The greatest opportunity yet to be fully exploited online may lie in the area of providing value to sellers. Seller agents focus on helping producers present themselves to customers and to the marketplace. They do this by helping producers gain knowledge of and access to the market, influencing customer purchasing and providing customer service. The need for specialised seller agency is growing for two reasons. First, lower transaction costs drive producers to concentrate on design and production, and to outsource online sales and service. Second, the Internet has introduced new customers and new marketplaces to every industry. So seller agents can rapidly achieve scale by serving large numbers of producers, and increase their offering levels in an area that now requires specialised skills.
Doubleclick, one of the most successful Internet seller agents, identifies likely viewers of online advertisements and targets messages to those viewers as they browse. ADSmart, another seller agent, designs online promotions and delivers the technologies customers need to manage the buying and selling of Internet advertising. In the pharmaceuticals industry, Professional Detailing leverages the power of the Internet to represent drug companies that wish to outsource their dedicated sales force. Maintaining this capability in-house is difficult for all but the largest pharmaceutical companies. Professional Detailing employs over 900 sales representatives who are shared by its clients, including six of the top ten pharmaceutical companies.
Similarly, INSWeb has created the online equivalent of the independent sales agent in the insurance industry by creating a site the informs users of the offerings of many insurance companies. Such online seller agents allow their clients to focus on the core competencies of developing winning products to fulfil customer needs, rather than the vagaries of eBusiness. Success for new seller agents relies on a number of important factors, including: (1) unique customer knowledge or relationships, otherwise unavailable to the seller, which can support sales (DoubleClick, for example, has detailed data on Web-user behaviours and online demographics), and (2) enough knowledge of the producer's product and business to effectively represent them. Adding value to the sales process requires doing more for the producer than the producer can do alone. Although the Internet has reduced barriers to entry, economies of scale and preferential access to market makers are still important to sellers, and to the success of seller agents.
A third intermediary role is that of market maker. Net-enabled market makers have arisen in almost every industry segment, including electronics components, financial markets, seafood, utilities, telecommunications bandwidth, airline tickets, and even flea markets. Some have been wildly successful. OnSale grew from $140,000 to $89m in sales in its first three years of business and now sells over $200m annually. The market capitalisation of eBay, at $20bn, is more than double that of leading US bricks and mortar retailer Federated Stores, owner of well-known chains like Bloomingdale's and Macy's.
There are two kinds of market maker: vertical market makers that focus on selling to a particular industry, and horizontal market makers that focus on a particular function or product type across industries. Stock market investors seem to think that both approaches can be rewarding; they've put high multiples on Internet market makers in both categories. Vertical market makers include Chemdex and BravoSolution.com. Horizontal market makers include Ariba in procurement, CommerceOne in maintenance, repair and operation (MRO) and Adauction in media buying.
These market makers use a variety of market-clearing mechanisms: English auctions, reverse auctions, Dutch auctions, real-time trading, electronic Requests For Quotations (RFQs), and more. Some innovate by introducing previously understood mechanisms into new markets. For example, iBeauty gives its online customers the ability to receive shipments of their favourite cosmetics and fragrances on a customer-defined schedule, introducing continuous replenishment to the online health and beauty market.
Some market makers offer 'all in one' markets that use several market mechanisms to satisfy a range of customer needs. Egghead is one of the few retailers to shift successfully from bricks and mortar to online selling. Its 'Shop Three Times Smarter' program combines online superstores with auctions and liquidation selling to offer three ways to shop. Similarly, Amazon.com offers customers the alternative of buying from the company store or bidding in an online auction. Multi-mechanism, all-in-one markets can help a business capture or keep customers who cross traditional market segments, for example consumers who buy airline tickets both for business and for leisure travel, or business customers who at one time need the original product and at another time the replacement parts. Success for new market makers depends on:
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