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Re-Thinking the E-Marketplace

To succeed in the future, companies must understand how today's e-marketplaces are quickly evolving into four distinct categories and they must reassess their current strategies to capitalize on these opportunities, says a new report.

In fact, the current definitions used to describe B2B e-marketplaces "do not accurately reflect the opportunities or risks companies face in pursuing these new business ecosystems," says the report from research firm Summit Strategies Inc.

"Contrary to industry hype, all e-marketplaces are not created equal," said Marilyn Muller, author of the report, entitled Operating and Delivery Philosophies for E-Marketplaces - A New Perspective.

"Companies anchoring their e-marketplaces into one or more applications can streamline an entire B2B business process, making it more convenient and transparent to users," she said. "These embedded e-marketplaces will have a distinct advantage over the stand-alone e-marketplaces prevalent today, with the biggest payoff from reducing total administrative overhead."

The report found two categories of operating model:

The laissez-faire model, in which the e-marketplace acts as a lead source for sellers and as a venue in which buyers can comparison shop. The marketplace itself plays no role in negotiating on behalf of either buyer or seller.

The mediated operating model is one in which the e-marketplace acts as an active intermediary, negotiating or aggregating deals on behalf of buyers or suppliers. Transactions occur through the e-marketplace.

The two delivery models are:

The stand-alone model, in which the marketplace is an independent entity that is not part of an application. The marketplace may exist within a portal, but data is not tied directly into any other aspect of the portal. Users access the e-marketplace directly. Transactions may or may not occur online.

The embedded delivery model, in which the e-marketplace is embedded within an application or set of applications. Users can conveniently buy or sell products and services within the context of the application and may take advantage of integrated features between the e-marketplace and the application. Transactions must occur online.

Based on interviews with more than 40 e-marketplace operators, the report also predicts that a forthcoming squeeze on transaction-related revenues will force most e-marketplace vendors to re-evaluate their business strategies.

"E-marketplace operators cannot succeed by relying on individual features, functionality or a transaction-based strategy," said Muller. "Creating a sustainable advantage will require e-marketplace operators to clearly define their place in this new business ecosystem and understand how their business model must evolve in the near future."

E-marketplaces referenced in the report include: Commerce One's MarketSite Global Trading Portal, Chemdex, EDS's CoNext, Demandline.com, i2's TradeMatrix network, EqualFooting.com, TradeOut.com, BizBuyer.com, Bidcom and HoustonStreet.com.