E-Marketplace Services – What do the e-hub sites deliver? Professor Robin Mansell

1. E-Marketplace Services – What do the e-hub sites deliver? Professor Robin Mansell (with D. Paré , J. Humphrey, H. Schmitz) A joint LSE-IDS project funded by DFID Presentation for 3rd Sociotechnical Lecture Series, Westminster Business School, 20 February 2002

2. Migrating Trading Practices to E-Commerce • Internet-based B2B e-commerce will extend the abilities of firms to access trading networks and expand network memberships through open internetworking. • B2B e-commerce for awareness building, transacting business, redefining value chains • Opportunities for all producer firms world-wide due to major reductions in transaction costs

3. A ‘New Economy’, but an Old Economy Problem • Information control - firms are more likely to enter open networks if they can preserve control of key resources (including vital information) • Despite all the hype for B2B e-commerce, what new scope is there for managerial control of the value chain?

4. B2B E-Commerce Migration Strategies Internet technologies (as system perturbation) Pathway 1 (persist with existing system) Pathway 2 (substitute closed system with open Internet system) Existing Proprietary EDI Networks Pathway 3 (complement closed system with open Internet system) Pathway 4 (substitute closed system with semi-open Internet system and partition Internet space into ‘closed membership communities’) Past Events, Selection and Expectations

5. The ‘New Institutionalist’ Transaction-cost Theory • B2B e-commerce is seen as a means of reducing trade-related transaction costs by providing opportunities to develop direct one-to-one trading relationships between buyers and sellers • Internet-based B2B e-commerce is expected to lead to ‘leap-frogging’. • B2B e-commerce promises a radical shift in the way that firms trade with one another.

6. The ‘Old Institutionalist’ Transaction-cost Theory • Complementary services are needed for negotiating and fulfilling contracts and for ensuring contract terms between trading parties are met. • Most E-hubs do not assist producer firms directly with logistics or oversee the settlement process. • E-hubs are not well-prepared to facilitate trade of labour intensive products or products without a high degree of standardisation. • Market power still matters; institutional processes shape how e-marketplaces using new technology develop.

7. Defining e-Hubs “Neutral Internet-based intermediaries that focus on specific industry verticals or specific business processes, host electronic marketplaces, and use various market-making mechanisms to mediate any-to-any transactions among businesses” . (Kaplan and Sawhney 1999) E-hubs are expected to address transaction cost-related problems of coordination and of motivation due to information asymmetries. (Milgrom and Roberts 1992)

8. The B2B E-Commerce Project • Focus on Internet-based B2B e-commerce in two sectors – garments and horticulture. • Sectors are important for the employment and export growth of poor countries in South Asia and sub-Saharan Africa. • Global trading platforms (e-hubs) for these products are in operation. • Examines the attributes and experiences of e-hubs and of the buyers and sellers that are brought together by these portals. • Evidence of how trading relationships are being constructed rather than speculation about the future.

9. B2B e-Marketplaces (117 e-hubs) FoodTrader.com <http://www.foodtrader.com> Agriwatch.com™ <http://www.agriwatch.com> ClickTex.com <http://www.clicktex.com> Biz2Biz.com <http://www.biz2bizapparel.com>

10. B2B e-Marketplace Requirements • ·Transport: There is no point trying to sell products that cannot be delivered, at reasonable, cost to the buyer's desired location. • ·Payment systems: E-commerce requires low-cost and reliable payment systems.   • ·Confidence in the product: Buyers must be confident that the product being purchased meets the desired specifications.   • ·Availability of effective redress: As in all other forms of commerce, customers must be confident that they can obtain redress if something goes wrong.

11. E-Hub Exchange Structures • e-Retail: E-hub sells products/services to users. Similar to exchange on B2C web sites. • Direct Buyer/Seller Links: E-hub offers a means for sellers to post direct links from hub to own company Web-sites. • Online Auctions: E-hub acts as an agent on behalf of independent sellers; or as a retailer, and hybrids. • Request for Quotes: Seller or buyer posts a message to a forum indicating a desire to buy/sell particular items. • Trade Leads/Classifieds: Buyers or sellers post messages to a forum with control over firm access.

12. Empirical Results • B2B e-hubs are unlikely to enable a reduction in overall transaction costs, sufficient to facilitate entry into new global markets. • B2B e-hub providers do not appear to be providing the types of services that firms need to engage in transaction preparation and completion. • Most e-hubs focus on minimising information search costs - bringing ‘strangers’ together - ‘buyer and seller beware’. • Product certification, product quality, or trading partner reputation is not easily accessible at e-hubs.

13. Exchange Structure Combinations

14. Information in Horticulture/Agriculture Exchange Structures

15. Information in Garment/Apparel Exchange Structures

16. Exchange Settlement Mechanisms

17. Access to Delivery Mechanisms

18. Access to Logistical Support

19. Further Reading and Resources D. Paré(2002) ‘Does This Site Deliver? B2B E-commerce Services for Developing Countries’, http://www.gapresearch.org/production/ecommerce.html J. Humphrey (2002) Business-to-business e-Commerce and Access to Global Markets: Exclusive or Inclusive Outcomes?, http://www.gapresearch.org/production/ecommerce.html R. Mansell et al. (2002) ‘E-commerce: Accelerator of Development?’ IDS Policy Briefing Paper, http://www.ids.ac.uk/ids/bookshop/briefs/brief14.html R. Mansell (2001) Issues Paper on E-Commerce prepared for OECD Forum, http://www.gapresearch.org/production/ecommerce.html