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-marketplaces or 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. 2.1: Marketspace Components
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

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) Types of Stores and Malls
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
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: Six Types of Portals
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
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
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: Auctions can be done:
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): Dynamic pricing
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 multiple buyers and their bidding prices are matched with multiple sellers and their asking prices, considering the quantities on both sides.

27. 2.5: Auctions: Benefits to 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.