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Home : Articles : Electronic Procurement Electronic Marketplaces (E-Marketplaces)

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ELECTRONIC MARKETPLACES (E-MARKETPLACES)

An e-marketplace is a location on the Internet where companies can obtain or disseminate information, engage in transactions, or work together in some way. Most of the e-marketplaces provide two basis functions: 1) they allow companies to obtain new suppliers or buyers for company products, or 2) developing streamlined trading networks that make negotiating, settlement, and delivery more efficient. Currently e-marketplaces exist in many different industries.

E-marketplaces can be structured in several different ways. One way to structure a marketplace is similiar to eBay, where the market maker is neither a buyer or seller, but is a neutral third party. Other e-marketplaces are set up be a consortium of sellers that leverage their combined power to efficiently sell their products to buyers. Buyers can also set up a marketplace to reduce their costs and obtain better purchasing terms. An example of this type of marketplace is Covisant, a marketplace run by the automobile industry. Moreover, large buyers can set up another type of marketplace, a private marketplace, for their supplier networks.

In order for a site to fall into the category of an e-marketplace, the site needs be open to multiple buyers and sellers and needs to provide one or more commerce related functions. These functions include: forward or reverse auctions, vendor catalogues, fixed price ordering, trading exchange functionality, bulliten boards / wanted ads, and RFQ, RFI, or RFP capability. Sucessful e-marketplaces can deliver significant value to their users or members and are profitable.

If you are looking at joining an e-marketplace, there are several things that you need to consider when you are exaiming your options. The next sections describe key considerations when looking at e-marketplaces:
  1. Ownership of the E-marketplace: This is crucial. Successful e-marketplaces are usually backed by good capital and this helps to ensure their success and longevity. You also do not want to be involved in a marketplace if your competitor is the major owner.

  2. Costs: This is also important. You should compare the costs of joining the marketplace with the projected savings and efficieny gains from joining the marketplace. Look for hidden costs. Possible things that e-marketplace charge for are commissions for completed transactions, membership fees, listing fees, value added services (inspection, escrow, delivery, etc).

  3. Ease of Use / Support: An e-marketplace should be easy to use and should not require a lot of training for your staff. Check to make sure that the marketplace does not require special equipment and has a strightforward transaction process.

  4. Industry Fit: Many e-marketplaces are targeted toward one or two industries. Consequently the processes and structure of the marketplace are designed to maximize efficieny gains and transaction costs for that industry. Be sure your company is a good fit.

  5. Marketplace Participation: If there are no buyers and sellers listed on the marketplace, it is unlikely that you will gain anything from joining the marketplace. A viable marketplace will have a lot of buyers and sellers - this is the only way that an e-marketplace can work.

  6. Security / Privacy: Be sure that the transaction information is not published or available for a third party or a competitor. You do not want a competitor getting hold of your key supplier data or pricing information. Moreover, you would only want to do business with reputable buyers. An e-marketplace should have systems in place to prevent or reduce fraud.

  7. Other Services: Depending on your industry, you may want to check that other services the marketplace offers. some marketplaces offer delivery or escrow services. Other marketplace pre-qualify vendors. These may provide value for your organization.

  8. Process Integration: An efficient marketplace should be designed so that it integrates with existing buyer and seller ways of doing business. This may means conducting transaction in an industry standard format or offering ways to "plug into" the system.

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