E-MARKETPLACES: MECHANISMS,
TOOLS, AND IMPACTS OF E-COMMERCE
The major electronic commerce (EC) activities,
processes and the mechanisms.
E-marketplaces, their components and the major
types.
Electronic catalogs, search engines, and shopping
carts.
The major types of auctions and their characteristics.
The benefits, limitations, and impacts of auctions.
Competition in the digital economy.
The impact of e-marketplaces on organizations,
intermediation,
© BIS
Department, 2015: BIS 312 E-and industries.
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1
EC Mechanisms: An Overview
• EC activities and mechanisms ➠
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EC Mechanisms: An Overview
• Sellers, buyers, and transactions
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EC Mechanisms
★ The
purchasing
process
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Electronic Markets
• E-marketplace
★
“An online market, in which buyers and sellers exchange goods or
services.”
★
Changed the processes in trading & supply chain:
a) Greater information richness of the transactional & relational
environment
b) Lower information search costs for buyers
c) Diminished information asymmetry between sellers & buyers
d) Less time between purchase & possession of physical products
e) Greater temporal proximity between time of purchase & time of
possession of digital products
f) The ability of buyers, sellers, and the virtual market to be in
different locations
g) The ability of EC to leverage capabilities with increased
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2015: BIS 312lower
Eeffectiveness,
transaction & distribution costs.
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E-Marketplace Components & Participants
Customers
✴
Look for bargains, customized items, collectors’ items,
entertainment, socialization, etc..
✴
Sellers
Products and
services
Infrastructure
Front end
Search for detailed information, compare, bid, and negotiate.
✴ Stores owned by companies, government agencies, or
individuals.
✴ Physical products, digital products.
✴
Electronic networks, hardware, software, etc..
The seller’s portal, electronic catalogs, a shopping cart, a search
engine, an auction engine, a payment gateway.
Back end
✴ Order aggregation & fulfillment, inventory management,
purchasing from suppliers, accounting & finance, insurance,
payment processing, packaging, delivery.
Intermediaries ✴ Help match buyers & sellers, provide some infrastructure
services, help customers and/or sellers institute, complete
transactions.
Other business ✴ E.g. Shippers use the Internet to collaborate along the supply
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312 Epartners
chain.
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Types of E-Marketplaces
1.Private e-marketplaces
★
Owned & operated by a single company.
a) Sell-side e-marketplace
✴
“A private e-marketplace in which one company sells either
standard and/or customized products to individuals (B2C) or to
business (B2B).”
b) Buy-side e-marketplace
✴
“A private e-marketplace in which one company makes purchases
from invite suppliers (B2B).”
2.Public e-marketplaces (exchanges)
★
Owned by a 3rd party / by a group of buying/selling companies.
★
Serve many sellers & many buyers.
★
E.g. Stock exchange.
★
Open to the public, regulated by the government / the exchange’s
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Customer Interaction Mechanisms: Storefronts, Malls, and
Portals
• Electronic storefronts (E.g. dell.com, walmart.com)
★ “A single company’s Web site where products
and services are sold.”
★ Mechanism:
✴ Electronic catalog, search engine, electronic cart,
e-auction facilities, payment gateway, shipment
court, customer services.
• Electronic malls (online mall)
★ “An online shopping center where many online
stores are located.”
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Customer Interaction Mechanisms: Storefronts, Malls, and
Portals
• Types of stores & malls
General stores/malls
Specialized stores/malls
Regional versus global
stores
Pure-play online
organizations versus
click-and-mortar stores
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Large marketspaces that sell all kinds of products,
e.g. amazon.com, choicemall.com, walmart.com,
yahoo.com, aol.com, msn.com.
Sell only one / a few kinds of products, e.g. books,
flowers, wine, cars, pet toys.
Serve customers that live nearby, e.g.
parknshop.com.
✴E.g. amazon.com; walmart.com.
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Web (Information) Portals
• “A single point of access, through a Web browser, to critical
•
business information located inside and outside (via Internet) of an
organization.”
Types
of portals
Commercial
(public) portals
• E.g. yahoo.com, msn.com
Corporate portals (enterprise
portals / enterprise information
portals)
Provide organized access to rich content within
relatively narrow corporate & partners’ communities.
Publishing portals
For communities with specific interests.
Personal portals
•
•
Target specific filtered information for individuals.
Offer narrow content, very personalized.
Mobile portals
Accessible from mobile devices.
Voice portals
With audio interfaces, can be accessed by a standard
telephone / a cell phone, by using both speech
recognition & text-to-speech technologies.
Knowledge portals
Enable access to knowledge by knowledge workers,
facilitate collaboration.
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Intermediaries in E-Marketplaces
• 2 types of online intermediaries
1.Brokers
✴ A company that facilitates transactions between buyers
& sellers.
2.Infomediaries
✴ “Electronic intermediaries that provide and/or control
information flow in cyberspace, often aggregating
information, and selling it to others.”
• Distributors in B2B: e-distributor
★ “An e-commerce intermediary that connects manufacturers
with business buyers (customers) by aggregating the
catalogs of many manufacturers in one place -- the
intermediary’s Web site.”
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Electronic Catalogs (E-Catalogs)
• “The presentation of product information in an electronic form; the
•
backbone of most e-selling sites.”
3 dimensions of e-catalogs:
1. The dynamics of the information presentation.
✴ Motion pictures, videos, animation, with supplemental sound.
✴ Real time, changing frequently.
2. The degree of customization.
✴ Content, pricing, display are tailored to the characteristics of
specific customers.
3. Integration with business processes.
✴ Order taking & fulfillment; electronic payment systems;
intranet workflow software & systems; inventory & accounting
systems; suppliers’ / customers’ extranets; paper catalogs.
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Online Catalogs Versus Paper Catalogs
Type
Paper
catalogs
Advantages
• Easy to create without high technology
• Reader is able to look at the catalog without
computer system
• More portable than electronic
Online
catalogs
• Easy to update product information
• Can integrate with the purchasing process
• Good search & comparison capabilities
• Provide timely, up-to-date product information
• Provide globally broad range of product
information
• Can add voice & animated pictures
• Long-term cost savings
• Easy to customize
• More comparative shopping
• Ease of connecting order processing,
© BIS Department, 2015: BIS 312 Einventory processing, payment processing to
Disadvantages
• Difficult to update changed product
information promptly
• Display a limited number of products
• Limited information through
photographs & textual description is
available
• No possibility for advanced multimedia.
• Difficult to develop catalogs, large fixed
cost
• Need for customer skill to deal with
computers & browsers.
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EC Search Activities, Types, Engines
• Types of EC searches
1. Internet/Web search
2. Enterprise search (within an organization)
✴
“The practice of identifying and enabling specific content across the
enterprise to be indexed, searched, and displayed to authorized
users.”
3. Desktop search (e.g. Web browser histories, e-mail archives)
✴
“Search tools that search the contents of a user’s or organization’s
computer files, rather than searching the Internet.”
• Search engines, e.g. Google
★
“A computer program that can access databases of Internet
resources, search for specific information or keywords, and report the
results.”
• Software (Intelligent) agents
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2015: BIScomplex
312 E★ Department,
E.g. Conduct
searches, compare prices, interpret
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Shopping Carts
• Electronic shopping cart
★ “An
order-processing technology that allows customers to
accumulate items they wish to buy while they continue to
shop.”
★ Select items ➡ review what has been selected ➡ make
changes ➡ finalize the list.
• Product configuration
★ Support the acquisition of customer requirements while
automating the order-taking process.
★ E.g. Apple.
★ Allow customers to configure their products by specifying
their technical requirements.
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Auctions
• “A competitive process in which a seller solicits consecutive bids
from buyers (forward auctions) or a buyer solicits bids from
sellers (backward auctions). Prices are determined dynamically
by the bids.”
• Limitations of traditional offline auctions
Bidder
Seller
•
Last only a few minutes/seconds, for
each item sold ➡ May not get what they
really want, pay too much for the item.
•
Last only a few minutes/seconds, for
each item sold ➡ May not get the
highest possible price.
•
Do not have much time to examine the
goods.
•
Difficult to move goods to an auction
site.
•
Difficult to know about auctions, cannot
compare what is offered at each
location.
•
Commissions are high (rent,
advertising, labor).
•
Must physically present at auctions.
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Auctions
• Innovative auctions
★
•
E.g. JetBlue airlines started to auction flights in September 2008
on eBay.
✴ Initial offer: 300 flights + 6 vacation packages, with opening
bids set (5₵ - 10₵).
✴ The 3-, 5-, and 7-day auctions included 1- and 2-person
roundtrip, weekend flights in September from cities including
Boston, Chicago, New York, Orlando, and Southern
California.
✴ Although no one was lucky enough to get a flight for 5/10
cents, many auctions gave the winners a flight that was 10%
to 20% cheaper than regular prices.
Dynamic pricing
★ “Prices that change based on supply and demand relationships
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Auctions
• 4 categories of auctions:
1. One buyer, one seller
✴
Use negotiation, bargaining, bartering.
✴
The resulting price: determined by each party’s bargaining power, supply
& demand in the item’s market, business environment factors.
2. One seller, many potential buyers
✴
Forward auction
✦
“An auction in which a seller entertains bids from buyers. Bidders
increase price sequentially.”
3. One buyer, many potential sellers
✦
Reverse auction (bidding/tendering system)
✤
“Auction in which the buyer places an item for bid (tender) on a request
for quote (RFQ) system, potential suppliers bid on the job, with the price
reducing sequentially, and the lowest bid wins; primarily a B2B or G2B
mechanism.”
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Auctions
4. Many sellers, many buyers (Double auction)
✴
“An auction in which multiple buyers and their bidding prices are
matched with multiple sellers and their marking price, based on the
quantities on both sides.”
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Benefits of E-Auctions
Sellers
•Increased revenues:
Buyers
•Opportunities to find
broader bidder base, shorter unique items &
cycle time, sell globally.
collectibles.
E-Auctioneers
•Higher repeat
purchases.
•Higher “stickiness” to the
•Opportunity to bargain: sell •Entertainment.
Web site.
any time, conduct frequent
•Convenience: buyers bid •Easy expansion of the
auctions.
•Optimal price setting
anywhere; do not have to auction business.
travel to an auction place.
determined by the market.
•Anonymity.
•Gain more customer dollars •Possibility of finding
by offering items directly (no bargains.
intermediaries).
•Liquidate large quantities
quickly.
•Improved customer
relationship & loyalty.
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Limitations of E-Auctions
1.Minimal security
★ Some
auctions are done in an unencrypted
environment.
2.Possibility of fraud
★ Buyers
may get defective products (since they
cannot see the items).
★ Buyers may receive goods/services without
paying for them.
3.Limited participation
★ Some
auctions are by invitation/dealers only.
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Impacts of Auctions
1.Auctions as a coordination mechanism
★ Establish price equilibrium.
2.Auctions as a social mechanism to determine a price
★ For fine arts / rare item, attracts potential buyers & experts.
➡ With enough exposure of purchase & sale orders, an optimal
price can be determined.
3.Auctions as a highly visible distribution mechanism (e.g. Cathay
Pacific)
★ Auctions off a limited number of items ➔ gain attention ➔
attract those customers.
4.Auctions as an EC component
★ Combine with other e-commerce activities.
5.Auctions for profit for individuals
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★ Make money by selling things.
Bartering and Negotiating Online
• Online bartering
★
Bartering
✴
★
E-bartering is done in a bartering exchange
✴
★
“The exchange of goods and services.”
“A marketplace in which an intermediary arranges barter
transactions.”
Process:
1. The company tells the bartering exchange what it wants to offer.
2. The exchange assesses the value of that products/services, offers
it certain “points”/ “bartering dollars”.
3. The company can use the “points” to buy the things it needs from a
participating member in the exchange.
• Online negotiating
★
Deals with pricing and/or nonpricing terms (payment method & credit).
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Competition in the Internet Ecosystem
• Competitiveness factors
★
EC competition is very intense because online transactions enable:
Lower search costs
for buyers
Customers can find less expensive products ➡ Sellers reduce prices,
improve customer service.
Speedy
comparisons
Customers can find products quickly.
Lower prices
Low costs of operation (e.g. no physical facilities, minimum inventories,
etc.)
Customer service
Amazon.com provides superior customer service.
Barriers to entry are Setting up a Web site is easy, fast, inexpensive ➡ Don’t need sales
reduced
force & brick-and-mortar stores.
Virtual partnerships
multiply
Easy access to the Web + Share production & sales information easily
➡ Creation of virtual partnership increases dramatically.
Market niches
abound
No limits imposed by the physical storefronts ➡ No. of business
opportunities is as large as the Web.
Differentiation
To provide a product/service that is not available elsewhere.
E.g. Amazon.com provides customers with information such as
with authors, almost real-time book review, and book
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Competition in the Internet Ecosystem
• Customization and personalization
★
Customization
✴ “Creation of a product or service according to the buyer’s
specifications.”
★ Personalization (E.g. Google will e-mail all news regarding
certain topics to a user)
✴ “The ability to tailor a product, service, or Web content to
specific user preferences.”
• Impact on competition
★ Competition between companies ➡ Competition between
networks
✴ The company with better communication networks, online
advertising capabilities, relationships with other Web
companies
(e.g.
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2015: BIS 312
E- Google, Amazon.com) has a strategic
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The Analysis-of-Impacts Framework
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Improving Marketing and Sales
Old model Mass & segmented marketing
New model One-to-one & customization
Relationships with
customers
Customer is a passive recipient
Customer is an active coproducer
Customer needs
Articulated
Articulated, inferred
Segmentation
Mass market + target segments
Segmented targets, 1:1 targets
Product & service
offerings
Product line extensions &
modification
Customized products, services, marketing;
personalization
New product
development
Marketing + R&D
R&D develops the platforms ➡ consumers customize
based on their inputs
Pricing
Fixed prices + discounting
Customer influence pricing; e-auctions, e-negotiations
Communication
Advertising + PR
Integrated, interactive, customized marketing
communication, education, entertainment; avatars
Distribution
Traditional retailing + direct
marketing
Direct (online) distribution + 3rd-party logistics services
Branding
Traditional branding + cobranding
Customer’s name as the brand
Basis of competitive Marketing power
advantage
Marketing finesse + customer as “partner” while
integrating marketing, operations, R&D, information
Communities
Discount to members in physical
communities
Discounts to members of e-communities, social
networking
Advertising
TV, newspapers, billboards
Innovative, viral, on the Web, wireless devices
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Transforming Organizations
• To survive, companies learn & adapt new technologies quickly.
• New products, services, business models ➡ Strategic & structural
changes.
• The changing nature of work
★
E.g. Reduce the no. of employees to a core of essential staff ➡
Outsource work ➡ Create new opportunities & risks ➡ New jobs,
careers, salaries.
• Disintermediation
★
“Elimination of intermediaries between sellers and buyers.”
★
E.g. Many airlines require customers to pay $5/more per ticket if they
buy a ticket from an agent.
• Reintermediation
★
“Disintermediated entities/newcomers take on new intermediary
roles”.
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312 E★ Department,
E.g. Brokers
who
manage
electronic intermediation, like eTrade.
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Redefining Organizations
• New & improved product capabilities
★ Customer profiles & preferences, can be used
as a source of information for improving
products / designing new ones.
• Mass customization
★ “A method that enables manufacturers to create
specific products for each customer based on
the customer’s exact needs”.
★ E.g. Nike, Lego, T-shirt, ...
★ Build-to-order (pull system).
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Redefining Organizations
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Redefining Organizations
• Improving the supply chain
★
Self-service
✴
Transfer some activities to customers, employees.
✴
In call centers (e.g. track your package), with self-configuration of
products, customers using FAQs, allowing employees to update
data online.
➡
Saves money, increases data accuracy & accountability.
• Impacts on manufacturing
★
From mass-production lines to demand-driven, just-in-time
manufacturing.
★
E.g. Using Web-based ERP systems, customer orders can be
directed to designers, to the production floor within seconds.
★
Production cycle time can be cut 50%, even if production is done in a
different country.
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Redefining Organizations
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