3 Intermediaries in EC and their roles. 2.4 Electronic catalogs and other market mechanisms 2.5 Auctions, bartering and negotiating online. 2.6 EC in the Wireless Environment: M-Commerce 2.7 Liquidity, quality and success factors in e-marketplaces 2.8 The economic impact of EC. 2.9 Competition and strategies in the digital economy 2.10 Impact of E-markets on business and organisations.

2. 2.1: Marketplaces • Markets (electronic or otherwise) have three main functions: • Matching buyers and sellers • Facilitating the exchange of information, goods, services, and payments associated with market transactions • Providing an institutional infrastructure, such as a legal and regulatory framework, that enables the efficient functioning of the market

3. 2.1: Electronic Marketplaces • Electronic marketplaces(e-marketplacesor marketspaces), changed several of the processes used in trading and supply chains • Greater information richness • Lower information search costs for buyers • Diminished information asymmetry between sellers and buyers • Greater temporal separation between time of purchase and time of possession • Greater temporal proximity between time of purchase and time of possession • Ability of buyers and sellers to be in different locations

4. 2.1: Marketspace • Marketspace • A marketspace is an electronic marketplace in which sellers and buyers exchange goods and services for money (or for other goods and services). • While traditional marketplaces are constrained by their physical locations, marketspaces use technology to eliminate this constraint (by being online)

5. Customers (most important) Sellers Products and services, including digital products: goods that can be transformed into digital format and delivered over the Internet, e.g., e-books, software, graphics, video clips, etc. Infrastructure Other business partners Front end e-seller’s business processes through which customers interact, eg. seller’s portal & e-catalogs Back end activities that support online order-taking Intermediaries Third party that operates between sellers & buyers Support services 2.1: Marketspace Components

7. 2.2: Storefronts • Electronic storefront: • A single company’s Web site where products and services are sold. • Most common mechanisms necessary for conducting the sale: • electronic catalog • search engine • electronic cart • e-auction facilities • payment gateway

8. 2.2: Storefronts • Online Mall (e-mall) • An online shopping center where many stores are located • Types of Stores and Malls • General stores/malls • Specialised stores/malls • Regional or global stores • Pure online stores or click-and-mortar stores

9. 2.2: Types of E-Marketplaces • e-marketplace: • An online market, usually B2B, in which buyers and sellers exchange goods or services; the three types of e-marketplaces are private, public, and consortia • Private e-marketplaces: • Online markets owned by a single company; can be either sell-side or buy-side e-marketplaces • Sell-side e-marketplace: • A e-marketplace in which a company sells either standard or customised products to qualified companies

10. 2.2: Types of E-Marketplaces • Buy-side e-marketplace: • A e-marketplace in which a company makes purchases from invited suppliers • Public e-marketplaces: • B2B marketplaces, usually owned and/or managed by independent third parties, that include many sellers and many buyers; also known as exchanges • Consortia: • E-marketplaces owned by a small group of large vendors, usually in a single industry

11. 2.2: Information Portals • Information Portal: • A single, personalised online point of access (through a Web browser) to business information inside an organisation. • Six Types of Portals • Commercial (public) portals - most popular and diverse • Corporate portals • Publishing portals • Personal portals • Mobile portals: a portal accessible via a mobile device • Voice portals: a portal accessed by telephone or cell phone.

12. 2.3: Intermediation in E-Commerce • Intermediaries (brokers) provide value-added activities and services to buyers and sellers, such as wholesalers and retailers • Infomediaries: • Electronic intermediaries that control information flow in cyberspace, often aggregating information and selling it to others • Roles and value of intermediaries in e-markets • Reduce search costs • Increase or create privacy • Provide more complete information • Reduce contract risk • Reduce pricing inefficiencies

13. 2.3: Intermediation in E-Commerce • e-distributor: • An e-commerce intermediary that connects manufacturers (suppliers) with buyers by aggregating the catalogs of many suppliers in a single location - the intermediary’s Web site • Disintermediation: • Elimination of intermediaries between sellers and buyers • Reintermediation: • Establishment of new intermediary roles for traditional intermediaries that were disintermediated

14. Case Study: Diamonds Forever—Online • The age-old business of gem buying is very inefficient: • Several layers of intermediaries can jack up the price of a gem 1,000% between wholesale and final retail prices. • American Don Kogen made his fortune in Chanthaburi (Thailand) - one of the world’s leading centers for processing gems • He started by purchasing low-grade gems from sellers that arrived early in the morning and then selling them for a small profit to dealers who arrived late in the day • This quick turnover of inventory helped him build up his capital resources • He reached the U.S. gem market using advertising.

15. Case Study: Diamonds Forever—Online • Using faxes, he shortened the order time • In 1998, Kogen decided to use the Internet -establishing thaigem.com and sold his first gem online • By 2001, the revenue from his online business reached $4.3 million, and it more than doubled (to $9.8 million) in 2002 • Online sales account for 85 percent of the revenue • The buyers are mostly dealers or retailers such as Wal-Mart or QVC

16. Case Study: Diamonds Forever—Online • He buys raw or refined gems from all over the world, some online, catering to the demand of his customers • Thaigem’s competitive edge is low prices • The proximity to gem processing factories and the low labour cost enable prices significantly lower than his online competitors. • Unsatisfied customers can return merchandise within 30 days, no questions asked • Delivery to any place in the world is made via Federal Express, at about $15 per shipment.

17. 2.4: Electronic Catalogs • Electronic catalogs: • The presentation of product information in an electronic form; the backbone of most e-selling sites. • They consist of a product database, a directory with search capabilities, and a presentation function. • Electronic catalogs can be classified by the following dimensions: • The dynamics of the information presentation • The degree of customisation • Integration with business processes • Customised catalogs • A catalog assembled specifically for a company, usually a customer of the catalog owner

19. 2.4: E-Catalogs, Search Engines & Shopping Carts • Search engine • A computer program that can access a database of Internet resources, search for specific information or keywords, and report the results • Software (intelligent) agent: • Software that can perform routine tasks that require intelligence • Electronic shopping cart: • An order-processing technology that allows customers to accumulate items they wish to buy while they continue to shop

20. Case Study: Electronic Catalogs at Boise Cascade • Boise Cascade Office Products • $4-billion office products wholesaler customer base includes over 100,000 large corporate customers and 1 million small ones • 900-page paper catalog used to be mailed to customers once each year • Boise also sent mini-catalogs tailored to customers’ individual needs based on past buying habits and purchase patterns • In 1996, the company placed its catalogs online • Customers view the catalog at boiseoffice.com and can order straight from the site or submit orders by e-mail • The orders are shipped the next day • Customers are then billed

21. Case Study: Electronic Catalogs at Boise Cascade • In 1997, the company generated 20 percent of its sales through the Web site • Now the process of producing a Web catalog that is searchable, rich in content, and available in a variety of formats takes only 1 week • One major advantage of customised catalogs is pricing • Boise estimates that electronic orders cost approximately 55 percent less to process than paper-based orders

22. 2.5: Auctions • Auction: • A market mechanism by which a seller places an offer to sell a product and buyers made bids sequentially and competitively until a final price is reached. • Auctions can be done: • online • off-line • at public sites (eBay) • at private sites (by invitation)

23. 2.5: Auctions • Electronic auction (e-auction): • Traditional auctions are limited by the short duration of the auction itself and the physical location of the auction. • Electronic auctions (conducted online) can occur over greater time periods and are not limited by location since they take place in electronic marketspaces. • Dynamic pricing • Prices that change based on supply and demand relationships at any given time • Dynamic pricing has the advantage of being constantly updated and moving towards the true market price. • The disadvantages: its constant variability and possibility that the market price is below the sellers expected price.

24. 2.5: Auctions • Types of auctions: • One buyer-one seller • On seller-many buyers • Forward auctions used for fast liquidation and as a selling channel. Price is increasing; the highest bidder wins. (Forward auction: An auction in which a seller entertains bids from buyers). • One buyer-many potential sellers • Reverse auction (bidding or tendering system) in which the buyer places an item for bid (tender) on a request for quote (RFQ) system, potential suppliers bid, with price reducing sequentially, and the lowest bid wins; primarily a B2B or G2B mechanism

25. 2.5: Auctions • Types of auctions (cont’d): • One buyer-many sellers (special mode) • “name-your-own-price” model: • An auction model in which a would-be buyer specifies the price (and other terms) they are willing to pay to any willing and able seller. • It is a C2B model, pioneered by Priceline.com • Many buyers-many sellers • Double auction: • Auctions in which multiplebuyers and their bidding prices are matched with multiple sellers and their asking prices, considering the quantities on both sides.

27. 2.5: Auctions: Benefitsto Buyers, Sellers & Auctioneers • Auctions provide several advantages to buyers because they allow them to purchase goods from a wide variety of sellers without the constraint of time or place. • The wide variety of different auctions styles meets the needs of a wide variety of different purchasers. • Auctions benefit sellers by allowing them to sell to a huge potential marketplace not constrained by time or place. • Additionally, it allows them to sell goods that may only have a very small target market. • Sellers are able to sell their goods at the prevailing global market price. • Auctioneers benefit from auctions because it provides a business model that allows their firms to stay in business. • They are able to benefit from usage by both buyers and sellers.

28. 2.5: Auctions: Limitations and Impacts • Limitations of e-auctions • Lack of security • Possibility of fraud • Limited participation • Impacts of auctions • Auctions as a coordination mechanism • Auctions as a highly visible distribution mechanism. • Auctions as a component in e-commerce • By bringing together many potential buyers in a given location, online auctions provide the liquidity necessary to create a marketplace for unique items.