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E book chapter 2 - Môn Kinh tế vĩ mô - Đại Học Kinh Tế - Đại học Đà Nẵng
Pinterest is a company that provides virtual pinboards that allow users to organize and share images found on the Web (referred to as “pins”). The pinned images (“boards”) are organized by any category the user wants and placed on a virtual pinboard, just like on a real bulletin board. For example, one can collect pictures of sailboats and pin them on one pinboard, with appropriate text explanation. Tài liệu giúp bạn tham khảo ôn tập và đạt kết quả cao. Mời bạn đọc đón xem!
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lOMoARcPSD| 50000674
E-Commerce: Mechanisms, Platforms, and Tools 2 Contents
1. Describe the major electronic commerce
Opening Case: Pinterest: A New Kid
(EC) activities and processes and the
on the E-Commerce Block ....................................... 51 mechanisms that support them.
2.1 Electronic Commerce Mechanisms: 2 . Defi ne e-marketplaces and list
An Overview .................................................... 54 their components. 2.2
3. List the major types of e-marketplaces and
E-Marketplaces ............................................... 55 describe their features.
2.3 Customer Shopping Mechanisms:
4. Describe electronic catalogs, search engines,
Webstores, Malls, and Portals ........................ 61 and shopping carts.
2.4 Merchant Solutions: Electronic Catalogs,
5 . Describe the major types of auctions and list Search Engines, their characteristics.
and Shopping Carts ........................................ 64
6. Discuss the benefi ts and limitations of e-
2.5 Auctions, Bartering, auctions.
and Negotiating Online ................................... 67
7. Describe bartering and negotiating online.
2.6 Virtual Communities
8. Describe virtual communities.
and Social Networks........................................ 73
9 . Describe social networks as EC mechanisms.
2.7 Virtual Worlds as an Electronic
10. Understand virtual worlds and their use in
Commerce Platform ........................................ 80 EC.
2.8 Emerging EC Platforms: Augmented
11. Describe the emerging technologies of
Reality and Crowdsourcing ............................ 83
augmented reality and crowdsourcing. 12.
2.9 The Future: Web 3.0, Web 4.0
Describe Web 3.0 and defi ne Web 4.0.
and Web 5.0 ..................................................... 86
Managerial Issues..................................................... 88
Closing Case: Madagascar’s Port
OPENING CASE: PINTEREST:
Modernizes Customs with TradeNet ...................... 93
A NEW KID ON THE E-COMMERCE BLOCK
Electronic supplementary material The online version An e-commerce site talked about a great deal
E. Turban et al., Electronic Commerce: A Managerial and Social Networks Perspective, 51
Springer Texts in Business and Economics, DOI 10.1007/978-3-319-10091-3_2,
© Springer International Publishing Switzerland 2015
of this chapter (doi: 1 0.1007/978-3-319-10091-3_2 ) since 2011 is Pinterest.
contains supplementary material, which is available to The Opportunity authorized users Learning Objectives
P interest is a social bookmarking website where
users “pin” images on a virtual “pinboard.” The
U pon completion of this chapter, you will be social bookmarking of images has been practiced able to:
on the Internet all over the world, for several
years. The company’s founders saw the business lOMoARcPSD| 50000674 52
potential and the success of similar companies in Yang’s Suggestions
Brazil and China. Furthermore, they succeeded Q uora Corporation posted a question on its
in attracting initial venture capital (see Chapter website: “How does Pinterest generate
16 ) to expand the business. For a guide, see revenue?” One of the most comprehensive
Leland ( 2013 ), and for statistics, see Smith ( answers received was provided by “Avid 2014) .
Pinterest User” Yang ( 2012) who presented 13
potential m onetization opportunities in four
categories: charging advertisers (e.g., see The Solution
Dembosky 2013 ), charging e-commerce
partners, charging users, and charging other B2B
Pinterest is a company that provides virtual partners. Most of these opportunities have
pinboards that allow users to organize and share existed in EC for years (e.g., charging for
images found on the Web (referred to as “pins”). premium services, creating an online retail shop,
The pinned images (“boards”) are organized by using an affi liate program, and building a
any category the user wants and placed on a comprehensive advertisement scheme).
virtual pinboard, just like on a real bulletin
board. For example, one can collect pictures of Selling Data for Market Research and
sailboats and pin them on one pinboard, with Analysis
appropriate text explanation. You can collect Brave ( 2012) suggested selling customer data
decorations for your home on another pinboard, available on Pinterest to retailers who can use
while you collect Chinese recipes on a third analytics, including data mining, to conduct
pinboard. Millions of people create pinboards market research using this data. Customer data
and anyone can search and view them. You can may reveal important statistical associations and
also add friends to your account and “follow” relationships between consumer behavior,
them. According to their website, ‘Pinterest is a content (e.g., product recommendations,
tool for collecting and organizing the things that personalization, ads), and services and products
inspire you’ (see about.pinterest.com/ ). For provided. These associations can be used for
more about what Pinterest is and how it works, one-to-one relationships and segmentation, as see
sheknows.com/living/articles/852875/ well as for marketing promotions and
pinterest-what-it-is-how-to-use-it-and-
advertisements. Retailers can use affi nity
whyyoull- be-addicted .
modeling and analysis to ascertain relationships
Having many visitors and a rapid growth rate so retailers can better understand consumer
are necessary but not suffi cient for EC success. purchasing behavior. This enables optimal
Viable business and revenue models are also marketing communication strategies . Brave needed.
also noted that by pinning and re-pinning at
Pinterest, consumers show their affi nity to
The Business and Revenue Models
certain themes or specifi c products. Brave
Pinterest does not have a formal revenue provided the following types of affi nity data:
model. (The company is privately held and it connection between products and themes,
does not have to report about such a model to segmenting people based on their affi nity to
the public.) It looks as though the company’s products, or to a collection of products in specifi
current priority is growth, as expressed in its c themes.
mission statement. Nevertheless, many people speculate about (or suggest)
revenue Other Suggestions for Doing Business on
opportunities for the company, some of which Pinterest are provided next.
• Hemley ( 2012) provides 26 different
suggestions in an A-Z guide (e.g., A=Add a lOMoARcPSD| 50000674 53
Pinterest “Follow” and/or “Pin it” Button;
S imilar reports on this amazing growth rate
B=Brands and Pinterest; C=Crowdsourcing and popularity are provided by comScore and and so forth)
other reporting companies. This growth has
• Hub Spot ( hubspot.com offers a free e-book attracted over $200 million in venture capital in
) titled “How to Use Pinterest for Business” ( 2012/2013 and generated many suggestions on
offers.hubspot.com/how-to-use-
money-making possibilities with Pinterest (e.g.,
Opening Case: Pinterest: A New Kid on the E-Commerce Block pinterestfor- business ). It
includes see Carr 2012 ; Loren and Swiderski 2012 ).
information such as how to create a Pinterest
In January 2014, the valuation of Pinterest
business account and how Pinterest works.
was about $3.8 billion. Should the company be
• Mitroff ( 2012) suggested using the approach able to generate signifi cant revenue, it probably
of Zappos Corporation. This approach, which will go to the IPO route, in which case the
is called PinPointing , involves product valuation may be much higher. Let us look now
recommendations based on what customers at some managerial issues facing the company.
pin. Pinterest may collaborate with retailers Representative managerial issues are:
such as Zappos to jointly create product recommendations.
(See Legal Concerns
pinpointing.apps.zappos.com/ .)
Many people collect images from the Internet to
• Wikipedia lists several potential revenue build their pinboards (and possibly a brand)
sources at en.wikipedia.org/wiki/Pinterest . without asking permission from the content
• For more suggestions see business.pinterest. creators, giving them an attribute, or
com/en/pinterest-guides .
compensating them. Some of the collected
material is formally copyrighted; other material
Using Pinterest for Advertising and
may be considered copyrighted. A similar Marketing
problem exists with material used on Facebook
M ost of the suggestions cited above, as well as or by bloggers. According to Pinterest’s ‘Terms of suggestions by others, concentrate
on Use,’ members are “solely responsible for what
advertising and marketing opportunities. For they pin and repin.” Furthermore, users must
comprehensive coverage, see Cario ( 2013) , have explicit permission from the owners of
Hayden ( 2012 ), and Miles and Lacey ( 2012 ). contents to post them. According to Shontell (
For how retailers can use Pinterest, see Jopson 2012 ), one lawyer deleted all her Pinterest and Kuchler ( 2013 ).
boards out of fear of copyright violation. Note
that Pinterest places all blame and potential
legal fees on its users (who may have to pay the
Results and Managerial Issues
legal fees incurred by Pinterest also). Pinterest
has taken several steps to alleviate the legal
P interest is the fastest growing social network concerns of users (e.g., see Hempel 2012 ). The
ever, and according to a marketing service
company is continuously adding measures to
(Experian 2012 ), Pinterest is the third most minimize the legal problems. For example, in
popular social network on the Web, behind May 2012, the company added a feature that
Facebook and Twitter (up from 7th place in facilitates the attribution of credit to content
November 2011). As of July 2013, the total creators. For a discussion, see Hornor ( 2012 ).
number of Pinterest users worldwide was 70 Finally, legal concerns may include dealing with
million ( smallbusiness. yahoo.com/advisor/30- the spammers who are busy on the site.
reasons-market-businesspinterest-2014-
infographic-184545665.html) . lOMoARcPSD| 50000674 54 The Competition
The success of Pinterest will be determined by its
The popularity of Pinterest has resulted in many revenue model and the company’s profi tability.
attempts to clone the company. Since the core
concept is basically image sharing, it may not be Sources: Based on Brave ( 2012) , Carr ( 2012 ),
patentable; therefore, competitors try to jump Hempel ( 2012 ), Jopson and Kuchler ( 2013 ),
into niche markets. For example, TripAdvisor ( Loren and Swiderski ( 2012) , Yang ( 2012 ), and
tripadvisor.com ) concentrates on travel. We Volpe ( 2012 ).
Heart It ( weheartit.com) is a Brazilian company
(operating in the U.S.) that is very similar to
Pinterest. An emerging competitor is Fancy 2.1 ELECTRONIC COMMERCE
( fancy.com ), which partnered with Google+ in
2013. Several companies concentrate on adult MECHANISMS: AN OVERVIEW
entertainment and pornography. Indirect
competitors are several Chinese companies that The many EC models and types of transactions
operate in a culturally different environment presented in Chapter 1 are enabled by different
(see McKenzie 2012 ). Companies such as mechanisms. To begin with, most B2C
Facebook and Google may initiate a competitive applications are conducted on the Internet. In
service. Some believe that Pinterest may take addition, the generic enablers of any
business away from both Facebook and Twitter information system including databases,
networks, security, software and server
due to its better match with the business world. software, operating systems, hardware (Web
servers), and hosting services need to be Conclusion
established. Added to the above are the specifi c
EC mechanisms presented in this chapter, such
According to Hempel ( 2012 ), Pinterest is more as electronic markets, shopping carts, e-
business oriented than Facebook or Twitter and catalogs, and support services such as payment
visitors tend to buy more from there, although and order fulfi llment. In addition to of all of the
the latter companies drive more visitors to their above, there are different methods for executing
sites. It seems that Pinterest has some potential EC, such as buying at a fi xed price or at an
benefi ts for small businesses (e.g., designers). auction, and each method has a different
Many companies already use Pinterest to derive support mechanism. Finally, there are the Web
benefi ts (e.g., see the Etsy case in Chapter 3 and 2.0-based collaboration and communication
Volpe 2012 ) . However, these applications do mechanisms (e.g., Twitter) and special platforms
not currently provide any revenue to Pinterest. such as the one used by Pinterest. In this
chapter, we describe the major EC mechanisms so that
LESSONS LEARNED FROM THE CASE
sharing. Pinterest is a derivative of Web 2.0 and
social media and as such, it is a new mechanism
P interest is a social network that
for supporting EC. Other social media
connects people who fi nd interesting
mechanisms that are covered in this chapter
images on the Web. At the same time,
are social networks and virtual worlds;
Pinterest is a platform on which several
different types of social media tools such as
activities of EC can be supported. For
blogs, microblogs, and wikis, are discussed in
example, companies can build pinboards
Online File W2.1. This chapter also covers the
that promote their brands. Pinterest can
traditional mechanisms of EC such as
be used as a platform for facilitating marketplaces, merchant software, and
innovations via idea-generation and auctions. lOMoARcPSD| 50000674 55
you will be able to understand their uses in the forthcoming chapters.
EC Activities and Support Mechanisms
E C activities are divided into six categories,
which are listed on the left side of Figure 2.1
. Each activity is supported by one or more
EC mechanisms, which are shown on the
right side of Figure 2.1 , along with the
section number in this chapter where they
are presented. Additional mechanisms exist
for special activities, such as payment
(Chapter 11) , security (Chapter 10 ), and
order fulfi llment (Chapter 12) . Also,
standard IT technologies such as RFID, EDI,
and extranets are described in Online Tutorial T2.
I n the next section, we describe online m
arkets. Before we do this, however, we will
describe what happens during a typical purchasing process. 2.2 E-Marketplaces EC Activities EC Mechanism
Figure 2.1 The EC activities–mechanism connection
The Online Purchasing Process
Customers buy goods online in different ways.
The most common is purchasing from catalogs at
fi xed prices. Sometimes prices may be negotiated
or discounted. Another way to determine price is
dynamic pricing, which refers to non-fi xed prices
such as those in auctions or stock (commodity) exchanges.
The process starts with a buyer logging on to a
seller’s website, registering (if needed), and lOMoARcPSD| 50000674 56
entering an online catalog or the buyer’s
2.4 of this chapter. The place where buying and
“My Account.” E-catalogs can be very large,
selling occurs is called an e-marketplace, which
so using a search engine may be useful. we introduce next.
Buyers usually like to compare prices;
therefore, an online price comparison
SECTION 2.1 REVIEW QUESTIONS
service can be useful (now available on
1. List the major EC activities.
smartphones). Some sellers (e.g., American
2. List the major EC mechanisms. Airlines, Amazon.com) provide price
3. Describe the online purchasing process
comparisons showing competitors. If not
satisfi ed, the buyer may abandon the
seller’s site. If satisfi ed, the buyer will place 2.2 E-MARKETPLACES
the chosen item in a virtual shopping cart
(or bag). The buyer may return to the seller’s
Electronic markets play a central role in the
catalog to choose more items. Each selected
digital economy, facilitating the exchange of
item is placed in the shopping cart. When
information, goods, services, and payments. In
the item selection is completed, the buyer
executing the trading process, e-marketplaces
goes to a checkout page, where a shipment
create economic value for buyers, sellers, market
option is selected from a menu (e.g.,
intermediaries, as well as for society at large.
standard, next day). Finally, a payment
M arkets (electronic or otherwise) have four option is selected. For example,
major functions: (1) enabling transactions to occur
newegg.com allows you to pay by credit
by providing a meeting place for buyers and
card, PayPal, check after billing, in
sellers; (2) enabling the fl ow of relevant
installments, and so on. After checking all
information; (3) providing services associated with
the details for accuracy, the buyer submits
market transactions, such as payments and the order.
escrow; and (4) providing auxiliary services such as
This process is illustrated in Figure 2.2 .
legal, auditing, and security (see Table 2.1 ).
The major mechanisms that support this
process are described in Sections 2.3 and lOMoARcPSD| 50000674 57
Figure 2.2 The buying process in e-markets 2.2 E-Marketplaces lOMoARcPSD| 50000674 58 Electronic Markets
Components of and the Participants in E-Marketplaces
The electronic market is the major venue for c
onducting EC transactions. An e-marketplace The major components and players in a
(also called e-market, virtual market, or marketspace are customers, sellers, products
marketspace ), is an electronic space where and services (physical or digital), infrastructure,
sellers and buyers meet and conduct different a front end, a back end, intermediaries and other
types of transactions. Customers receive goods business partners, and support services such as
and services for money (or for other goods and security and payments. A brief description of
services, if bartering is used). The functions of an each follows:
e-market are the same as those of a physical
marketplace; however, computerized systems
tend to make electronic markets much more effi
cient by providing more updated information
• Customers. More than 2 billion Internet
and various support services, such as rapid and
users worldwide are potential buyers of
smooth executions of transactions.
goods and services offered on the
E C has increased market effi ciency by
Internet. These consumers are looking
expediting and or improving the functions listed for bargains, customized items,
in Table 2.1. Furthermore, EC has been able to collectors’ items, entertainment,
signifi cantly decrease the cost of executing
socialization, and more. The social these functions.
customers have more power than
T he emergence of electronic marketplaces ,
regular customers. They can search for
especially Internet-enabled ones, has changed
detailed information, compare prices,
several of the processes used in trading and
bid, and sometimes negotiate. Buying
supply chains. In many cases, these changes,
organizations are also customers,
driven by technology, have frequently resulted
accounting for more than 85% of EC in: volume and value activities.
• Sellers. Millions of webstores are •
advertising and offering a huge variety
Lower the search time for information
of items. These stores are owned by and cost to buyers
companies, government agencies, or
• Reduced information misunderstanding
individuals. Every day it is possible to fi between sellers and buyers
nd new offerings of products and
• Possible reduction in the time gap
services. Sellers can sell directly from
between purchase and possession of
their websites or from public e-
physical products purchased online marketplaces.
(especially if the product can be
• Products and services. One of the digitized) major differences between the
• The ability of market participants to be
marketplace and the marketspace is the
in different locations while trading
possible digitization of products and online
services in a marketspace. Although
• The ability to conduct transactions at
both types of markets can sell physical
any time (24/7) from any place.
products, they can also sell digital lOMoARcPSD| 50000674 59
products , which are goods that can be
possible to digitize dozens of other
transformed into a digital format.
products and services, as shown in
However, in marketspaces, buyers can
Online File W2.2. Digital products have
buy digitized products online, anytime
different cost curves than those of
and from any place in seconds, and
physical products. In digitization, most
receive the purchased goods instantly.
of the costs are fi xed, and variable costs
In addition to the digitization of are very low. Thus, profi ts
software, music, and airline tickets, it is
will increase rapidly as volume
• Intermediaries. In marketing, an
increases, once the fi xed costs are
intermediary is typically a third party paid.
that operates between sellers and
• Infrastructure. The marketspace
buyers. Intermediaries of all kinds infrastructure includes electronic
offer their services on the Web. Some networks, databases, hardware,
intermediation is done manually; software, and more.
many kinds are done electronically.
• Front end. Customers interact with a The role of these electronic
marketspace via a front end. The
intermediaries is frequently different
major components of the front end
from that of regular intermediaries
can include the seller’s portal,
(such as wholesalers or retailers), as
electronic catalogs, a shopping cart, a
search engine, an auction engine, a
will be seen throughout the text,
payment gateway, and all other
especially in Chapters 3 and 4. For
activities related to placing orders.
example, online intermediaries create
• Back end. All the activities that are
and manage the online markets. They
related to order aggregation and fulfi
help match buyers and sellers, provide llment, inventory management,
escrow services, and help customers
purchasing from suppliers, accounting
and/or sellers complete transactions.
and fi nance, insurance, payment
Physical intermediaries may be
processing, packaging, and delivery eliminated and their jobs be
are done in what is termed the back
computerized (fully or partially) as end of the business. described next.
Table 2.1 Functions of a market
Matching of buyers and sellers
Facilitation of transactions
Institutional infrastructure
• Determination of product offerings. • Communication • Legal
Product features offered by sellers Posting buyers’ requests Commercial code, contract
Aggregation of different products Posting RFQs law, dispute resolution, intellectual property protection
• Search ( buyers for sellers, and
• Mechanisms: provide catalogs, etc. • Regulatory sellers for buyers) Rules and regulations,
Price and product information compliance, monitoring,
Organizing bids and bartering enforcement
Matching the seller’s offerings with the buyer’s preferences lOMoAR cPSD| 50000674 60 • Price discovery • Logistics • Discovery
Process determination of prices
Delivery of information, goods, or Provides market Enabling price comparisons services to buyer information (e.g., about competition, government regulations) • Others • Settlement Providing sales leads
Transfer of payments to sellers Providing W2.0 tools Escrow services Arranging auction • Trust
Credit system, reputations, rating
agencies such as Consumer Reports
and the BBB, special escrow and online trust agencies
Sources : Based on Bakos ( 1998 ), E-Market Services (2006 ), and the authors’ experiences lOMoARcPSD| 50000674 61
Case 2.1: EC Application: How Blue Nile Inc. Is Changing the Jewelry Industry Disintermediation and
CASE 2.1: EC APPLICATION: HOW BLUE Reintermediation
NILE INC. IS CHANGING THE JEWELRY INDUSTRY
Intermediaries usually provide three types of s
ervices: (1) they provide relevant information Blue Nile Inc. ( bluenile.com ), a pure-play online
about demand: supply, prices, and trading e-tailer that specializes in diamonds and jewelry,
requirements. (2) they help match sellers and capitalized on online diamond sales as a dot-com
buyers; and/or (3) they offer value-added start-up in 1999. The company is a textbook case
services such as transfer of products, escrow, of how EC fundamentally changes the way that payment arrangements, consulting,
or an industry conducts its business. For
assistance in fi nding a business partner. In information about the company, see
general, the fi rst and second types of services quotes.wsj.com/NILE/ company-people .
can be fully automated, and thus it is likely to be
assumed by e-marketplaces, infomediaries, and
portals that provide free or lowfee services. The The Opportunity
third type requires expertise, such as knowledge
of the industry, the market, the products, and Using the B2C EC model – eliminating the need
the technological trends, and therefore can only for physical stores – Blue Nile was able to offer be partially automated.
discounts of 35%, yet it became profi table in a
Intermediaries that provide only (or mainly) short time. (The cost of operating online stores
the fi rst two types of services may be is very low.) eliminated; this phenomenon is called
What are the critical success factors of the
disintermediation . An example is the airline company? First, they offer large discounts. For
industry and its push for selling electronic tickets example, you can purchase a $6,000 diamond for
directly by the airlines. Most airlines require $4,000, which attracts more customers. Second,
customers to pay $25 or more per ticket Blue Nile offers a huge selection of diamonds processed by an employee via
online and provides more information about
telephone. This results in the disintermediation diamonds than many physical jewelry stores can
of many travel agents from the purchasing offer. In May 2012, Blue Nile offered about process. In another example,
discount 60,000 round diamonds that could be used to
stockbrokers that only execute trades manually build a customized engagement rings. No
are disappearing. However, brokers who physical store can offer so many diamonds.
manage electronic intermediation are not only Third, the company provides educational guides
surviving but may also be prospering (e.g., as well as independent (and trusted) quality
priceline.com and expedia.com in the travel ratings for every stone. A customer can look over
industry and tdameritrade. com in stock a rating scale for cut, clarity, color, and so on, and trading). This phenomenon, in
which then compare prices using Bizrate ( bizrate. com
disintermediated entities or newcomers take on ) and other online stores. Note that there usually new intermediary roles, is
called is a 30-day 100% money-back guarantee (now an
reintermediation (see Chapter 3 ).
online industry standard). This provides
D isintermediation is more likely to occur in customers with a comfort level of trust against
supply chains involving several intermediaries, as fraud and gives Blue Nile a competitive edge illustrated by Case 2.1.
against stores that take the stones back but
charge a fee. The site provides live chat, payment
options, build-your- own engagement ring, gift
ideas, and much more. The company has a
mobile app for iPhone and Android users ( ; that now also sell fashion and apparel, fi ne art, m.bluenile.com) .
and accessories), but also from general e-tailers
such as overstock.com and amazon.com . The Results
Sources: Based on Rivlin ( 2007 ), Bloomberg
(2004 ), BusinessWeek Online (2006 ),
Blue Nile’s sales reached $129 million in 2003 (a en.wikipedia.org/wiki/Blue_Nile_Company,
79% increase over 2002), with a net income of and bluenile.com/about-blue-nile (both
$27 million. In 2013, net sales were $450 million accessed March 2015). (
marketwatch.com/story/blue-nile- Questions
announcesfourth-quarter-and-full-year-
1. Using the classifi cation of EC (Section 1.2 ,
2013-financialresults-2014-02-06 and
Chapter 1 ), how would you classify the Blue investor.bluenile.com/ Nile’s business?
releasedetail.cfm?ReleaseID=823747 ). The 2. In what ways is the company changing its
company became the eighth-largest specialty industry?
jewelry company in the United States and went 3. What are the critical success factors of the
public in 2004 (one of the most successful IPOs company?
of that year). While sales fell during the 4. Research Blue Nile’s affi liate marketing
economic downturn in 2008, in 2009 and 2010
programs. Write a report. Include how this
the company rallied again with a 2.3% growth. program helps Blue Nile.
In order to sell $450 million in jewelry in 1 5. Competition between Blue Nile and Amazon.
year, a traditional retail chain needs over 300
com will continue to increase. In your opinion,
stores and over 3,000 employees. Blue Nile does
which one will win? (Visit their websites and
it with one 10,000-square-foot warehouse and see how they sell jewelry.)
193 employees. The company also bypasses the 6. Compare the following three sites: diamond.
industry’s complex supply chain, in which a
com , ice.com , and bluenile.com .
diamond may pass through fi ve or more 7. Follow the performance of Blue Nile’s stock
middlemen before reaching a retailer. Because
since 2003 (symbol: NILE, go to money.cnn.
they are a large buyer, they can deal directly with
com ). Compare it to the performance of the original suppliers.
market average. What is your conclusion?
A s a result, some 465 small jewelry stores 8. Find the payment options at Blue Nile when
closed in 2003 alone. The survivors specialize in you shop there. custom-crafted pieces. Large traditional
companies compete with Blue Nile by offering
online merchandise, becoming click-and-brick Types of E-Marketplaces multi- channel organizations, and by
streamlining their supply chain and customer The term marketplace differs once it referred to service.
the Web. It is sometimes refers to as e-
T he future seems to be clear, as can be seen marketplace or marketspace. We distinguish two
in Bloomberg ( 2004) , in the case of Roger types of e- marketplaces: private and public.
Thompson, a small jeweler in Lambertville, New
Jersey, who said, “Anyone with half a brain who Private E-Marketplaces
wants a diamond engagement ring will go to the Private e-marketplaces are those owned and
Internet.” In the meantime, grooms who operated by a single company. Starbucks.com ,
propose with Blue Nile rings can save $3,000 to dell. com , target.com , and united.com sell $5,000.
from their websites. Private markets are either
Note that, the competition in the jewelry sell-side or buy-side. In a sell-side e-
business is very intense, not only from jewelry marketplace, a company, (e.g., net-a-
retailers (both offl ine and online, e.g., bidz.com
2.3 Customer Shopping Mechanisms: Webstores, Malls, and Portals 63
porter.com or cisco.com ) will sell either mechanisms are webstores ( storefronts) and
standard or customized products to individuals Internet malls. Let us elaborate on these, as well
(B2C) or to businesses (B2B); this type of selling as on the gateways to e-marketplaces – portals.
is considered to be one-to-many . In a buy-side
e-marketplace, a company purchases from
many potential suppliers; this type of purchasing Webstores
is considered to be many-to-one , and it is a B2B
activity. For example, some hotels buy their A webstore ( or storefront) refers to a single
supplies from approved vendors that come to its company’s (or individual seller’s) website where
e-market. Walmart ( walmart.com ) buys goods products and services are sold. from thousands of suppliers. Private
Webstores may target an industry, a location,
marketplaces can be open only to selected or a niche market (e.g., cattoys.com) . The
members and are not publicly regulated. We will webstore may belong to a manufacturer (e.g.,
return to the topic of private e-marketplaces in geappliances. com and dell.com) , to a retailer Chapters 3 (B2C) and 4 (B2B).
(e.g., amazon. com and wishlist.com.au) , to
individuals selling from home, or to another type
Public E-Marketplaces
of business. Note that companies that sell
Public e-marketplaces are in many cases B2B services (such as insurance) may refer to their
markets. They often are owned by a third party webstores as portals .
(not a seller or a buyer) or by a group of buying
A webstore includes tools known as
or selling companies (referred to as a merchant software (available in a suite), that are
consortium ), and they serve many sellers and necessary for conducting online sales. The most
many b uyers. These markets also are known as common tools are an electronic catalog; a
exchanges (e.g., a stock exchange). They are search engine that helps the consumer fi nd
open to the public and usually are regulated by products in the catalog; an electronic shopping
the government or the exchange’s owners. cart for holding items until checkout; e-auction
Public e-m arketplaces (for B2B) are discussed in facilities where auctions take place; a payment detail in Chapter 4 .
gateway where payment arrangements can be
made; a shipment center where shipping
SECTION 2.2 REVIEW QUESTIONS
arrangements are made; and customer services 1. Defi ne e-marketplace and
, which include product and warranty describe its attributes. information and CRM.
2. What is the difference between a physical marketplace and an
e-marketplace Microsites (marketspace)?
A microsite is a webpage(s) that acts as a
3. List the components of a marketspace.
supplement to a primary website, but is
4. Defi ne a digital product and provide fi ve external to it. It expands on the content by examples.
adding editorial, commercial, or educational
5. Describe private versus public e-markets. material. 2.3 CUSTOMER SHOPPING
MECHANISMS: WEBSTORES, MALLS, AND PORTALS
Several kinds of interactions exist among sellers,
buyers, and e-marketplaces. The major B2C Electronic Malls 65
In addition to shopping at individual webstores,
consumers can shop in electronic malls (e-malls).
Similar to malls in the physical world, an e-mall
(online mall) is an online shopping location enterprise information portals .
where many stores present their catalogs. The
Corporate portals appear in different
mall charges commission from the sellers based
forms and are described in detail in
on their sale volume. For example, the Emall of
Chapters 4 and 5 . Examples of e-
Maine ( emallofmaine.com) is an e-mall that
commerce portals can be found at
aggregates products, services, and providers in
ibm.com/software/products/
the state of Maine. It contains a directory of
en/websphere-portal-family .
vacation services and product categories and the
• Patient Portals. Several companies
vendors in each category. When a consumer
offer patient portals. For example,
indicates the category he or she is interested in,
Quality Systems, Inc. ( qsii.com) and
the consumer is transferred to the appropriate
mypop.healthcarepartners.com .
independent webstore . This kind of mall does
Quality Systems provides software for
not provide any shared services; it is merely a
health care providers so they can offer
directory. Other malls, such as choicemall.com,
information for their patients (in
or etsy.com (see Chapter 3) do provide some
English, Spanish and Chinese) via a
shared services. Both yahoo.com and ebay.com
portal. Patients have access to their operate electronic malls.
personal information. The portal also allows communication between
patients and their caregivers. Called
Web (Information) Portals
‘Next Gen Patient Portal the portal
increases patients’ engagement in their
A portal is an information gateway that is used healthcare.
in e-marketplaces, webstores, and other types of
• Publishing portals. These portals are
EC (e.g., in e-collaboration, intrabusiness, and e-
intended for communities with specifi c
learning). A Web (information) portal is a
interests and involve relatively little
single point of access, through a Web browser,
to critical business information located inside
customization of content; however,
and outside of organizations. This information is
they provide extensive online search
aggregated and is accessed and presented in a features and some interactive
consistent way. Many Web portals personalize
capabilities. Examples of such sites are
for users. Note that wireless devices are
techweb.com and zdnet.com .
becoming portals for both enterprise and
• Mobile portals. Mobile portals are
Internet access. A schematic view of a portal is
portals that are accessible from mobile
shown in Figure 2.3 . Information sources
devices (see Chapter 6 for details). An
(external and internal) are shown on the left
increasing number of portals are
side, and integrated and process data are shown
accessible via mobile devices. One
example of such a mobile portal is i-
• Commercial (public) portals. These
mode, which is described in Chapter 6
popular portals offer content for . anyone. Although they can be
• Voice portals. Voice portals are
customized by the user, they are still
websites, usually portals, with audio
intended for broad audiences and offer
fairly routine content, some in real time
interfaces. This means that they can be
(e.g., a stock ticker and news).
accessed by a standard telephone or a
Examples of such sites are yahoo.com,
cell phone. AOLbyPhone ( aolbyphone.
google.com , and msn.com .
com) is an example of a service that • Corporate (private) portals.
allows users to retrieve e-mail, news,
Corporate portals provide organized
and other content from AOL via access to internal corporate
telephone. It uses both speech
information. These also are known as recognition and text-to-speech enterprise portals or technologies. Products by
as output on the monitor’s screen. Web portals Types of Portals
offer some generic services such as e-mail, news, P ortals can assume many shapes. One way to stock prices, entertainment,
shopping distinguish among them is to look at their capabilities, and so forth.
content, which can vary from narrow to broad,
and their community or audience, which also can
differ. The major types of portals are as follows:
2.3 Customer Shopping Mechanisms: Webstores, Malls, and Portals
Figure 2.3 How a portal works 67
companies such as Microsoft’s Tellme (
The Roles and Value of Intermediaries in
tmaa.com/microsoftand247inc.html ) E-Marketplaces
and Nuance OnDemand ( nuance.com/
for-business/by-solution/customer-
Intermediaries, such as brokers, play an important
service-solutions/solutions-s ervices/
role in commerce by providing value-added
hosted-contact-center-solutions/
activities and services to buyers and sellers. There
index.htm ) offer access to the Internet
are several types of intermediaries. The most well-
from telephones, as well as tools to
known intermediaries in the physical world are
build voice portals. Voice portals are wholesalers and retailers.
especially popular for 1–800 numbers
T he two major types of online intermediaries
(enterprise 800 numbers) that provide
are brokers and infomediaries. self-service to customers with
information available in Internet Brokers
databases (e.g., fi nding your balance or
A broker in EC is a person or a company that
last deposit made at your bank).
facilitates transactions between buyers and sellers.
• Knowledge portals. Knowledge portals
The following are different types of brokers:
enable easy access to knowledge by
knowledge workers and facilitate
• Trading. A company that aids online collaboration.
trading (e.g., E*TRADE or eBay).
• C ommunities’ portals. These are
• Organization of online malls. A
usually parts of online communities.
company that organizes many online
They are dedicated to some theme and
stores in one place (e.g., Yahoo!
may be sponsored by a vendor such as Shopping and Alibaba.com). Sony.
• Comparison agent.A company that
• An example is 17173.co-- portal for
helps consumers compare prices, gamers in China. encourages
istributor’s catalog. An example is W.W.
user comments, and provides customer
Grainger ( grainger. com ). The distributor buys
service at different stores (e.g., Bizrate
the products and then sells them, as
for a great diversity of products and supermarkets do. Hotwire, Inc. for travel-related products and services.
SECTION 2.3 REVIEW QUESTIONS
• Shopping aids provider. A company
1. Describe webstores and e-malls.
that helps online shopping by providing
2. List the various types of webstores and e-
escrow, payments, shipping, and malls.
security (e.g., PuntoMio, Inc.).
3. What are Web (information) portals? List the
• Matching services. These services major types.
match entities such as jobs to 4. Describe e-distributors.
applicants, and buyers to sellers.
Distributors in B2B
A special type of intermediary in e-commerce is 2.4 M ERCHANT SOLUTIONS:
the B2B e-distributor. These intermediaries ELECTRONIC CATALOGS,
connect manufacturers with business buyers
(customers), such as retailers (or resellers in the SEARCH ENGINES,
computer industry). E-distributors aggregate
product information from many manufacturers,
sometimes thousands of them, in the e-d AND SHOPPING CARTS
integrated with selling and buying procedures,
shopping carts, order taking, and payment. E-
To enable selling online, a website usually needs catalogs may include video clips. The tools for
EC merchant server software. Merchant building them are being integrated with
software includes several tools and platforms. merchant software suites and Web hosting tools
Such software offers basic tools that include (e.g., see
electronic catalogs, search engines, and smallbusiness.yahoo.com/ecommerce ).
shopping carts; all are intended to facilitate the Examples of a simple product catalog can be electronic trading process.
seen at JetPens ( jetpens.com and Starbucks One example of such software
is Store ( store.starbucks.com ).
osCommerce, which is open-source software
Although used only occasionally in B2C c
(see oscommerce.com ). Another example can ommerce, customized catalogs are used be seen
at frequently in B2B e-commerce.
smallbusiness.yahoo.com/ecommerce . Electronic Catalogs
C atalogs have been printed on paper for
generations. Recently, electronic catalogs on a
DVD (or CD-ROM) and on the Internet have
gained popularity. Electronic catalogs (e-
catalogs) consist of a product database,
directory, and a presentation function. They are
the backbone of most e-commerce sales sites.
For merchants, the objective of e-catalogs is to
advertise and promote products and services.
For the customer, the purpose of such catalogs
is to locate information on products and
services. E-catalogs can be searched quickly with
the help of search engines. Some offer tools for
interactions. For an example, see Infi nisys
‘Change My Image’ for Microsoft Windows at
en.infi nisys.co.jp/product/cmimage, and for Macintosh at en.infi nisys.
co.jp/product/cmimage_mac . This product
permits a buyer to insert his/her photo and then
change the hairstyle and color in the photo, so
the buyer can see his/her look with a new
hairstyle. E-catalogs can be very large; for
example, Amazon.com’s catalog contains millions of products.
M ost early online catalogs were static
presentations of text and messages from paper
catalogs. However, online catalogs have evolved
to become more dynamic, customizable, and lOMoARcPSD| 50000674 69 2.4
Merchant Solutions: Electronic Catalogs, Search Engines, and Shopping Carts
EC Search Activities, Types, and
Internet/Web Search. This is the most Engines
popular search that involves looking for
any documents on the Web. According
Search activities are popular in EC, and many
to Pew Research Internet Project
tools for conducting searches are available. A
( pewinternet.org) and other statistical
study by Stambor ( 2010 ) published in Internet
sites (e.g., see infoplease.com/ipa/
Retailer revealed that 94% of shoppers conduct
A0921862.html ), fi nding information
research online before making any purchase,
is one of the most frequent activities
and 61% use a search engine when shopping done on the Web.
online. Consumers may search inside one
Enterprise Search. An enterprise search
company’s catalog to fi nd a product or service,
describes the search for information
or use Google or Bing to fi nd companies that sell
within the fi les and databases of an
the product they need. Here we describe only
organization. For example, Google has
the essentials for EC search. For a video
a powerful Enterprise Search Appliance
illustration, see “Google Commerce Search” (known as GSA).
(2009) by Google+ Your Business (2:15 minutes) at
Desktop Search. A desktop search
youtube.com/ watch?v=gj7qrotOmVY. To
read publications on electronic research and e-
involves a search of a user’s own com-
commerce at the Research at Google website,
puter fi les (e.g., using copernic.com or see research.
windows.microsoft.com/en-
google.com/pubs/EconomicsandElectronic
us/windows7/products/features/windo
Commerce.html . Let us now look at three major
wssearch ). Searching for documents is types of searches.
done by looking through all the
information that is available on the
Types of EC Searches
user’s PC. A simple example is the ability
T he three major types of EC searches are
to search all fi les related to your e-mail
Internet/ Web search, enterprise search, and
archive. A search also can be extended desktop search.
to photos, USB ports, and Word
documents. For details, see pcmag. com/encyclopedia/term/41175/ desktop-search .
A ll search types discussed above are
accomplished by using search software agents. Search Engines
Customers tend to ask for information (e.g.,
requests for product information or pricing) in
similar ways. This type of request is repetitive,
and answering such requests manually is costly.
Search engines deliver answers economically
and effi ciently by matching questions with
frequently asked question (FAQ) templates,
which respond with “canned” answers. In lOMoARcPSD| 50000674
general, a search engine is a computer program images. Some of them, such as bing.com/videos
that can access databases of Internet or intranet will search across multiple sites; others, such as
resources, search for specifi c information or YouTube will search only for their own content.
keywords, and report the results.
For a list of over 40 sites (compiled in 2010) see
G oogle and Bing are the most popular search thesearchenginelist.com/video-search . For
engines in the U.S. Baidu is the primary search another example, the search engine Bing has a
engine in China. Portals such as Yahoo! and MSN search feature that allows you to listen to more
have their own search engines. Special search than 5 million fulllength songs.
engines organized to answer certain questions or
search in specifi ed areas include ask.com , Mobile Search
mamma.com , and looksmart.com . Thousands S everal search engines are adapted to mobile
of different public search engines are available search. Notable are Google, Yippy, and Yahoo!
(see searchengineguide.com ). Each of these
tools excels in one area. These can be very Visual Shopping Search Engine
specialized with different capabilities. In V isual search means looking for information that
addition, many companies have their own is presented visually (photos, images, etc.) For an
enterprise search engines. For example, Endeca overview, see scholarpedia.org/article/Visual_ Commerce from Oracle
( search . This technology can be used to support
oracle.com/technetwork/apps-
tech/ e-commerce. For example, google.com/
commerce/endeca-commerce/index.html is a ) shopping provides a visual search engine based
special search engine for online catalogs. For on machine learning and computer vision that
more information about training in Oracle focuses on consumer products. Endeca Commerce, see
T he technology lets users see what terms like
education.oracle.com/pls/web_
prod-plq- “red high-heeled pumps” mean. It also created
dad/ou_product_category.getPage?
algorithms that evaluate how well red pumps p_cat_id=338 .
match specifi c clothing the consumer plans to
buy. Visual search is popular when conducted on
Voice-Powered Search mobile devices.
To ease searching, especially when using a
smartphone, Google introduced a voice- Social Network Search Engines powered tool (Google Voice
Search; Social network search , also known as social
google.com/insidesearch/
search is a class of online search engines that
features/voicesearch/index-chrome.html ) that help people fi nd material about social
allows you to skip the keyboard altogether. The networking activities, such as in user generated
fi rst product was included as part of iPhone’s content, discussion groups, or
mobile search application. It allows you to talk recommendations. Like all search engines, these
into your phone, ask any question, and the organize, prioritize, and fi lter search results.
results of your query are provided on your Examples of such search engines are:
iPhone. In addition to asking questions by talking socialmention.com – ‘real time social media
into your iPhone, you can also listen to search search and analysis,’ yoname.com – ‘people
engine results. For an example of Apple’s search across social networks, blogs, and more,’
intelligent personal assistant, “Siri,” see bing.com/explore/social . For an overview, see
apple.com/ios/siri and imore.com/siri .
the blog “Social is the Next Search” available at
info.gigya.com/rs/gigya/images/ Gigya-Social-
Video and Mobile Search
The-Next-Search.pdf. For a discussion of the
T here are dozens of dedicated search tools and benefi ts and concerns, see en.
sites that will search for videos and other wikipedia.org/wiki/Social_search .