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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.
BISCompetition
Department, 2015: BIS 312in
E- the digital economy.
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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
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312 E-
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E-Marketplace Components & Participants
Customers Look for bargains, customized items, collectors items,
entertainment, socialization, etc..
Search for detailed information, compare, bid, and
negotiate.
Sellers Stores owned by companies, government agencies, or
individuals.
Products and Physical products, digital products.
services
Infrastructure Electronic networks, hardware, software, etc..
Front end The sellers 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.
Intermediarie Help match buyers & sellers, provide some
s infrastructure services, help customers and/or sellers
institute, complete transactions.
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Other E.g. Shippers use the Internet to collaborate along the
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.
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Open to the public, regulated by the government / the Page 9
Customer Interaction Mechanisms: Storefronts, Malls,
and Portals
Electronic storefronts (E.g. dell.com, walmart.com)
A single companys 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 Large marketspaces that sell all kinds of
products, e.g. amazon.com, choicemall.com,
walmart.com, yahoo.com, aol.com, msn.com.
Specialized Sell only one / a few kinds of products, e.g.
stores/malls books, flowers, wine, cars, pet toys.
Regional versus global Serve customers that live nearby, e.g.
stores parknshop.com.
Pure-play online E.g. amazon.com; walmart.com.
organizations versus
click-and-mortar stores

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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 Provide organized access to rich content within
(enterprise portals / relatively narrow corporate & partners
enterprise information communities.
portals)
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.
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Knowledge 2015: BIS 312 E- Enable access to knowledge by knowledge Page1
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
BIS Department, 2015: BIS 312 E-
intermediarys 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
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312 E- systems; suppliers / Page1
Online Catalogs Versus Paper Catalogs
Type Advantages Disadvantages
Paper Easy to create without high technology Difficult to update changed
catalog Reader is able to look at the catalog product information promptly
s without computer system Display a limited number of
More portable than electronic products
Limited information through
photographs & textual description
is available
No possibility for advanced
multimedia.
Online Easy to update product information Difficult to develop catalogs, large
catalog Can integrate with the purchasing fixed cost
s process Need for customer skill to deal
Good search & comparison capabilities with computers & browsers.
Provide timely, up-to-date product
information
Provide globally broad range of product
information
Can add voice & animated pictures
Long-term cost savings
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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 users or
organizations 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
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2015: BIS 312 E- agents Page1
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, Last only a few minutes/seconds,
for each item sold May not get for each item sold May not get
what they really want, pay too the highest possible price.
much for the item.
Difficult to move goods to an
Do not have much time to examine auction site.
the goods.
Commissions are high (rent,
Difficult to know about auctions, advertising, labor).
cannot compare what is offered at
each location.
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
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Auctions
4 categories of auctions:
1. One buyer, one seller
Use negotiation, bargaining, bartering.
The resulting price: determined by each partys bargaining
power, supply & demand in the items 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 2015:
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312 E- 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 Buyers E-Auctioneers
Increased revenues: Opportunities to find Higher repeat
broader bidder base, unique items & purchases.
shorter cycle time, sell collectibles.
Higher stickiness to
globally.
Entertainment. the Web site.
Opportunity to bargain: Convenience: buyers Easy expansion of the
sell any time, conduct bid anywhere; do not auction business.
frequent auctions. have to travel to an
Optimal price setting auction place.
determined by the
Anonymity.
market.
Possibility of finding
Gain more customer bargains.
dollars by offering items
directly (no
intermediaries).
Liquidate large
quantities quickly.
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Improved customer Page2
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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Bartering and Negotiating Online
Online bartering
Bartering
The exchange of goods and services.
E-bartering is done in a bartering exchange
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
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Deals with pricing and/or nonpricing terms (payment method
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Competition in the Internet Ecosystem
Competitiveness factors
EC competition is very intense because online transactions enable:
Lower search Customers can find less expensive products Sellers reduce
costs for buyers prices, improve customer service.
Speedy Customers can find products quickly.
comparisons
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 Setting up a Web site is easy, fast, inexpensive Dont need
are reduced sales force & brick-and-mortar stores.
Virtual Easy access to the Web + Share production & sales information
partnerships easily Creation of virtual partnership increases dramatically.
multiply
Market niches No limits imposed by the physical storefronts No. of business
abound 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
BIS Department, 2015:communication
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Competition in the Internet Ecosystem
Customization and personalization
Customization
Creation of a product or service according to the
buyers 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 2015:
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The Analysis-of-Impacts Framework

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Improving Marketing and Sales
Old model - New model -
Mass & segmented marketing One-to-one & customization
Relationships with Customer is a passive recipient Customer is an active coproducer
customers
Customer needs Articulated Articulated, inferred
Segmentation Mass market + target Segmented targets, 1:1 targets
segments
Product & service Product line extensions & Customized products, services, marketing;
offerings modification personalization
New product Marketing + R&D R&D develops the platforms consumers
development 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 Direct (online) distribution + 3rd-party logistics
marketing services
Branding Traditional branding + Customers name as the brand
cobranding
Basis of Marketing power Marketing finesse + customer as partner while
competitive integrating marketing, operations, R&D,
advantage information
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Communities Discount to members in Discounts to members of e-communities, Page3
social
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.
BIS E.g. Brokers
Department, who
2015: BIS 312 E-manage electronic intermediation, like Page3
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 customers 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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