The best way to differentiate
between “Internet Marketplaces” and a sell-side/buy side solution is
to study the different Internet models used in e-commerce solutions.
Each of these models supports different business functions and they
generally fall into three categories: Procurement Marketplaces,
Vertical Marketplaces and e-Business Portals.
Procurement
Marketplaces
Procurement marketplaces are buyer-hosted. They streamline corporate or group purchasing while empowering independent divisions, partners or companies to maintain independent buying processes and supplier relationships. Key targets for this market include large and mid-sized companies with multiple autonomous divisions, franchises, trade associations and purchasing co-ops.
As an example, a company wanted to unite procurement across their owned and franchised hotel properties. They decided that the best way to do this was to host a centrally managed procurement marketplace, which would provide access to common suppliers, products and combined contracts. Additionally, they needed to enable the independently owned hotels to set up their own view of the marketplace, which matched their specific processes and buying relationships.
Vertical Marketplaces
Vertical marketplaces are the most widely understood examples of new Internet models. They focus on a single industry that is suffering from a critical inefficiency in distribution or sales. Vertical marketplaces also use the marketplace as a strategy to bring buyers and sellers together. Along with that, they automate existing distribution channels or break those channels by creating new exchanges. They thrive in fragmented markets that lack dominant suppliers or buyers. They can eliminate industry specific problems for both buyers and sellers by exploiting a combination of technology and deep expertise in a particular industry. Lastly, vertical marketplaces provide new distribution channels for raw materials, secondary inventory and supplies.
Therefore, transactions are streamlined, information flows freely, inventory and sales costs are reduced – and the marketplace host generates revenue. Major distributors, resellers and new market makers typically host these Vertical Marketplaces and tend to fall into one of three groups: Virtual Distributors, Exchanges and Enablers.
Virtual distributors attempt to replace and improve some portion of the existing distribution channel. For example, a company has managed to eliminate as much as five hours a week from the process of product searching in the pharmaceutical and biotech industry. Rather than going through hundreds of vendors' catalogs, research scientists can turn to this marketplace, where the catalog data has been aggregated into a one-stop, online comparison-shopping venue. The online search cuts across all vendor catalogs – making the search easier for the researchers – while simultaneously reducing the vendors’ cost to reach those scientists. Therefore, the virtual distributor cuts the cost to all customers, large and small, with product and price information. By integrating a catalog once into a marketplace, rather than separately with each customer, the marketplace enables a host of benefits for all parties involved.
Exchanges work best on loose and inefficient broker networks, using the Internet's ability to eliminate barriers of geography. The online solution creates effective transparency of distribution, price and inventory. As an example, a steel exchange company lets buyers post their demand for products while seeing the entire inventory currently available. The marketplace reduces costs in time and money since procurement extends beyond the enterprise to all marketplace buyers. The marketplace also enables small and medium-sized companies to realize the benefits of reporting on purchases that were previously available only to large enterprises.
Enablers facilitate the integration of an enterprise into a central platform. Bringing additional buying power into the marketplace raises vendor participation, expands sources and selection and reduces prices by increasing competition. These markets offer a tool that existing distributors or brokers can pass along to their customers. As an example, a company has created a market in the commercial printing industry among the corporate buyers of printing projects, print brokers and commercial printers. Because print brokers know which local printers have idle presses, as well as which printers have the best prices and the capability to print a particular job, they add value and retain their place in e-commerce. The online market enables the broker to speed up the matching process while the sophisticated software offered in this online market – available on the customer's desktop through a web browser – eliminates errors in the pre-press process and sends the job to the printer electronically and instantly.
E-Business Portals
E-Business portals, or “horizontal“ markets, are hosted by trusted third parties to provide online buying and selling services to a set of identified clients. They allow providers to extend their brand identity to the Internet and capitalize on new revenue generating opportunities. They also bring powerful assets to the game by leveraging core competencies in facilitating commerce. They can find a lot of business relationships and opportunities for branding or for positioning themselves as financial agents and trusted third parties in these growing online marketplaces.
E-Business portals also offer trusted third
parties that host large financial institutions, utilities,
telecommunications companies, IT and Commerce service providers.
They provide the financial and operational benefits of on-line
buying and selling to a specific customer base
