This study of e-Marketplaces
looks at 32 e-Marketplaces in the winter of 2000-2001 as well as 20 Buyer and
20 Seller participants in 69 e-Marketplaces, 15 Infrastructure Software
Vendors, 3 Systems Integrators, and 63 demographically selected Current and
Potential e-Marketplace Customers.
This is a report where much of
our research was enhanced by checking with the pages of daily newspapers and
the Web, as new e-Marketplaces were announced, new partnerships formed, and
failed e-Marketplaces closed or converged.
This process, of course, has continued as we evaluated the research
results and prepared this report. E-Marketplaces
are in a fast-paced state of change.
In this study we found that
Role of Buyers
Buyers and Customers come to
e-Marketplaces looking for products, Sellers, and good prices.
They prefer to buy the products in online transactions, if possible,
via catalog-listed prices, negotiation with the Seller, or (to a lesser
extent) via Auctions.
Referral “Marketplaces”
Many of today’s
e-Marketplaces are referral sites, pointing Buyers to products and Sellers,
but where no actual transactions can take place.
This is probably a transitional stage.
Referral sites are often little different than free portals and, in
fact, many Buyers and Customers have difficulty differentiating between
e-Marketplaces, portals, and some types of e-Commerce sites, especially
multi-vendor sites. This makes it
difficult to monetize the e-Marketplace referral sites and likely that they
will disappear or become transactional.
Role of Transactions
Transactions are an important
part of success, because most e-Marketplaces get some or all of their revenue
from Transaction Fees, generally charged Sellers as a percent of their
business. 91% of the
e-Marketplaces we interviewed for this report charge Transaction Fees.
Buyers don’t like Transaction Fees, but they don’t see them
directly; rather they are included in the prices offered by Sellers.
Pricing is important to Buyers, but they are almost as interested in
Availability and Quality.
Competitive versus Premium Pricing
Some e-Marketplaces believe
that they will convince Buyers to pay premium prices (compared to other
e-Marketplaces), based on premium Services or site content.
We agree that Buyers can be sold premium services if they value them,
but we doubt that that this is a substitute for competitive pricing.
They should instead be sold as optional up-sells to competitively
priced products.
Seller Reluctance
Sellers have been somewhat
difficult to convince that participating in e-Marketplaces is a benefit for
them. Many are afraid it will
result in their cannibalizing their existing customers at lower price points.
This study shows that 70% of them are seeing new Buyer relationships on
e-Marketplaces, so there are plenty of additional customers to meet.
On the other hand, the cost of customer acquisition may be too high for
e-Marketplace owners or facilitators if all the Buyers must come from
elsewhere. Many of the most
successful e-Marketplaces occur when Sellers bring their Buyers to the
e-Marketplace because it’s an efficient way for both of them to meet the
market.
Changes in e-Marketplace Focus
A year ago, much of the
emphasis for e-Marketplaces was on the “fat butterfly” model,
multi-seller, multi-buyer markets, often very ambitious in scale.
These e-Marketplaces might be started by industry players (consortiums
of Sellers or Buyers), but they were more often started and run as
profit-making corporations by separate companies.
e-Market makers pushed for scale and market share – only one online
marketplace could be the Big Player in any one market.
Infrastructure hardware and software vendors focused, too, on these
potential big winners, assuming that this was where the future money (and
eventually profitability) would be.
It seems to be turning out
differently. Only a few of these
third party and consortium marketplaces are doing well.
Few additional ones are surfacing now.
But the pace of online
procurement hasn’t slowed, it’s just changed focus.
Instead of the Fat Butterfly, multi-buyer/multi-seller e-Marketplaces
of a year ago, we’re seeing lots of single-winged creatures.
Vertical
e-Markets for Similar Buyers
Some are a single Seller offering his
wares (and sometimes merchandise from partners) to many Buyers.
Often, these buyers have some underlying homogeneity – they’re in
the same geography or industry segment.
Online
Procurement
In other cases, a single Buyer creates
his own online marketplace, automating his procurement process and including
all of his many suppliers.
In both cases, the
infrastructure hardware and software vendors have been quick to follow, making
subtle alterations to their products and their marketing models to reposition
themselves into the new realities of these smaller and more focused (but much
more successful) e-Marketplaces.
We continue to believe there
is a place for Multi-Buyer/Multi-Seller e-Marketplaces.
The ones that we’ve seen succeed, however, often have distinct
features.
·
They are often owned and/or managed by individuals with deep
expertise in the market segment. This
expertise enables them to pick the right Sellers, attract the right Buyers,
and offer just the right mix of features at a price that satisfies everyone.
We’ve
noted, with interest, that a number of these e-Marketplaces are in the food
distribution
business, often based on existing (brick-and-mortar)
businesses.
·
They may offer products that are highly homogeneous, commodities
or near-commodities, such as energy (electricity, gas, or oil) or financial
instruments.
Online auctions are an entirely appropriate way for such
markets to reach prices
determined by
real-time supply and demand.
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