Using email or having a website are very obvious ways in which businesses can participate in e-business. But perhaps just having a website that promotes your business or emailing clients is only scratching the surface of what is possible. Some businesses would benefit from participating in an online marketplace involving the businesses from whom they buy (ie below them in the supply chain) and the businesses to whom they sell (ie those above them in the supply chain). This kind of online market place is often referred to as an e-marketplace.
An e-marketplace is an electronic exchange where firms register as sellers or buyers to communicate and conduct business over the Internet. For example, firms representing each section in a supply-chain could join an e-marketplace to transfer information and purchase products.
There are many types of e-marketplaces based on a range of business models. They may operate on a cost-recovery basis by an independent third party (such as an industry association) or be set up as a business offering, with a middle-person providing a value-added function such as transaction services.
Services offered by e-marketplaces include business directory listings, electronic catalogues for online purchasing of goods and services and trading or transaction services. E-marketplaces that are worth considering are those that interconnect with other marketplaces and allow low-cost connection to a firm's financial accounting systems.
There has been significant rationalisation in the number of e-marketplaces operating over the last few years, and careful consideration is needed before making a commitment to join an e-marketplace, to determine whether it is appropriate for your business needs.
What e-marketplaces can offer
Advantages of joining an e-marketplace include:
• greater opportunities for suppliers and buyers to make new trading partnerships, either within their supply-chain or across supply-chains
• the potential to lower the costs of negotiating and making transactions with automation of standard business procedures
• the potential for more transparent pricing as buyers and sellers take the opportunity to trade in a more open environment
• the opportunity to access value-added services such as inventory control and management of dispatch and distribution processes using electronic systems
• the potential to access global markets.
To join an e-marketplace or not - the questions to address.
The following is a summary of issues to consider in assessing the case for your business to participate in an e-marketplace.
1. The purpose
• What is the purpose of the e-marketplace? Is this compatible with my business strategy?
• Who else buys from the e-marketplace?
2. Management practices
• Who owns the e-marketplace? Who shares the profits and the risks?
• What is the legal entity, financial structure and organisational structure?
• What are the contractual agreements I will be required to enter into? - eg exit clauses?
• Does participation in one e-marketplace preclude me from participating in another?
• Am I denied participation in an e-marketplace because of some exclusive arrangement brokered by a competitor?
These last two points are particularly important with respect to avoiding participating in e-marketplaces that operate under price collusion and other anti-competitive behaviour that is restricted by the Australian Competition and Consumer Commission.
3. Business model of the e-marketplace
• What does it cost to participate? - joining fee, exit fee, annual fee, transaction fee (is this per transaction or limited to a certain volume of transactions), fees for value added services
• What is the switching cost to change e-marketplaces?
• What is the potential revenue from participation? (What is the volume of sales enjoyed by current participants in the e-marketplace?)
• Are the answers to these issues consistent with my business model?
4. Branding and promotion
• Does the e-marketplace have a brand or attachment to a brand of integrity recognised by the target audience ?
• Is it promoted vigorously via suitable means? - eg email, TV, magazines, other sites
• Does it have sufficient and suitably qualified staff to promote the e-marketplace? - eg devise and implement promotional strategies and to provide held desk facilities
5. Contents
• Who owns the contents, or is the e-marketplace just a gateway? If the e-marketplace owns the contents or is the "umbrella-merchant" there are significant legal, contents, marketing, technical and maintenance ramifications.
• Services and products offered through the e-marketplace must:
o be appropriate for online selling and fulfilment - their availability, the back-end inventory and accounting systems used by the merchant/supplier
o have high potential for cross-promotion across all media - ie web, TV, newspapers
o be constantly refreshed and have new products and services added.
• How will my products be displayed on the site? - next to my competitors? showing my logo and brands?
6. Design
• Does the design and functionality make it easy for users to find my business and to purchase from me?
• Is it so easy to use that they want to come back?
7. Technical requirements
• What do I have to do with my systems to make them compatible with systems used by the e-marketplace? Also, what are the integration costs associated with making my systems compatible with those used by potential buyers or markets accessed through the e-marketplace?
• Are the services provided by the e-marketplace appropriately reliable and fast?
• Is the e-marketplace adequately and appropriately staffed to maintain services 24 hours x 7 days x 52 weeks per year?
What to do
1. Work through the questions and issues posed above and determie whether e-marketplaces are for you and/or which one is appropriate.
2. Explore e-market basics.
Download and read the following document: From Paper to Procurement - effective catalogue creation and management for buyers and suppliers (574 kb)
This guide has just been produced by the Australian Government (Department of Communications, Information Technology and the Arts) in conjunction with relevant associations, agencies and companies that specialise in the area of e-procurement and e-catalogues. It was funded through the Australian Government's Information Technology Online (ITOL) grants program.
Access the E-market Services website at http://www.emarketservices.com/emarket_basics and read about (or download the PDF) e-markets and which one might be best for you.
E-market Services is a not-for-profit project funded by the trade promotion organisations of Australia, Denmark, Holland, Iceland, Italy, New Zealand, Norway, Portugal, Spain and Sweden. This organisation provides information about e-markets in different industries all over the world, including a directory of e-markets, case studies, articles, reports and newsletters. Their aim is to make it easier for companies, particularly small and medium sized companies, to use electronic marketplaces for international business. http://www.emarketservices.com
3. Undertake E-market Services' self assessment checklist. The free Self-Assessment Checklist has been developed by eMarket Services and Det Norske Veritas (DNV). DNV has developed the checklist to make it easier for visitors to eMarket Services to find quality e-markets. It is intended to help e-markets grow trust, improve their business longevity, grow the confidence of e-market users, and promote a healthy e-business environment. http://www.emarketservices.com/ebusiness_issues/SelfAssessmentChecklist_Sept03.pdf
4. Seek advice from your industry association.
5. Trade New Zealand
This site provides a checklist of issues to consider when deciding whether e-markets are applicable to your business.
http://www.tradenz.govt.nz/page_article/0,1300,4512%252d2108,00.html
6. Opportunity Wales guide to e-marketplaces
http://www.opportunitywales.co.uk/0-0-0/2-0-0/2-3-0/2-3-13
7. This website also has information on electronic trading places and selecting an e-marketplace.