Chapter 2

E-Marketplaces:
Structures and Mechanisms
Learning Objectives

1. Define e-marketplaces and list their

components.
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, search engines, and portals.

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Learning Objectives

5. Describe the major types of auctions

and list their characteristics.
6. Discuss the benefits, limitations, and
impacts of auctions.
7. Describe bartering and negotiating
online.
8. The major mechanisms of Web 2.0.

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E-MARKETPLACES

 e-marketplace (marletspace)
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.

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E-MARKETPLACES COMPONENTS

 E-MARKETPLACE COMPONENTS AND

PARTICIPANTS
 Customers
 Sellers
 Products and services
 digital products
Goods that can be transformed to digital format
and delivered over the Internet.
 Infrastructure: Hardware, Software and
Networks

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E-MARKETPLACES COMPONENTS

 front end
The portion of an e-seller’s business processes
through which customers interact, including the
seller’s portal, 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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Sun 2-10 E-MARKETPLACES
COMPONENTS
 intermediary
A third party that operates between sellers and buyers.
(Matching sellers and buyers, assisting in finding bus. Partner)
 Other business partners —collaborate on the Internet,
mostly along the supply chain (ex: shippers)
 Support services such as
 Certification and trust services (to ensure security)

Disintermediation: Elimination of intermediaries between

sellers and buyers. (Ex: Dell)
Reintermediation: Establishment of new intermediary roles
for traditional intermediaries that have been disintermediated.
(Ex: edmunds.com – cars)

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Types of E-Marketplaces and Mechanisms:
from Storefronts to Portals

 TYPES OF E-MARKETPLACES
 private e-marketplaces
Online markets owned by a single company; may
be either sell-side and/or buy-side e-marketplaces.
 sell-side e-marketplace
A private e-marketplace in which one company sells either
standard and/or customized products to qualified
companies. (Ex: Cisco.com)
 buy-side e-marketplace
A private e-marketplace in which one company makes
purchases from invited suppliers. (Ex: Raffles hotels)

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Types of E-Marketplaces and Mechanisms:
from Storefronts to Portals
 public e-marketplaces
B2B marketplaces, usually owned and/or
managed by an independent third party, that
include many sellers and many buyers; also
known as exchanges. (Ex: Stock exchange)
 Consortia —e-marketplaces that deal with
suppliers and buyers (usually) in a single
industry (may be established by buyersin the
industry, OR sellers in the industry)
 Vertical consortia are confined to one industry
 Horizontal allow different industries trade there

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Types of E-Marketplaces and Mechanisms:
from Storefronts to Portals

 E- Storefront ( Webstore )
A single company’s Web site where
products or services are sold. (Ex: Walmart.com)
 e-mall (online mall)
An online shopping center where many
online stores are located. (ex: Hawaii.com)

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Types of E-Marketplaces and Mechanisms:
from Storefronts to Portals

 TYPES OF STORES AND MALLS

 General stores/malls (ex:Yahoo.com)
 Specialized stores/malls (Ex: Buy.com – computers)

 Regional versus global stores

 Pure-play online organizations (Amazon.com)
versus click-and-mortar stores (Walmart.com)

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Sun 2-10 Types of E-Marketplaces and
Mechanisms: from Storefronts to Portals

 Information (Web) portal

A single point of access through a Web
browser to business information inside
and/or outside an organization.
(Scattered info. – documents, DBs, E-
mail messages, …etc)

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Types of E-Marketplaces and Mechanisms:
from Storefronts to Portals

 Types of Portals
 Commercial (public) portals --- yahoo, msn
 Corporate portals --- rich content, narrow community
 Publishing portals --- large communities, diverse interests
 Personal portals – specific filtered info to individuals (Personalization)
 mobile portal
A portal accessible via a mobile device.
 voice portal
A portal accessed by telephone or cell phone.
 Knowledge portals

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Intermediation in E-Commerce
 Brokers
 Infomediaries
 Electronic intermediaries that provide and/or
control information flow in cyberspace, often
aggregating information and selling it to others.
 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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Intermediation in E-Commerce
 Intermediaries provide value-added activities and
services to buyers and sellers: wholesalers, retailers,
infomediaries
 Roles of intermediaries
 Search costs—databases on customer preferences
 Lack of privacy—anonymity of sellers and buyers
 Incomplete information—gather product information
 Contract risk—protect sellers against non-payment
 Pricing inefficiencies—induce appropriate trades

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Participants, Transactions,
Intermediation, and Processes in EC

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Electronic Catalogs

 electronic catalogs
The presentation of product information in an
electronic form; the backbone of most e-
selling sites.
 Electronic catalogs can be classified on three
dimensions:
1. The dynamics of the information presentation
2. The degree of customization
3. Integration with business processes

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Electronic Catalogs
 Evolution of electronic catalogs
 Merchants—advertise and promote
 Customers—source of information and
price comparisons
 Consist of product database, directory and
search capability and presentation function
 Replication of text that appears in paper
catalogs
 More dynamic, customized, and integrated

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Classifications of
Electronic Catalogs
 Dynamics of information presentation—static or
dynamic
 Degree of customization—ready-made or
customized
 Electronic catalogs allow integration of:
 Order taking and fulfillment
 Electronic payment
 Inventory and accounting system
 Suppliers’ extranet
 Relationship to paper catalogs

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Customized Catalogs
 Assembled specifically for:
 A company
 An individual shopper

 Customization systems can:

 Create branded, value-added capabilities
 Allows user to compose order
 May include individualized prices, products,
and display formats
 Automatically identify the characteristics of
customers based on the transaction records

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Search Engines, Intelligent Agents
and Shopping Carts
 Search engine
A computer program that can access databases of
Internet resources, search for specific information or
keywords, and report the results.
 Software (Intelligent) Agents —software that can
perform routine tasks that require intelligence
 E-commerce users use both search engines and
intelligent agents
 Search engines find products or services
 Software agents conduct other tasks (comparisons)
 electronic shopping cart
An order-processing technology that allows customers
to accumulate items they wish to buy while they
continue to shop.

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Auctions

 Auction—a market mechanism by which

a seller places an offer to sell a product
and buyers make bids sequentially and
competitively until a final price is reached
 Auctions deal with products and services
for which conventional marketing
channels are ineffective or inefficient

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Limitations of Traditional Auctions

 Traditional auctions are generally a

rapid process
 It may be difficult for sellers to move
goods to the auction site
 Commissions are fairly high

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Electronic Auctions
 Electronic auctions (e-auctions)—auctions conducted
online
 Major online auctions offer:
 Consumer products
 Electronic parts
 Artwork
 Vacation packages
 Airline tickets
 Host sites on the Internet serve as brokers offering:
 Services for sellers to post their goods for sale
 Allowing buyers to bid on those items
 Many sites have certain etiquette rules that must be
adhered to in order to conduct fair business

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Dynamic Pricing
 Dynamic pricing—prices that change based on
supply and demand relationships at any given
time
 The four major categories of dynamic pricing
are based on the number of buyers and sellers
involved:
 One buyer, one seller
 One seller, many potential buyers
 One buyer, many potential sellers
 Many sellers, many buyers

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Types of Dynamic Pricing

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Dynamic Pricing (cont.)
 One buyer, one seller uses
 Negotiation
 Bargaining

 Bartering

 Price will be determined by:

 Each party’s bargaining power
 Supply and demand in the item’s market

 Possibly business environment factors

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Dynamic Pricing (cont.)

 One seller, many potential buyers

 Forward auction—an auction in which a
seller entertains bids from buyers
 English auction—an auction in buyers
bid on an item in sequence and the price
increases with time
 Yankee auction—auction of multiple identical items
in which bidders can bid for any number of the
items offered, and the highest bid wins

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Dynamic Pricing (cont.)
 Dutch auction—auction of multiple
identical items, with prices starting at a
very high level and declining as the
auction time passes
 Free-fall (declining price) auction—a
variation of the Dutch auction in which
only one item is auctioned at a time; the
price starts at a very high level and
declines at fixed time intervals, the
winning bid is the lowest one when the
time expires
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English Auction, Ascending Price

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Dynamic Pricing (cont.)
 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
price reducing sequentially, and the
lowest bid wins; primarily a B2B or G2B
mechanism

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The Reverse Auction Process

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Dynamic Pricing (cont.)
 One buyer, many potential sellers (cont.)
 ”Name-your-own-price” model
 Consumer-to-business (C2B) model

 Many sellers, many buyers

 Double Auction—buyers and their
bidding prices and sellers and their
asking prices are matched, considering
the quantities on both sides

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Limitations of Electronic Auctions
 Possibility of fraud—defective goods or
receive goods/services without paying
 Limited participation—invitation only or
Open to dealers only
 Lack of security—C2C auctions sometimes
not done in an unencrypted environment
 Limited software—only a few “complete”or
“off-the-shelf” market-enabling solutions

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Impacts of Auctions

 Auctions as a coordination mechanism

 Auctions as a social mechanism to
determine a price
 Auctions as a highly visible distribution
mechanism
 Auctions as a component in e-
commerce

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 Bartering Online
 Bartering—an exchange of goods and services
 Bartering exchanges

 Give your offer to intermediary

 Intermediary asses value of your product or

service in”points”
 Use “points” to buy what you need

 Bartering sites must be financially secure

 Alternative to bartering is to auction surplus

and then use the money collected to buy items
needed
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Bartering Online (cont.)

 E-bartering—bartering conducted online,

usually by a bartering exchange
 Bartering exchange—a marketplace in
which an intermediary arranges barter
transactions

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Online Negotiating
 Online negotiation—electronic negotiation, usually
done by software (intelligent) agents that perform
searches and comparisons; improves bundling
and customization of products and services
 Dynamic prices can be determined by negotiation
 Negotiated prices result from interactions and
bargaining among sellers and buyers
 Expensive items like cars and real estate
 Deal with nonpricing terms like payment
method and credit

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Online Negotiating (cont.)

 Three factors that facilitate negotiated

prices
 Intelligent agents that perform searches
and comparisons
 Computer technology that facilitates
negotiation process
 Products and services that are bundled
and customized

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Web 2.0 Mechanisms and Tools

 Weblogging (blogging)
Technology for personal publishing on
the Internet.
 blog
A personal Web site that is open to the
public to read and to interact with; often
dedicated to specific topics or issues.

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Web 2.0 Mechanisms and Tools

 wikilog (wikiblog or wiki)

A blog that allows everyone to
participate as a peer; anyone can add,
delete, or change content.

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Web 2.0 Mechanisms and Tools

 podcast
A media file that is distributed over the Internet
using syndication feeds for playback on mobile
devices and personal computers. As with the
term radio, it can mean both the content and
the method of syndication.
 mashup
A Web site that combines content data from
more than one source to create a new user
experience.

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