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2008 Pearson Prentice Hall, Electronic Commerce 2008, Efraim Turban, et al.Reconstructed by Noor Maizudin Bin Mohamad Noor, FBA, Unitar

Chapter 2

E-Marketplaces: Structures and

Mechanisms.

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Learning Objectives

1. Define e-marketplaces and list theircomponents.

2. List the major types of e-marketplaces and

describe their features.3. Describe the various types of EC

intermediaries and their roles.

4. Describe electronic catalogs, shopping carts,

and search engines.5. Describe the major types of auctions and list

their characteristics.

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Learning Objectives

6. Discuss the benefits and limitations of

auctions.

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E-Marketplaces

e-marketplace

An online market, usually B2B, in which buyers and

sellers exchange goods or services

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E-Marketplaces

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E-Marketplaces

marketspace

A marketplace in which sellers and buyers exchange

goods and services for money (or for other goods and

services) but do so electronically

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E-Marketplaces

Customers

Sellers

Products and services digital products

Goods that can betransformed to digitalformat and delivered

over the Internet

Infrastructure

Front end

Back end Intermediaries

Third parties thatoperates betweensellers and buyers

Other businesspartners

Support services

E-Marketplace Components and Participants

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E-Marketplaces

front end

The portion of an e-sellers business processesthrough which customers interact, including the sellersportal, electronic catalogs, a shopping cart, a search

engine, and a payment gateway back end

The activities that support online order fulfillment,inventory management, purchasing from suppliers,payment processing, packaging, and delivery

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Types of E-Marketplaces:

From Storefronts to Portals

Electronic Storefronts

storefront

A single companys Web site where products orservices are sold

e-mall (online mall)

An online shopping center where many onlinestores are located

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Types of Stores and Malls

General stores/malls Large marketspaces that

sell all types of products. Examples are

amazon.com, choicemall.com and the major publicportals (yahoo.com, aol.com and msn.com)

Specialized stores/malls Sell only one or a few

types of products, such as books, flowers, cars, or

pet toys. Amazon.com started as a specialized e-

bookstore but today is a generalized store.

1800flowers.com sells flowers and related gifts.

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Types of Stores and Malls

Regional versus global stores Some stores,

such as e-grocers or sellers of heavy furniture,

serve customers that live nearby. However, somelocal stores will sell to customersin other countries

if the customer will pay the shipping, insurance, and

other costs.

Pure-play online organizations versus click-

and-mortar stores Stores maybe pure online

organizations such as Amazon.com. Others are

physical that also sell online such as walmart.com.

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Types of E-Marketplaces

Private e-marketplaces

Online markets owned by a single company; maybe either sell-side and/or buy-side e-marketplaces

sell-side e-marketplace

A private e-marketplace in which one companysells either standard and/or customized productsto qualified companies

buy-side e-marketplaceA private e-marketplace in which one companymakes purchases from invited suppliers

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Types of E-Marketplaces

Public e-marketplaces

B2B marketplaces, usually owned and/or managed

by an independent third party, that include manysellers and many buyers; also known as exchanges

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information portal

A single point of access

through a Web browser

to business informationinside and/or outside an

organization

Types of Portals

Commercial (public)

Corporate

Publishing

Personal

Mobile

Voice

Knowledge

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Types of Portals

Commercial (public) These portals offer diverse

communities and are the most popular portals on the

Internet. (yahoo.com, msn.com)

Corporate Organized access to rich content within

relatively narrow corporate and partners

communities.

Publishing These portals are intended for

communities with specific interests (techweb.com,zdnet.com)

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Types of Portals

Personal These target specific filtered information

for individuals

Mobile

Portals that are accessible from mobiledevices

Voice Web sites with audio interfaces

Knowledge Enable access to knowledge by

knowledge workers and facilitate collaboration

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Transactions, Intermediation,

and Process in E-Commerce

Sellers, Buyers, and Transactions

A seller (retailer, wholesaler, or manufacturer) sells

to customers

The seller buys from suppliers: either raw material(as a manufacturer) or finished goods (as a retailer)

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The Roles and Value ofIntermediaries in E-

marketplaces

The two types of online intermediaries are

infomediaries and brokers infomediaries

Electronic intermediaries that provide and/or control

information flow in cyberspace, often aggregating

information and selling it to others

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A brokeris a company that facilitates transactions

between buyers and sellers

Types of brokers

Buy/sell fulfillment

A corporation that helpsconsumers place buy and sell orders (eTrade)

Virtual mall A company that helps consumers

buy from a variety of stores (Yahoo! Stores)

Metamediary

A firm that offers customersaccess to a variety of stores and provides them

with transaction services, such as financial

services (Amazon zShops)

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Types of brokers

Bounty An intermediary that will locate a

person, place, or idea for a fee (BountyQuest)

Search agent

A company that helpsconsumers compare different stores

(Shopping.com)

Shopping facilitator A company that helps

consumers use online shops by providing

currency conversion, language translation,

payment features and delivery solutions

(MyOrbital.com)

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Intermediaries can address the following five

important limitations ofdirect interaction:

Search costs

It may be expensive for providers andconsumers to find each other

Some intermediaries maintain databases of

customer preferences, and they can predict

demand and reduce search costs by

selectively routing information from providers

to consumers and by matching customers with

products and/or services

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Lack of privacy

Either the buyer or seller may wish to remainanonymous or at least protect some

information relevant to a trade.

Intermediaries can relay messages and make

pricing and allocation decisions without

revealing the identity of one or both parties

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Incomplete information

The buyer may need more information thanthe seller is able or willing to provide.

An intermediary can gather product

information from sources other than the

product provider, including independent

evaluators and other customers

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Intermediaries can address the following five important

limitations ofdirect interaction:

Contract risk

A consumer may refuse to pay after receiving a

product, or a producer may provide inferior

products or give inadequate postpurchase service

Intermediaries can:

Disseminate information about the past

behavior of providers and consumers; or Accept responsibility for the behavior of parties

in transactions; or

Provide insurance against bad behavior

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Pricing inefficiencies

In order to secure a desirable price for aproduct, providers and consumers may miss

opportunities for mutually desirable trades

Intermediaries can use pricing mechanisms

that induce just the appropriate trades; for

example, dealing with an imbalance of buy and

sell orders in stock market

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disintermediation

Elimination of intermediaries between sellers and

buyers

reintermediationEstablishment of new intermediary roles for

traditional intermediaries that have been

disintermediated, or for newcomers

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Electronic Catalogs

and Other Market Mechanisms

electronic catalogs

The presentation of product information in an

electronic form; the backbone of most e-selling sites

Three dimensions of electronic catalogs: The dynamics of the information presentation-

Catalogs may be static or dynamic. In static

catalogs, information is presented in text and

static pictures. In dynamic catalogs, information is

presented in motion pictures or animation,

possibly with supplemental sound.

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Electronic Catalogs


Three dimensions of electronic catalogs:

The degree of customization Catalogs may

be standard or customized. In standard catalogs,

merchants offer the same catalog to anycustomer. In customized catalogs, content,

pricing, and display are tailored to the

characteristics of specific customers.

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Electronic Catalogs


Three dimensions of electronic catalogs:

Integration with business processes

Catalogs can be classified according to the

degree of integration with the following businessprocesses or features: order taking and

fulfillment, electronic payment systems, inventory

and accounting systems; suppliers and

customers extranets.

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Electronic Catalogs


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Electronic Catalogs


search engine

A computer program that can access databases of

Internet resources, search for specific information or

keywords, and report the results. Google, Altavistaand Lycos are popular search engines.

software (intelligent) agent

Software that can perform routine tasks that require

intelligence. For example, software agents can be

used to support tasks such as comparing prices,

interpreting information, and monitoring activities.

Users can even chat with agents.

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Electronic Catalogs


electronic shopping cart

An order-processing technology that allows

customers to accumulate items they wish to buy

while they continue to shop (similar to a shoppingcart in the physical world). The software program of

an electronic shopping cart allows customers to

select items, review what has been selected, make

changes, and the finalized the list. Clicking on buy

will trigger the actual purchase.

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Auctions as EC Market Mechanisms

auction

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

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Traditional Auctions versus

E-Auctions

Limitations of traditional offline auctions

rapid process gives potential buyers little timeto make a decision

In many cases, the bidders do not have muchtime to examine the goods

It may be difficult for sellers to move goods to

an auction site electronic auction (e-auction)

Auctions conducted online. Example: eBay

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Types of Auctions

One buyer, one seller

One seller, many potential buyers

One buyer, many potential sellers Many sellers, many buyers

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Types of Auctions

One buyer, one seller One can use

negotiation, bargaining, or bartering. The resulting

price will be determined by each partysbargaining power, supply and demand in the

items market.

One seller, many potential buyers. The seller

uses a forward auction, an auction in which a

seller entertains bids from buyers. Biddersincrease price sequentially

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One buyer, many potential sellers

reverse auction (bidding or 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

name-your-own-price model

Auction model in which a would-be buyer specifiesthe price (and other terms) he or she is willing to

pay to any willing and able seller. It is a C2B model

that was pioneered by Priceline.com

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Many sellers, many buyers

double auction

Auctions in which multiple buyers and their

bidding prices are matched with multiplesellers and their asking prices, considering the

quantities on both sides

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Benefits of E-Auctions

Benefits to Sellers

Increased revenues from broadening bidder

base and shortening cycle time Opportunity to bargain instead of selling at a

fixed price

Sellers can gain more customer dollars by

offering items directly Improved customer relationship and loyalty

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Benefits of E-Auctions

Benefits to Buyers

Opportunities to find unique items and

collectibles Participation in e-auctions can be entertaining

and exciting

Buyers can bid from anywhere, even with a

cell phone; they do not have to travel to anauction place

With the help of a third party, buyers can

remain anonymous

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Limitations of E-Auctions

Minimal security some of the auctions

conducted on the Internet are not secure because

they are not done in an unencrypted environment.

This means that credit card numbers could be

stolen during the payment process.

Possibility of fraud Because the buyer cannot

see the items, the buyer may get the defective

products. Also, buyers can commit fraud byreceiving goods or services without paying them

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Limitations of E-Auctions

Limited participation Some auctions are by

invitation only; others are open to dealers only.

Limited participation may be a disadvantage to

sellers, who usually benefit from as large a pool

of buyers as possible

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