24
C H A P T E R 2
Marketplace analysis for e-commerce
Table of contents
Learning outcomes 24
Management issues 24
Chapter at a glance 25
Learning outcomes
After completing this chapter the reader should be able to:
Complete an online marketplace analysis to assess competitor, customer and
intermediary
use of digital technologies and media as part of strategy development
Management issues
The fundamentals of e-commerce imply these questions for managers:
What are the implications of changes in marketplace structures for how we trade
with customers and other partners?
Which business models and revenue models should we consider in order to exploit the
Internet?
What will be the importance of online intermediaries and marketplace hubs to our
business and what actions should we take to partner these intermediaries?
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Chapter at a glance
Main
topics
Online marketplace analysis
Location of trading in the marketplace
Business models for e-commerce
Focus
on
Auction business models
Case studies
2.1 i-to-i a global marketplace for a start-up company
Suggested teaching and learning approaches
The headings below are intended to mirror those in the text to assist cross referencing.
Introduction. What type of influences are there and why are environment influences
important? Activity 2.1 (
based
on Figure 2.2) gives a
structured approach to
highlighting changes in the macro- and micro-environment.
Marketplace analysis for analysis. This section starts by reviewing the importance of
strategic agility with the interview showing the importance of reviewing the
marketplace. The section A process for online marketplace analysis is most important
Review of marketplace channel structure. Use diagrams such as
Figures 2.62.8 for
a particular industry such as the car industry to explain these terms. Talk about these as
strategic responses. What are the penalties for ignoring these?
1 Marketplace map example
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Understanding customer journeys across online and offline
channels through using channel
chains (Figure 2.9) should also be covered.
Different types of online intermediary. The different types of intermediary shown in
Table 2.5 and
their relative importance through the buying process should be discussed
with students. As a group
activity, intermediaries important in different sectors such as
retail, banking, financial services and
travel can be identified.
Business and revenue models. This will be the most interesting sections for many
students interested in their own online venture. Ask students to consider different
models in the context of Figure 2.10 and 2.11 or by reviewing different revenue models
Case studies
Case study 2.1 i-to-i a global marketplace for a start-up company
This case is about a specialist travel and education company, focusing on its online
TEFL
(Teaching English as a Foreign Language) courses. The case illustrates the
importance of
marketplace analysis.
Questions
1. Select one country that i-to-i operate in and summarise the main types of sites and
businesses involved using a marketplace map (Figure 2.4).
2. Review the different factors that i-to-i will need to review to gauge the commercial
effectiveness of its online presence in different geographic markets.
i-to-i will need to review the different drivers or leads and sales in different markets as
referenced in the chapter with search visibility being most important.
Chaffey, Digital Business and E-Commerce Management, 6th edition,
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Conversion rates are there issues with the content assets or product, pricing which limits
conversion
Questions for debate
Debate 2.1 Countermediation
The advent of e-commerce means that marketers cannot rely on the online presence of
existing intermediaries instead they must create their own online intermediaries.
Examples from particular industries should be used to demonstrate this. Summary of arguments
for are as follows:
Intermediaries are important online because of service and product comparison online
missed opportunity to communicate.
Cost of paying referrals to third party.
Company can use intermediary to explore new concepts and markets while minimising
damage to core brand.
Summary of arguments against are as follows:
Cost of setting up independent intermediaries.
Debate 2.2 Innovative business models
The new business models associated with the dot-com era were, in fact, existing models
in an online context. Business models and revenue models have not changed.
Summary of arguments for are as follows:
Look at online business model proposed by Timmers in the section on business models
few have changed.
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Summary of arguments against are as follows:
New business models such as C2B.
Exercises
Self-assessment
questions
1. Outline the main options for trading between businesses and consumers.
These are:
B2C retail to consumers
2. Explain the concepts of disintermediation and reintermediation with reference to a
particular industry; what are the implications for a company operating in this
industry?
Example, air travel. A carrier has the option of:
3. Describe the three main alternative locations for trading within the electronic
marketplace.
4.
What are the main types of commercial transactions that can occur through the
Internet or in traditional commerce?
See Table 2.4.
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Commercial (trading) mechanism
2. Brokered deal
4. Fixed-price sale
6. Barter
5. Digital business involves re-evaluating value chain activities. What types of changes
can be introduced to the value chain through digital business?
6.
List the different business models identified by Timmers (1999).
Timmers (1999) identifies no less than 11 different types of business models that can be
facilitated by the web as follows:
2. E-procurement electronic tendering and procurement of goods and services.
4. E-auctions these can be both for B2C and B2B as is the case with eBay.
5. Virtual communities these can be B2C communities such as Xoom
6. Collaboration platforms these enable collaboration between businesses or
8. Value-chain integrators offer a range of services across the value chain.
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11. Trust and other services examples of trust services include Which Web
Trader
(www.which.net/webtrader) or TRUSTE (www.truste.org) that authenticate
7. Describe some alternative revenue models for a website from a magazine publisher.
8. Draw a diagram summarising the different types of online marketplace.
Refer to Figure 2.9.
Essay and discussion questions
1. Disintermediation and reintermediation occur simultaneously within any given
market. Discuss.
Suggested approach:
Research intermediaries in market by using a directory such as Yahoo!
Research disintermediation by online services offered by existing players.
2.
For an organisation you are familiar with, examine the alternative business and
revenue models afforded by the Internet and assess the options for the type and
location of e-commerce transitions
.
Suggested approach:
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3. For a manufacturer or retailer of your choice, analyse the balance between partnering
with portals and providing equivalent services from your website.
An example of this approach is Boots The Chemist that have produced their own portal
Handbag.com (www.handbag.com).
Suggested approach:
4. Contrast the market potential for B2B and B2C auctions.
Suggested approach:
Research current and sales history of major B2C players such as eBay.
Research current and future trading of commodities in different B2B
Review buyer behaviour what are the barriers to purchasing in this way, for
example,
trust, authenticating purchase?
5. Select an intermediary site and assess how well it makes use of the range of
business models and revenue models available to it through the Internet.
Suggested approach:
Make sure these types of revenue models are included
Subscription: per-month payment
Pay–per–view: pay for each article, or articles up to a value
Examination
questions
1. Explain disintermediation and reintermediation using examples.
Disintermediation
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Reintermediation
The creation of new intermediaries between customers and suppliers providing services such as
supplier search and product evaluation.
2. Describe three different revenue models for a portal such as Yahoo!
3. What is meant by buy-side, sell-side and marketplace-based e-commerce?
4. What are the different mechanisms for online auctions?
Forward, upward or English auction (initiated by seller). These are the types of
auctions
available on consumer sites such as eBay. Increasing bids are placed
within a certain time
limit and the highest bid will succeed provided the reserve
(minimum) price is exceeded. According to Commerce One, companies may use
online forward auctions to sell slow moving, excess or obsolete inventory items.
5. Describe two alternative approaches for using digital business to change a
companys value chain.
Disintermediation
The removal of intermediaries such as distributors or brokers that formerly linked a company to
its customers.
Reintermediation
The creation of new intermediaries between customers and suppliers providing services such as
supplier search and product evaluation.
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6. Explain what a business model is and relate it to an Internet pureplay of your choice.
A summary of how a company will generate revenue identifying its product offering, value-
added services, revenue sources and target customers.
Revenue sources for the pure-play, for example, lastminute.com include:
Subscription: per-month payment
Pay-per-view: pay for each article, or articles up to a value
7. Outline the elements of the digital business environment for an organisation and
explain its relevance to the organisation.
8. Give three different transaction types that an industry marketplace could offer to
facilitate trade between buyers and suppliers.
Straight fixed-price transaction
Auction to lowest bidder reverse auction
Barter.
Activity answers
Activity 2.1 Online ecosystems
Discuss in a group, or make notes to identify, the main companies (e.g. Facebook) and
platforms (e.g. tablet devices) used by consumers that are important for companies to
review their presence on. Once you have identified the main company or service types,
group them together so that their overall importance can be reviewed.
These are typical types of sites and the combination of software and hardware platforms.
1. Search engines
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2. Social networks
3. Publishers (broad and niche)
Apps e.g. iOS iTunes store vs. Andriod Play Marketplace.
Activity 2.2 Exploring business models
Identify overlap between the different business models identified by Timmers (1999). Can
you group the different business models into different types of services? Do you think
these business models operate in isolation?
An immediate distinction can be made between the operation of individual companies (e-shop)
using the web to sell direct to the customer and deal with suppliers (e-procurement) and
intermediary services such as e-auctions and third-party marketplaces that make up most of the
Activity 2.3 Revenue models at online media sites
1.
Summarise the revenue models which are used for each site by looking at the
information for advertisers and affiliates.
E-consultancy (www.econsultancy.com)
Online revenue models include annual subscription and pay-per-view access to articles.
Marketing Sherpa (www.marketingsherpa.com)
This mainly offers a pay-per-view model for articles and reports. Surprisingly, it has
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2. What are the advantages and disadvantages of the different revenue models for the
site audience and the site owner?
This answer can be broken down by the different revenue models as shown in the table given
below. Given the advantages and disadvantages of each, it makes sense to have several models
to maximise monetisation of site visitors.
Revenue model Advanta
g
e Disadvanta
g
e
Online subscription Continuous revenue stream Difficult to get visitors to commit
to an ongoing agreement
Pay-per-view Instant fulfilment likely to appeal if
article or reports meets
someones immediate need.
Reports are often more
specialised and more immediate
Difficult to provide sufficiently
compelling unique content that
is not already freely available
on the web
Advertising Relatively easy to setup,
Advertisers have to be
3. Given an equivalent audience, which of these sites do you think would generate the
most revenue? You could develop a simple spreadsheet model based on the following
figures:
Monthly site visitors
: 100,000, 0.5 per cent of these visitors clickthrough to affiliate
sites where 2 per cent go on to buy business reports or services at an average
order value of
100.
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Calculation:
Visitors Clickthrough
rate
Affiliate
site visits
Conversion
rate
Sales Average
order
value
(
Euros
)
Revenue
at 25%
commission
Calculation:
Monthly
page
Ad units per
page
Inventory sold Total ads
served
Cost per
1000
Total
revenue
You can see that this model is more appealing for the publisher in terms of revenue earned.
Subscribers to weekly newsletter
: 50,000. Each newsletter broadcast four times per
month has
four advertisers each paying at a rate of 10 CPM.
Newsletter
subscribers
Newsletters
per month
Advertisers Inventory
sold
Total ads
served
Cost per
1000
Total
revenue