Page 142 - Introduction to Electronic Commerce and Social Commerce

122 4 Business-to-Business E-Commerce

• Accelerate sales cycles and minimize inventory risk
• Lower operating costs and improve margins 4. Buyers and sellers interact with bids and offers in
• Promote your brand to increase awareness and drive com- real time.
merce activities 5. Sometimes buyers join together to obtain a volume
• Source global talent” discount price (group purchasing).
6. A deal is struck when there is an exact match between
(see solarexchange.com/solarxpages/StaticAboutUs.aspx). a buyer and a seller on price, volume, delivery date,
For how this exchange works and the bidding process, see and other variables, such as location or quality.
solarexchange.com/solarxpages/StaticGetStarted.aspx 7. The deal is finalized, and payment and delivery are
and solarexchange.com/solarxpages/StaticBiddingProcess. arranged.
aspx.

Consortium Trading Exchanges (CTE)
Advantages, Limitations, and the Revenue
A consortium trading exchange (CTE) is an exchange Model of Exchanges
formed and operated by a group of major companies in one
industry. They can be suppliers, buyers, or both. The major Exchanges have several benefits, for buyers and sellers,
declared goal of CTEs (also called consortia) is to provide including making markets more efficient, providing opportu-
services that support trading activities. These services nities for sellers and buyers to find new business partners,
include links to the participants’ back-end processing sys- reducing the administrative costs of ordering MROs, and
tems as well as collaborative planning and design services. expediting trading processes. They also facilitate global
Examples of consortia exchanges are avendra.com in the trade and create communities of informed buyers and
hospitality industry and OceanConnect oceanconnect.com sellers.
in the shipping industry. Despite these benefits, beginning in 2000, exchanges
Note that some consortia have hundreds of members in started to collapse, and both buyers and sellers realized that
the same industry. they faced the risks of exchange failure or deterioration. The
potential benefits and risks of B2B exchanges for buyers and
for sellers are summarized in Table 4.2. As the table shows,
Dynamic Pricing in B2B Exchanges the benefits outnumber the risks.

The market makers in both vertical and horizontal exchanges Revenue Models
match supply and demand in their exchanges, and this match-
ing determines prices, which are usually dynamic and are Exchanges, like all organizations, require revenue to survive.
based on changes in supply and demand. Dynamic pricing Therefore, an exchange’s owners, whoever they are, must
refers to the rapid movement of prices over time and possibly decide how they will earn revenue. The potential sources of
across customers. Stock exchanges are a prime example of revenue for exchanges are similar to those discussed in
dynamic pricing. Another good example of dynamic pricing Chapter 1. They include transaction fees, membership fees,
occurs in auctions, where prices vary all the time. service fees, advertising fees, and auction fees (paid by the
The typical process that results in dynamic pricing in sellers and/or buyers). In addition, for a fee, exchanges offer
most exchanges includes the following steps: software, computer services, management consultation, and
so forth.
Note: For many new B2B e-marketplaces, see Demery
(2015).

1. A company posts a bid to buy a product or an offer
to sell one. SECTION 4.7 REVIEW QUESTIONS
2. An auction (forward or reverse) is activated.
3. Buyers and sellers can see the consecutive bids and 1. Define B2B exchanges and list the various types of
offers but usually do not see who is making them. exchanges.
Anonymity often is a key ingredient of dynamic 2. List the major functions of exchanges and the services
pricing (e.g., in stock markets). they provide.
3. What is dynamic pricing? How does it work?