Introduction to Electronic Introduction to Electronic Marketplaces (E-Marketplaces (E-

marketplaces)marketplaces)

ELECTRONIC MARKETPLACES ELECTRONIC MARKETPLACES (E-MARKETPLACES)(E-MARKETPLACES)

An e-marketplace is a location on the Internet An e-marketplace is a location on the Internet where companies can obtain or disseminate where companies can obtain or disseminate information, engage in transactions, or work information, engage in transactions, or work together in some way. together in some way.

Most of the e-marketplaces provide two basis Most of the e-marketplaces provide two basis functions: functions: – 1) they allow companies to obtain new suppliers or 1) they allow companies to obtain new suppliers or

buyers for company products, orbuyers for company products, or– 2) developing streamlined trading networks that make 2) developing streamlined trading networks that make

negotiating, settlement, and delivery more efficient. negotiating, settlement, and delivery more efficient. Currently e-marketplaces exist in many different Currently e-marketplaces exist in many different industries. industries.

E-marketplaces structuresE-marketplaces structures

E-marketplaces can be structured in several E-marketplaces can be structured in several different ways.different ways.– One way to structure a marketplace such that One way to structure a marketplace such that

the market maker is neither a buyer or seller, the market maker is neither a buyer or seller, but is a neutral third parties. eBaybut is a neutral third parties. eBay

– Other e-marketplaces are set up be a Other e-marketplaces are set up be a consortium of sellers.consortium of sellers.

– Buyers can also set up a marketplace to reduce Buyers can also set up a marketplace to reduce their costs and obtain better purchasing terms. their costs and obtain better purchasing terms.

– Moreover, large buyers can set up another type Moreover, large buyers can set up another type of marketplace, a private marketplace, for their of marketplace, a private marketplace, for their supplier networks. supplier networks.

E-Market is …E-Market is …Web-based marketplaceWeb-based marketplace

e-markete-market is Web sites is Web sites where buyers and where buyers and sellers come together sellers come together to communicate, to communicate, exchange ideas, exchange ideas, advertise, bid in advertise, bid in auctions, conduct auctions, conduct transactions, and transactions, and coordinate inventory coordinate inventory and fulfillmentand fulfillment

BuyersBuyers

SellersSellers

MarketSiteMarketSite

Key Considerations For Looking At Key Considerations For Looking At E-marketplaces E-marketplaces

Ownership of the E-marketplace:Ownership of the E-marketplace: This is This is crucial. Successful e-marketplaces are usually crucial. Successful e-marketplaces are usually backed by good capital and this helps to ensure backed by good capital and this helps to ensure their success and longevity. You also do not their success and longevity. You also do not want to be involved in a marketplace if your want to be involved in a marketplace if your competitor is the major owner. competitor is the major owner.

Costs:Costs: This is also important. You should This is also important. You should compare the costs of joining the marketplace compare the costs of joining the marketplace with the projected savings and efficiency gains with the projected savings and efficiency gains from joining the marketplace. Look for hidden from joining the marketplace. Look for hidden costs. Possible things that e-marketplace costs. Possible things that e-marketplace charge for are commissions for completed charge for are commissions for completed transactions, membership fees, listing fees, transactions, membership fees, listing fees, value added services.value added services.

key considerationskey considerations Ease of Use / Support:Ease of Use / Support: An e-marketplace should An e-marketplace should

be easy to use and should not require a lot of be easy to use and should not require a lot of training, special equipment for your staff. training, special equipment for your staff.

Industry Fit:Industry Fit: Many e-marketplaces are targeted Many e-marketplaces are targeted toward one or two industries. Consequently the toward one or two industries. Consequently the processes and structure of the marketplace are processes and structure of the marketplace are designed to maximize efficiency gains and designed to maximize efficiency gains and transaction costs for that industry. Be sure your transaction costs for that industry. Be sure your company is a good fit.company is a good fit.

Marketplace Participation:Marketplace Participation: If there are no If there are no

buyers and sellers listed on the marketplace, it is buyers and sellers listed on the marketplace, it is unlikely that you will gain anything from joining the unlikely that you will gain anything from joining the marketplace. A viable marketplace will have a lot of marketplace. A viable marketplace will have a lot of buyers and sellers - this is the only way that an e-buyers and sellers - this is the only way that an e-marketplace can work. marketplace can work.

Key considerationsKey considerations Security / Privacy:Security / Privacy: Be sure that the transaction Be sure that the transaction

information is not published or available for a information is not published or available for a third party or a competitor. You do not want a third party or a competitor. You do not want a competitor getting hold of your key supplier competitor getting hold of your key supplier data or pricing information. data or pricing information.

Other Services:Other Services: Depending on your industry, Depending on your industry, you may want to check that other services the you may want to check that other services the marketplace offers. marketplace offers.

Process Integration:Process Integration: An efficient marketplace An efficient marketplace should be designed so that it integrates with should be designed so that it integrates with existing buyer and seller ways of doing business. existing buyer and seller ways of doing business.