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88 Part 1 Introduction

have a hole in its production run, or a sales target that the Another barrier is that government contracts tend to run
contract fills. ‘It creates real time, dynamic competition for many years.
between suppliers’, he says. ‘It’s a real marketplace.’ The But over time e-auctions could become common-
DVLA, for example, saved more than £200,000 buying place. The DVLA and Royal Mail, having tried them on a
several tons of watermarked paper. It is now working on pilot basis, both plan to use them again. And the Office
a similar e-auction for millions of the envelopes it uses of Government Commerce, happy they now fit within EU
every year. The Royal Mail, having saved £550,000 on its procurement rules, is encouraging other government
first two e-auctions, is in the process of buying more than departments to use them.
£20m of air freight space to shift air mails.
Source: A bid to save money for the government. By Nicholas Timmins.
Paul Cattroll of the DVLA says the reaction of Financial Times, 29 January 2003.
suppliers is mixed. Some feel that it has forced them to
reduce their profit margins. ‘But it is an opportunity for Questions
the government to get better value for money for the
1 Summarize the operation of a B2B reverse auction
taxpayer’, he says.
from both the buyer’s and seller’s perspective.
Despite the need to prepare the auction carefully,
2 Which types of products are suitable for purchase
Accenture argues that the process can prove quicker
by reverse auction?
than traditional procurement, while cutting the adminis-
3 Explain the benefits of reverse auction to
trative cost for both purchaser and provider.
purchasers.
E-auctions have been slow to take off in the public
4 What are the implications to selling companies
sector because there was a question mark over whether
of the reverse auction?
they breached European Union procurement rules.

Focus on Internet start-up companies

To conclude the chapter, we review how to evaluate the potential of new Internet start-ups.
Dot-coms Many ‘dot-coms’ were launched in response to the opportunities of new business and rev-
Businesses whose main enue models opened up by the Internet in the mid-to-late 1990s. We also consider what
trading presence is on
the Internet. lessons can be learnt from the dot-com failures. But Table 1.1 showed that innovation and
the growth of Internet pureplays did not end in 2000, but rather many successful online
companies such as digital publishers and social networks have developed since then.

From ‘bricks and mortar’ to ‘clicks and mortar’

Bricks and mortar These expressions were introduced in 1999/2000 to refer to traditional ‘bricks and mortar’
A traditional organization enterprises with a physical presence, but limited Internet presence. In the UK, an example of
with limited online
presence. a ‘bricks and mortar’ store would be the bookseller Waterstones (www.waterstones.co.uk),
which when it ventured online would become ‘clicks and mortar’. Significantly, in 2001
‘Clicks and mortar’ Waterstones decided it was most cost-effective to manage the Internet channel through a
A business combining
an online and offline partnership with Amazon (www.amazon.co.uk). In 2006 it reversed this decision and set up
presence. its own independent site once more. As mentioned above, some virtual merchants such as
Amazon that need to operate warehouses and shops to sustain growth have also become
Clicks only or
Internet pureplay ‘clicks and mortar’ companies. An Internet ‘pureplay’ which only has an online representa-
tion is referred to as ‘clicks only’. A pureplay typically has no retail distribution network.
An organization with
principally an online They may have phone-based customer service, as is the case with office supplier Euroffice
presence.
(www.euroffice.co.uk), or not, as is the case with financial services provider Zopa
(www.zopa.com), or may offer phone service for more valuable customers, as is the case with
hardware provider dabs.com (www.dabs.com).