Content

1
Andreas S. Weigend, PhD?????
SJTU Dec 2004
E-Business (7) Markets???? (7) ?????

• Content
• Market size for B2B (Business to Business)
  B2B(?????)????
• Price-setting mechanisms (catalogs, auctions,
  exchanges)????(????????)
• Pricing models for operating the market????
• Reputation management????
• Supplier adoption, quality assurance, dispute
  resolution,??????????
• Example eBay? eBay

2
B2B Commerce and B2B MarketsB2B???B2B??

• B2B commerce Purchase and sale of goods and
  services between businessesB2B?????????????
• Auto parts????
• SDRAM chips SDRAM??
• Telecom bandwidth????
• Natural gas
• ???
• Office supplies????
• B2B markets Internet-based markets for B2B
  commerce B2B????????B2B????

3
B2B Markets Some History B2B????????

• Before B2B markets EDI (electronic data
  interchange), close bilateral relationships
• Pre-1998 Conventional Internet-based commerce by
  some leading computer and networking product
  companies
• Cisco, Dell, Sun,
• 1998 Independent (VC-backed) markets emerge, to
  connect buyers and sellers over the Web
• Chemdex, VerticalNet, MetalSite
• 1999 Specific buyers and sellers launch their
  own B2B markets
• AutoExchange (Ford, buyer), Polymerland (GE,
  seller)
• 2000 Participants join forces to announce
  industry-sponsored marketplaces
• Role of independents becomes software vendors
• 2002 7 penetration

• ?B2B??????????????????
• 1998?????????????????????????
• ????????
• 1998???(????????)????,?????????????
• Chemdex, VerticalNet, MetalSite
• 1999???????????????B2B??
• AutoExchange (??,??), Polymerland (????,??)
• 2000????????????????????,???????????
• Role of independents becomes software vendors
• 2002? 7???

4
B2B????(09/01) B2B Market Projections (09/01)
Total B-to-B Commerce B2B????
Percentage of Total Penetration????
5
B2B MarketsB2B????
???
3,000
????
????
???????
????
2,500
??
?????
???
???????
2,000
????
??
Value of B2B transactions online
(B) ??B2B????(10???)
????
1,500
????????
1,000
500
0
2000
2001
2002
2003
2004
Source Forrester Research, 2000
6
Percent of total trade in different industries
(U.S.)????????????(??)
????????
????
????????
?????
???
Source Jupiter Internet B-to-B Commerce Model,
6/00 (US only)
7
Perceived Importance and Actual Trade Percentage
B2B?????????????
How important is online B2B eCommerce
Of your total trade, how much is done using the
Internet?
??B2B????????
???????????????
Sellers
Buyers
??
??
gt50
- 4
Critical
37
32
22
????
73
67
1-50
Very
50
18
18
??
??
23
12
important
Percent of
????
18
18
??
trade done
12
Important
???
10
71
on the Net
27
32
???
Not
?
0
3
important
46
None
02/2000
2002 (est.) 2002(??)
7
02/2000
2002 (??)
2002 (est.)
Source Forrester Research, 2000
8
Summary of B2B Market Size??

• Penetration ???
• Worldwide, 510 of entire trade volume done
  online ????????5-10??????
• In US, 30 in some sectors (computers,
  defense)???,????????30(??????)
• Characteristics of early adopters ????????
• Internet infrastructure companies (e.g., CISCO)
  and/or highly standardized parts (automotive)
  ?????????(???)?/?????????(??)
  
• B2B is 90 95 of all EB
  B2B????????90-95
• Next ??????
• Pricing of goods (catalogs, auctions, exchanges)
  ?????(????????)
• Pricing for providing market place ???????
• Supporting services ?????

9
Type of product traded???????

• Operating (indirect) inputs??(??)??
• Used for MRO (maintenance, repair, operations)
  ??MRO(????????)
• Do not serve as direct inputs into a production
  process ????????????
• Example Office supplies?????
• Lower volume, higher frequency and of
  transactions ?????,?????,???
• Commodities??
• Electricity, oil, bandwidth, natural
  gas,????????????
• Direct inputs????
• Typically a manufacturing input????????
• Used directly in the production
  process????????
• Example auto parts, memory chips??????????
• Higher volume, lower number of transactions
  ?????,?????

10
Purchasing forecasts????
Source Forrester Research, 2000
11
Purchasing forecasts
2000??????????????????2002???

????
Based on 50 companies responding
???????50???

• eMarketplace purchases in 2002

15
????
12
8
6
0-25
26-50
51-75
76-100
Based on 41 companies responding
???????41???

• eMarketplace purchases in 2002

18
????
14
6
2
0-25
26-50
51-75
76-100
Based on 40 companies responding
???????40???
Source Forrester Research, 2000
12
Focus of Market????

• Horizontal markets????
• Span a variety of industries??????
• Tend to be better suited for operating
  inputs??????????
• Vertical markets????
• Specialized in one specific industry???????????
• Likely to be for direct manufacturing
  inputs???????????
• Possibly integrated into supply-chain of
  buyers/seller
  ????????/??????
• Possibly designed to suit the specific needs of
  the industry ??????????????
• Other types of market focus?????????
• Product focus bandwidth, natural gas,
  electricity
  ?????????????
• Regional focus????

13
- Price-setting mechanisms (for goods)????(??)
- Catalogs, auctions, exchanges ????????-
Pricing models for operating the market?????????
14
Pricing structures????

• Distinct from market mechanism???????
• Price of providing the market vs. price of
  product traded
  ??????????????
• Is providing the market an information good?
  ?????????????
• Transaction-related fees??????
• Per transaction, per bundle of transactions, of
  savings ????,?????,?????
• Common in commodities markets??????????
• Membership fees???
• Fixed periodic fees, unlimited transactions??????,
  ?????
• Other models????
• Advertising??
• Fees for related commerce services????????
• Revenues from information sales??????

15
Market Mechanisms????

• The market mechanism determines the rules based
  on which the price of the goods being traded is
  set
• ??????????????????
• Method of determining price???????
• Frequency of price changes???????
• The mechanism is one crucial determinant of
  market liquidity and efficiency??????????????????
  ????
• Some examples of possible B2B mechanisms
  ?????B2B????
• Catalogs of fixed prices??????
• Auctions of various flavors???????
• Exchanges (double auctions, clearing
  houses)??(????????)
• Dynamic bid-ask matching????-????
• Dealer markets?????
• Negotiated prices??

16
Mechanism Catalog????

• Prices are pre-determined and listed?????????
• Different buyers could have different price
  views
  ?????????????
• Market does not perform a price-creation
  function?????????
• Market should provide the following
  functions?????????
• Aggregating buyers and sellers???????
• Detailing rich product specification
  information???????????
• Standardized product specifications???????
• Content management tools for vendors??????????
• Well-suited for B2B marketplaces???B2B??
• With a wide variety of low-priced
  products??????????
• Where buyers tend to buy small quantities
  frequently?????????
• Where the benefits of emergent prices outweigh
  the costs ??????
  ??????
• Indirect inputs????

17
Catalogs Example????
18
Auction Heinz in China uses Freemarkets

• "Procurement has been a back-room process
  essentially unchanged since the days when Henry
  Heinz traveled from farm to farm to contract with
  growers for their crops. Today, it is an exciting
  new, global frontier for Heinz that is being
  transformed on a global basis by modern
  technology and thinking."-William R. Johnson,
  Chairman, President, and Chief Executive Officer
  of H.J. Heinz Company
• Reverse auction
• Open, but anonymous bids, 30 minutes
• ROI?
• Cost savings?
• Better prices / more efficient markets

19
Auction Another example from China?????????

• Why not make it an e-market? ????????????????
• Buy the software for the auction or outsource as
  ASP ?????????ASP????
• Expect to obtain higher price? ??????????
• Pro and con of e-market ????????
• Pro larger reach, less overhead ?????,?????
• Con Less social effect of bidding it up, fun is
  part of it, participants are willing to pay for
  it
  ???????,???????,???????

• Example Mobile telephone numbers ??????
• Ascending prices ????
• Highest surviving bid / Last man standing gets
  the number ?????/?????????
• Currently People flying to the auction to attend
  in-person ?????????????

20
Mechanism One-sided auction??????

• Prices are set based on bids of one set of market
  participants (either buyers or sellers, typically
  buyers)
  ????????????(?????,?????)??????
• Bids ??
• Ascend vs descend ?????
• Visible vs sealed ??????
• Winner pays ????
• What winner had bid vs the highest losing bid
  ???????????
• If several items???????
• Everybody pays the same price vs each what each
  had bid ???????????????????
• Typically used for excess inventory sales, spot
  needs ??????????,????

21
The Winners Curse?????
22
The Winners Curse?????
23
One-sided auctions Example
??????
24
One-sided auctions Example ??????
25
Choice of Auction???????

• Some details ??????
• English auctions tend to generate the highest
  prices for sellers (for a variety of
  reasons)???????????????(??????)
• Dutch (descending price) auctions seem to work
  well for perishable non-commodity products like
  airline seats, hotel rooms???(????)??????????????
  ???????????
• When buyers are averse to risk, first-price
  sealed bid auctions lead to higher prices than
  second-price???????????,???????????????????????
• When the estimated valuation distributions of
  ones buyers have??????????
• Same shape, different range use
  sealed-bid????,???????????
• Same range, different shape use
  ascending????,???????????

26
Mechanism Exchange????

• Two-sided (double) auctions??(??)??
• Buyers and sellers submit bids?????????
• Limit prices, quantities???????
• Market-maker periodically chooses price that
  clears the market (at which demand supply)
  ????????????(????)???
  
• Benefits??
• Price emerges from the market, reflecting
  supply and demand at that point
  
  ???????,????????????
• ? Price discovery ????
• Prices are more visible?????
• Issues??
• Requires high volumes to be effective????????
• ? Liquidity ???
• Requires highly standardized products being
  traded ????????????

27
Exchanges Example????
28
Arbinet-thexchange www.arbinet.com

• Deep vertical marketplace
• Created and operates the spot market for voice
  minutes
• Compiles and distributes market data
• Develops the routing intelligence
• Used by telcos to buy, sell and manage wholesale
  voice traffic

29
Other mechanisms used????

• Reverse auctions????
• Sellers bid for buyers???????
• Matching systems????
• Exchange-like two-sided bids?????????
• Buyers and sellers directly matched based on
  complex preference profiles??????????????????
• Niche technology vendors OptiMark???????OptiMar
  k
• Richer language for orders in finance

30
Benefits of B2B Markets B2B?????

• Operational efficiencies????
• Lower ordering costs (reduced by an order of
  magnitude) ??????(????????)
• Shorter order cycles, flexibility of more
  frequent orders ??????,???????
• Standardized product specifications???????
• Tighter supply-chain integration????????
• Price efficiencies????
• Larger set of trading partners???????
• More efficient methods of setting prices????????

31
Benefits of B2B Markets B2B?????

• Expanded markets????
• Ability to sell surplus product
  inventory??????????
• Ability to create markets for surplus
  capacity?????????? ??
• Lower search costs??????
• Easier to identify trading partners?????????
• Access to smaller trading partners????????????
• Easier to comparison shop?????????
• Increased transparency ?????

32
Supplier Adoption Incentives
???????

• B2B markets have many potential benefits to
  suppliers ??????,B2B?????????
• Operational??
• Improved supply-chain management???????
• Superior production planning and scheduling
  ????????????
• Lower inventory, faster inventory
  turns????,??????
• Financial??
• Faster payment processing??????
• Superior cash flows??????
• Other??
• Access to broader base of buyers????????
• Contract standardization?????
• Superior marketing information?????????

33
Supplier Adoption Incentives
???????

• However, there are possible deterrents to
  suppliers
  ??,????????????
• Fear of product commoditization???????
• Listing fees, investments into content management
  ???????????
• Marketplaces should offer incentives to join
  depending on
  ????????????,????
• Estimated level of natural benefits to supplier
  ??????????????
• Strategic importance of supplier?????????
• Dominant/preferred supplier of commodity inputs
  
  ??????????/??????
• Supplier of operationally critical direct inputs
  
  ????????????????

34
Supplier Adoption Incentives
???????

• Fears of commoditization could pan out in at
  least two ways (both possibly favoring adoption
  by supplier)
  ???????????????????(???
  ????????????)
• If there are indeed well-regarded smaller
  substitute suppliers, a larger supplier may lose
  business by staying out of a market
  
  ?????????????????,????????
  ????????
• If, on the other hand, the suppliers product has
  few competitive threats, joining does not
  commoditize the product
  
  ?????????,??????????
  ????,??????????

35
Choice of Market Mechanism???????

• Selected guidelines for choosing market
  mechanisms ?????????????
• Catalogs High product complexity, frequent
  trade, low variability in supply and demand
  ???????????????????
  
• True markets Uniform, divisible,
  well-understood, high-volume, frequently traded,
  perishable
  ????????????????????????
  ???
• Possible products oil, gas, electricity,
  bandwidth, memory, steel,
  ??????????????????????
• Auctions If a true market isnt feasible, high
  supply or demand variability, infrequent trade,
  large volume per order????????????,????????,??
  ???,???????

36
Reputation management????
37
Quality Assurance Trading Partner??????

• When a business trades with more
  partners?????????
• Better prices, availability, and so
  on?????????????
• but lower learning about reputation for
  reliability from repeated transactions
  ????????????????????
• Necessitates (standardized) method for sharing
  partner-quality information??????????????(???)??
• From the buyers point of view????????
• Does this supplier represent quality accurately,
  deliver on time, ship the right products
  
  ????????????,????,????
• From the sellers point of view????????
• Does this buyer have the money, will payment be
  on time???????,??????
• Q Should these reputation services be
  marketplace specific or shared across multiple
  marketplaces??????????????????????????

38
Reputation systems????

• Problem What merchant can a buyer trust?
  ??????????????
• Comparison shopping suffers from a similar
  problem as search There are many possible
  vendors returned, who to buy from?
  
  ????????????????????????,????????
• Since shopbots reduce search costs, this problem
  surfaces quickly ????????????,???????
  ???????
• Solution Reputation systems, based on community
  feedback????????????????????
• Explicit ??
• Reviews, ratings ??,??
• Implicit (through actions) ??(????)

Problem of fraud Need to build statistical
models to filter out irregularities.????????????
,????????
39
Reputation systems leverage community?????????

• Reputation systems address the question whether I
  can trust??????????????????
• The product? ???
• The buyer????
• The seller? ???
• Who provides the reputation system? ????????
• The comparison site or the marketplace
  itself????????????
• Specialized firms from the outside? ???????

40
Quality Assurance Trading Partner??????

• Some desirable qualities of a reputation service
  ?????????
• Simplicity Understanding ratings does not
  require deep analysis??????????????
• Appropriate basis for rating Provides
  information that is pertinent to the
  buyer/sellers needs (delivery, payment
  timeliness, product quality, support,)
  ????????????/???????????(???
  ?????????????)
• Span of coverage Covers as many potential
  trading partners as possible?????????????????
• Predictive Is able to generalize across partners
  (thereby increasing the depth of information
  beyond merely the transaction histories of the
  participants)
  ?????????????????(?????????,???????????????)

41
Quality Assurance Trading Partner??????

• Example??
• Rating services for B2B marketplaces B2B??????
• Subscription service for buyers, rather than
  being marketplace-specific??????,?????????
• Focus is on supplier ratings?????????
• Can enable companies to identify areas for supply
  chain improvement
• Selected products????
• Supplier Performance Review???????
• Buyer Insight?????
• Partners Dun Bradstreet, Deloitte Touche
  ??????????

42
Quality Assurance Trading Partner??????

• Example??

1.????(???????)
??
????
???
(?)
??????
??
??
????
??
?25?
????
??
8742/??????
SIC/????
2.???????
??????????????????????,?????????????????????????
????????????0-100,????????
SIC?????
????
??
??
?????????
8742/???????
43
Quality Assurance Trading Partner??????

• Example??

???????
???
??????????????????
??
????????????????????
?????
????????/?????????????????
?????
????/?????????????
??
??????????/??????????
????
?????????????
??
?????????????????????
????
44
Quality Assurance Trading Partner??????
4.????

• Example??

?????????????????????????????????????????????????,
?????0-10?,???????9-10,?????5-8,?????0-4????
????????????
????
???
??
?????
?????
??
????
??
????
???
????
????
????
45
Quality Assurance Product Inspection??????

• Services to ensure the quality of products
  ordered (based on inspection rather than
  transaction history)???????????????(?????????????)
  
• Examples of services????
• Order inspection quantity, workmanship,
  function, appearance, color, size specifications.
  ??????????????????????
  ?
• Product performance testing??????
• Product safety testing???????
• Factory/site inspection and approval, EHS
  compliance, random sampling of products,??/??????
  ?,??????????,??????,
• Examples of vendors?????
• Bureau Veritas
• Intertek Testing Services Intertek????
• SGS OnSite

46
Effects on market in China

• Higher number of attributes (in addition to
  price, e.g., quality, timeliness) ? better
  matches between buyers and suppliers
• Increased transparency allows us to get those
  attributes we care for
• This lecture focused on external processes
• Need standards

47
Other supporting services?????Market
ownership?????
48
Other supporting services?????

• Trade processes which were relationship-specific
  have to be provided and supported (independently
  or by marketplace)???????(???????)?????????
• Quality Assurance??
• Product Inspection, quality guarantees,
  counter-party insurance????????????????
• Partner Credit rating, credit checking
• ?????????????
• Payment and settlement?????
• Loans, letters of credit, open credit lines,
  transaction settlement, escrow, payment
  transfers,?????????????????????????????
• Logistics??
• Delivery guarantees, packing and shipping,
  shipping integration???????????????
• After-sale????
• Returns processing, dispute resolution ????,????

49
Financing, Payment and Settlement????????

• Financing for transactions????
• Loans, letters of credit, open credit lines
  ??????????????
• Reduction in payment risk??????
• Credit checks, insurance against non-payment,
  escrow
• ???????????????
• Transaction settlement ????
• Example??
• Joint venture between AIG and DB AIG?DB??
• Provides a suite of services, including credit
  checks, trade credit insurance, payment and
  settlement, product/cargo inspection??????,??????
  ????????????????/????
• Other examples TradeSafe, Actrade, eCredit.com,
  Escrow.com (Fidelity), SierraCities,
  TradeCard???? TradeSafe, Actrade, eCredit.com,
  Escrow.com (Fidelity), SierraCities, TradeCard

50
Dispute Resolution????

• In a B2B marketplace ?B2B??
• Trade disputes are more likely when one trades
  with a larger number of less frequent trading
  partners ?????????????????????????
  ?
• Trade disputes may be more complex to resolve
  (due to lowering of natural geographic trading
  constraints) ???????????????(???????
  ?????)
• A well-defined dispute resolution infrastructure
  is crucial for the efficient functioning of the
  market
  ?????????????????????
• Current options ????
• AAA eCommerce Dispute Resolution Protocol
• AAA??????????
• ICC International Court of Arbitration ICC
  ??????
• SquareTrade

51
B2B Market Ownership B2B?????

• Typical ownership structures????????
• Owned/sponsored by an industry consortium
  ????????/??
• Owned by a neutral third-party ?????????
• Owned by a single buyer or seller ???????????
• Other structures? ?????
• Ownership issues?????
• Is the owner affected by the price in the market?
  ?????????????
• Does the market requires liquidity to succeed?
  ????????????
• Do the participants need to adopt and deeply
  integrate with the market in order to benefit
  from it?
  ??????????????????????????
• Does the market owner exclusively owns the
  transaction and order flow information???????????
  ???????????

52
Ownership Independent ?????

• Venture-backed third parties who does not
  transact in the market????????????????????
• Focus Vertical/Horizontal????/??
• Product Varied initially, evolving to indirect
  inputs or commodities????????,????????????
• Mechanisms Multiple ????
• Represented first wave of B2B markets
  ??B2B???????
• Advantages??
• Natural incentive to choose most efficient
  mechanism
  ????????????
• No vested interests ?????
• Web/technology savvy (sometimes leading to new
  market technologies)??/?????(??????????)
• Examples????

53
Ownership Industry-Sponsored ???????

• Multiple industry participants collaborate to set
  up their own B2B market
  ?????????????,???????B2B??
• Focus Vertical ????
• Product Direct inputs (typically) ??????(????)
• Mechanisms Multiple (mostly catalog and auction,
  sometimes exchange)
  ????(????????,?????)
• Advantages??
• Born with critical mass/liquidity??????????/???
  
• Industry-specific knowledge??????
• Deeper supply-chain integration with participants
  
  ?????????????
• Deeper pockets ????????
• Examples????

54
B2B Market Information B2B????

• The move from isolated buyer-seller relationships
  to a common B2B marketplace results
  in??????-?????????B2B?????
• Availability of composite transaction
  information?????????
• Better supply and demand information???????
• Directly through order flow, willingness to pay
  ????????,?????
• Indirectly through price signals ????????
• Some issues and implications???????
• Valuable increase in efficiency through aggregate
  statistics
  ??????????
• Superior supply planning via aggregated
  downstream demand information???????????????????
• Higher transparency of competitor information
  ????????????
• Possible unfair inequity in information
  access??????????????
• Possibility of misuse of by powerful market
  participants
  ??????????????

55
B2B Market ConsolidationB2B????

• Expect 100-200 marketplaces (mostly vertically
  focused) by 2003?

56
B2B????

• Expect 100-200 marketplaces (mostly vertically
  focused) by 2003?
• ???2003??100-200???(??????????)?

1,200
????????(10?)
900
eMarketplace
trade in the US
600
(billions)

• 300

Online B2B volume (B) ??B2B???
??
??
??

• 0

2001
2002
2003
?
?
?
????????
?????
?????
??
?????
?
??????
?????
?
?????????
?
?
????????
???????? ??
????
?
?????????
?
?
????
57
B2B Market Consolidation B2B????

• Why is consolidation likely????????
• B2B markets display strong network effects
  B2B????????????
• More buyers -gt more value to each seller, and
  vice versa ????? -gt
  ????????????,????
• Scale implies more efficient pricing of products
  traded
  ???????????????
• Benefits from pooling of demand/supply
  information
  ????????????
• B2B markets could have high switching costs
  B2B?????????
• High upfront costs integration investment by
  participants
  ???????????????
• Brand-specific training in process/mechanisms
  ???/???????????
• Information and databases product/participant
  content, reputation and transaction
  histories????????/?????????????
• Deterrents to consolidation????????
• Consolidation of B2B markets raises antitrust
  concerns on at least two fronts
  B2B????????????????????
• Collusion via information sharing
  agreements????????????
• Lowered competitiveness from exclusion????????????
  ?

58
B2B Markets Antitrust Issues B2B????????

• Collusion via information sharing
  agreements????????????
• Higher prices (signaling, output
  collusion)????(????????)
• Inefficient standardization of transaction terms
  ????????
• Industry/agreement aspects that increase
  concerns
  ???????????/????
• High concentration/entry barriers????/?????
• Information transparency between competitors
  (rather than buyers and sellers)???(????????)?????
  ???
• Nature of information shared???????
• Price and output vs. other????????
• Direct vs. indirect goods, strategic significance
  ???????,?????
• Age (past/present/future) and granularity??(??/??/
  ??)???
• Current alternate sources of this
  information???????????

59
B2B Markets Antitrust Issues B2B????????

• Selective exclusion of buyers and/or
  suppliers?????????/????
• Industry-wide consortia may wield enough power to
  favor certain participants over
  others???????????????
• Range of possibilities selective rebates,
  selective access to partners, higher fees,
  outright exclusion???????????????????????????????
  
• But exclusion is not necessarily
  anti-competitive????????????
• Harm to competitors vs. harm to
  competition??????????????
• Examples AP vs. the US, Alaskan Airlines vs. UAL
  
  ????????????????????
• Questions that clarify anti-competitive
  concerns?????????????
• Are there substitute channels or alternative
  markets to the B2B in question???B2B?????????
• Does the exclusion in fact raise the prices for
  the incumbent participants in the
  B2B?????????B2B????????????
• Are there efficiency benefits from exclusion
  (e.g. avoiding free-riding and increasing
  incentives for investment)??????????????(?????????
  ??????)

60
eBay
61
Online auctions Oct 2002 Forrester

• By 2002, 21 of online North American households
  had made an online auction purchase
• eBay
• 42 million registered users
• Sells a pair of shoes every 20 seconds
• Retailers move merchandise to marketplaces
• Home Depot, Sears, IBM, Motorola use eBay to
  liquidate
• Keys to auction success
• Retailers use eBay to recover some costs for
  non-sold merchandise
• Portals will lose these marketing dollars and
  need to rethink their strategies
• Vendors keep innovating
• Channel Advisor Control and block deadbeat
  bidders at start
• NCR Teradata Provide analytics to identify
  patterns of offenders

62
Online auctions expected to grow to US55 billion
by 2007
63
eBay vs Alibaba, GlobalSourceseBay??????????

• Transactions ??
• Vs catalogue ???
• Price discovery ? increases market efficiency
  ???????????
• Vs fixed prices ?????
• Price discovery ????
• Multiple kinds of auctions ??????
• Payment of eBay eBay?????
• Insertion price (percentage of price) ????(?????)
• Network externalities ?????
• Liquidity ???
• Switching cost ????
• Reputation / History ??/??
• Both buyers and sellers! ????!
• Cognitive Lock-In ????
• Registration ??
• Initially C2C, and also B2C and B2B ???C2C?B2C?B2B

64
Discussion??

• Overview??
• Neutral marketplace for consumer-to-consumer
  trade??????????????
• Founded 1995 as a market for Pez dispensers
  ???1995?,??PEZ?????
• By the end of 2000?2000??
• 22 million users, 27B sales volume
  2200???,270??????
• 430M revenues, 300M gross profits, 48M net
  profit
  4.3??????3??????4800??????

????
??? (????)
65
Discussion??

• Multiple market mechanisms ??????
• English auctions (with reserve prices, minimum
  bid)????(???????)
• Fixed prices (Half.com, Buy It Now,) ????
  (Half.com, Buy It Now,)
• Multiple-item Dutch auctions (single-bid, all
  winners pay lowest winning bid)?????????(????,??
  ???????????)
• Pricing structure????
• Insertion fee based on minimum bid or reserve
  price ??????????????
• 0.01 - 9.99 0.30
• 10.00 - 24.99 0.55
• 25.00 - 49.99 1.10
• 50.00 - 199.99 2.20
• 200.00 and up 3.30
• Additional fees for featured listings, placement
  etc.????????????

66
Discussion??

• Supporting services?????
• Automatic fraud insurance (up to 200)?????
  (??200)
• Payment systems????
• Escrow?????
• Dispute resolution ????
• Authentication ????

67
Discussion??

• Quality Assurance Trading Partner??????
• eBays Feedback Forum records transaction
  histories of all its buyers and sellers
  eBay????????????????????
• 1, 0,-1 along with free-text comments
  1,
  0,-1,???????????

??7?
??1??
??6??
??????
??
??
??
??
??
????
68
Discussion??

• Quality Assurance Trading Partner
• ??????

• How much accountability should a market like eBay
  take for?eBay??????????????
• Product quality/authenticity?????/????
• Trading partner reliability?????????

69
Appendix

• Web services
• Cost drivers

70
Web Services

• Web Services
• - available over Internet
• - uses standardized XML messaging
• - not tied to any one operating system or
  language
• Key idea Application-centric Web
• XML eXtensible Markup Language
• SOAP Simple Object Access Protocol
• UDDI Universal Description, Discovery, and
  Integration

71
B2B Markets Cost Drivers
Indirect costs

• Price volatility
• Quality uncertainty

72
B2B??????
??
??
??

• 1

• 2

• 3

??????????
???????????
????????????
?????????????
??????
??/??
????

• ????????

• ??????

• ?????

• ????

• ??????

• ????????

• ????

• ????

• ?????

???

??????

• ??????

• ???

• ??????

??????

• ???

• ??????

• ???

???????

• ????

????

• ????

• ??????

• ?????
• ??????

• ????

??

• ??????

• ??????

• ?????

73
B2B Markets Cost Drivers B2B??????

• Three categories of buyers???????
• Baseline buyers Recurring indirect purchases
  ???????????
• Spot-market dabblers spot direct purchases
  ?????????????
• Enterprise enablers recurring direct purchases
  ???????????
• Baseline buyers?????

???
??
????
6
4
????
??
27
??
22
??
??
1
65
??
??
69
6
Source Forrester Research, 2001
74
B2B Markets Cost Drivers B2B??????

• Three categories of buyers???????
• Baseline buyers Recurring indirect purchases
  ???????????
• Spot-market dabblers spot direct purchases
  ?????????????
• Enterprise enablers recurring direct purchases
  ???????????
• Spot-market dabblers???????

???
??
9
12
????
????
??
29
??
23
??
54
??
??
1
59
??
13
Source Forrester Research, 2001
75
B2B Markets Cost Drivers B2B??????

• Three categories of buyers???????
• Baseline buyers Recurring indirect purchases
  ???????????
• Spot-market dabblers spot direct purchases
  ?????????????
• Enterprise enablers recurring direct purchases
  ???????????
• Enterprise enablers?????

???
????
????
15
??
??
??
39
33
46
??
16
??
1
??
??
21
29
Source Forrester Research, 2001