LESSON 2: IMPLEMENTATION OF IT SOLUTION

I. STARTING UP
Work in groups, imagine you are customers who want to buy something (a book, a watch, a
T-shirt, an electronic device, and so on) online. Discuss and provide the step of buying the
thing you want

II. READING COMPREHENSION

E-MARKETPLACES
Electronic market plays a central role in the digital economy, facilitating the exchange of information,
goods, services, and payments. In executing the trading process, e-marketplaces create economic
value for buyers, sellers, market intermediaries, as well as for society at large.

Markets (electronic or otherwise)have four major functions: (1) enabling transactions to occur by
providing a meeting place for buyers and sellers; (2) enabling the flow of relevant information; (3)
providing services associated with market transactions, such as payments and escrow; and (4)
providing auxiliary services such as legal, auditing, and security (see Table 2.1).
Electronic Markets

The electronic market is the major venue for conducting EC transactions. An e-marketplace (also
called e-market, virtual market, or marketspace), is an electronic space where sellers and buyers meet
and conduct different types of transactions. Customers receive goods and services for money (or for
other goods and services, if bartering is used). The function of an e-market are the same as those of a
physical marketplace; however, computerized systems tend to make electronic markets much more
efficient by providing more updated information and various support services, such as rapid and
smooth executions of transactions.

EC has increased market efficiently by expediting and or improving the functions listed in Table 2.1.
Furthermore, EC has been able to significantly decrease the cost of executing these functions.

The emergence of electronic marketplaces, especially Internet-enabled ones, has changed several of
the processes used in trading and supply chains. In many cases, these changes, driven by technology,
have frequently resulted in:

- Lower the search time for information and cost to buyers

- Reduced information misunderstanding between sellers and buyers
- Possible reduction in the time gap between purchase and possession of physical products
purchased online (especially if the product can be digitized)
- The ability of market participants to be in different locations while trading online
- The ability to conduct transactions at any time (24/7) from any place.

Components of and the Participants in E-Marketplaces

The major components and players in a marketspace are customers, sellers, products and services
(physical or digital), infrastructure, a front end, a back end, intermediaries and other business
partners, and support services such as security and payments. A brief description of each follows:

 Customers. More than 2 billion Internet users worldwide are potential buyers of goods and
services offered on the Internet. These consumers are looking for bargains, customized items,
collectors’ items, entertainment, socialization, and more. The social customers have more
power than regular customers. They can search for detailed information, compare prices, bid,
and sometimes negotiate. Buying organizations are also customers, accounting for more than
85% of EC volume and value activities.
 Sellers. Millions of webstores are advertising and offering a huge variety of items. These stores
are owned by companies, government agencies, or individuals. Every day it is possible to find
new offerings of products and services. Sellers can sell directly from their websites or from
public e-marketplaces.
 Products and services. One of the major differences between the marketplace and the
marketspace is the possible digitalization of products and services in a marketspace. Although
 both types of markets can sell physical products, they can also sell digital products, which are
goods that can be transformed into a digital format. However, in marketspaces, buyers can buy
digitized products online, anytime and from anyplace in seconds, and receive the purchased
goods instantly. In addition to the digitalization of software, music, and airline ticket, it is
possible to digitize dozens of other products and services. Digital products have different cost
curves than those of physical products. In digitization, most of the costs are fixed, and variable
costs are very low. Thus, profits will increase rapidly as volume increases, once the fixed costs
are paid.
 Infrastructure. The marketspace infrastructure includes electronic networks, databases,
hardware, software, and more.
 Front end. Customers interact with a marketspace via a front end. The major components of
the front end can include the seller’s portal, electronic catalogs, a shopping cart, a search
engine, an auction engine, a payment gateway, and all other activities related to placing
orders.
 Back end. All the activities that are related to other aggregation and fulfillment, inventory
management, purchasing from suppliers, accounting and finance, insurance, payment
processing, packaging, and delivery are done in what is termed the back end of the business.
 Intermediaries. In marketing, an intermediary is typically a third party that operates between
sellers and buyers. Intermediaries of all kinds offer their services on the Web. Some
intermediation is done manually many are done electronically. The role of these electronic
intermediaries is frequently different from that of regular intermediaries (such as wholesalers
or retailers). For example, online intermediaries create and manage the online markets. They
help to match buyers and sellers, provide escrow services, and help customers and/or sellers
complete transactions.
A. Glossary
- Bartering: The exchange of goods and services.
- Bartering exchange: A marketplace where an intermediary arranges barter transaction.
- Digital products: Goods that can be transformed to digital format
- E-bartering (electronic bartering): Bartering conducted online, usually in a bartering exchange.
- Electronic catalog (e-catalog): The presentation of product information in electronic form the
backbone of most e-selling sites.
- Electronic shopping cart: Software that allows customers to accumulate items they wish to buy
before they arrange payment and check out.
- Intermediary: A third party that operates between sellers and buyers.
- Search engine: A computer program that can access databases of Internet resources, search for
specific information or keywords, and report the result.
- Webstore (storefront): A single company’s (or individual seller’s) website where products or
services are sold.
B. Answer these following questions
1. Define e-marketplace and describe its attributes.
2. What is different between a physical marketplace and an e-marketplace (marketspace)?
3. List components of a marketspace.
4. Define a digital product and provide five examples.
C. Use given words to fill in the blanks

E-catalogs shopping cart search engine shipment payment

submits compare digital products logging Webstore

The process of online purchasing starts with a buyer (1)…………… on to a seller’s website,
registering (if needed), and entering an online catalog. (2)…………… can be very large, so using a (3)
…………… may be useful. Buyers usually like to (4)…………… prices; therefore, an online price
comparison service can be useful. If not satisfied, the buyer may abandon the seller’s site. If
satisfied, the buyer will place the chosen item in a virtual (5)……………. The buyer may return to the
seller’s catalog to choose more items. When the item selection is completed, the buyer goes to a
checkout page, where a (6)……………. option is selected from a menu. Finally, a (7)……………. option
is selected. After checking all the details for accuracy, the buyer (8)……………. the order.

III. Case study: NET-A-PORTER: DRESS FOR SUCCESS

Will a woman buy a $2,000 dress online without trying it on? Net-a-Porter (a UK online retailer)
bet on it and proved that today’s women will purchase their dresses (for success) online,
especially if the luxury and clothing and accessories are international brands such as Jimmy
Choo or Calvin Klein.

The Opportunity

When talking about e-commerce (EC), most people think about buying online books, vitamins,
CDs, or other commodity items. And this indeed was what people bought in the mid-1990s,
when EC began. But in 2000, Natalie Massenet, a fashion journalist, saw an opportunity
because of the success of luxury online stores such as Blue Nile and the fact that professional
women are very busy and willing to do more purchasing online.

The solution

Natalie decided to open an online business for luxury fashion. She created a comprehensive,
socially-oriented e-tailing site, naming it Net-a-Porter. According to the net-a-porter.com, the
company

- Opened an e-tailing store

- Offered merchandise from over 350 top designers most offline stores offer few dozen
 - Offered its own designs in addition to others
- Arranged distribution systems to over 170 countries
- Opened physical stores in London and New York to support the online business
- Arranged same day delivery in London and New York and overnight delivery elsewhere
- Organized very fast cycle time for producing and introducing new clothes and other
products that match customers’ preference
- Discovered what customers really want via social networks and fulfilled their needs
- Offered large discount

The result

Customers now come from over 170 countries and revenue and profits are increasing rapidly.
Several million visitors come to the site every week. The Net-a-Porter becomes profitable after
1 year, a very rare case in e-tailing. During the economic crisis of 2009, the Net-a-Porter’s total
sales were up 45%, versus a 14% decrease for one of its major competitors.

In June 2010 when the company celebrated its 10 th anniversary, it opened a new website
dedicated to menswear. To stay on top of the competition, the Net-a-Porter is planning new
ventures and expanding its business model to include children’s clothes. Net-a-Porter is an
example of the revolution that is occurring in the fashion industry.

Questions:

1. It is said that the Net-a-Porter is playing a significant role in transforming how designers
reach customers. Explain why.
2. What EC capabilities are helping the Net-a-Porter and its designers?
3. Analyze the competition in the high-end fashion market.