This blog post will look at how electronics B2B marketplace and buyer-supplier relationships are linked. Our findings show that when the market governance model is chosen, value-generating models perform well. We also believe that digital B2B marketplaces have turned off conventional businesses due to various reasons.
Invariably, it has been hypothesized that inter-organizational digital networks (which did not exist only a few decades ago) would impact transactions by increasing market productivity and enhancing buyer-supplier relationships.
Understanding the Viability of B2B Marketplaces
Today, digital B2B Marketplaces are the online standard. When we examine the many value creation models they provide, they often promote company returns to market mechanisms for transaction synchronization. The rationale behind this is that customers of electronics online sales marketplaces can purchase goods without physically inspecting them.
Consumers may be vulnerable to increased risk because they’re buying electronic products that are sometimes complex to describe or standardize. How would we explain this? In the area of information economics, these are referred to as search goods. However, they are distinguished from other customers because they may choose based on thoroughly evaluated search features before purchasing (Adler 1996).
While these characteristics apply to all online sales scenarios, we want to emphasize that transactions are more convenient and cost-effective in each of them, which encourages market coordination. Further, according to Koppelmann/Brodersen/Volkmann (2001), common and standard goods’ cost and typical characteristics are more suitable for digital procurement than innovative or customized products.
The German online energy market LPX is an excellent illustration of this. Participants exchange identical contracts and aren’t too focused on who the buyers are. Hence, when we consider higher transaction costs and, as a result, greater multilevel coordination, it is apparent that value-generating methods only solve these issues in part. Increased uncertainty, high specificity, and low frequency, according to Williamson (1985), may result in substantial transaction costs.
Existing models (mainly supplier inventory consolidation) may be helpful when there is a low frequency. A catalog like this would be a hardship for a single company if it were seldom utilized, but it might be cost-effective if used by many businesses. In addition, the low frequency will not enhance relational exchanges if the bought items are pure search goods.
Linking B2B Marketplaces to Electronics’ Product Quality and Transactional Convenience
According to (Benjamin/Wigand 1995, Steinfield/Kraut/Plummer 1995), an overwhelming majority of businesses utilize digital data exchange (EDI) networks to make targeted IT expenditures with essential suppliers. They may connect their suppliers into their value chain by using private networks. Although digital B2B markets are appealing to both suppliers and customers, EDI networks are still unappealing.
However, online electronics sales are critical for improving B2B customer relationships. In circumstances when digital B2B markets are accessible, relational transactions provide two possibilities for success. The first approach is to offer new services that lower transaction costs, resulting in more market-like coordination.
These new services must be developed to reduce vagueness and ambiguity to prevent ambiguity and needless misunderstanding. Further, virtual B2B markets have minimized the amount of specialist terminology used by deploying data standardization. By using information economics, business partners attempt to reduce risk.
Still, uncertainty may be divided into three types: pricing, quality, and conduct are all unpredictable (Kaas 1995). Comparisons to comparable prices may help reduce pricing ambiguity. The number of markets that operate on a catalog consolidation or market creation basis, especially those for B2B reasons, may significantly decrease search costs in this industry.
However, link growth is fueled not just by price uncertainty but also by concerns about the quality and behavior of others. Therefore, electronics consumers attempt to avoid such problems by researching the product or service first.
According to Darby/Karni (1973), how specific product attributes are assessed may differ depending on the kind of product. Some elements (experience quality) are only evaluated after the product has been used, while others are not assessed (credence qualities). Customers rely on data alternatives to learn about these characteristics (Gizycki 1999).
They may contain information regarding the provider’s raw materials and manufacturing processes and the supplier’s overall performance. Information may come directly from the supplier, be passed on by other customers, or be obtained via third-party sources.
Invariably, it is possible to provide value to customers by providing them with critical information that eliminates uncertainties. Online B2B marketplaces may serve as trustworthy mediators when parties lack knowledge, and they can also assist with information asymmetry by serving as an independent data source. They also have a large number of buyers and a lot of trade activity. The critical aspect is to come across as unbiased.
Differentiation from EDI
The second approach is to encourage and promote existing connections. Unlike EDI networks, digital B2B Marketplaces may establish EDI-like relationships with businesses of various sizes and via different communication methods, including the Internet (Steinfield/Kraut/Plummer 1995). Back-end systems, if correctly connected, may provide buyers and sellers with the benefits of EDI networks at a lower cost.
They may also expand digital links to all businesses in the supply chain, not only the immediate purchaser or supplier. Digital B2B marketplaces, as a result, are a significant source of new network members (Borders/Johnston/Rigdon 2001). According to Hagel and Armstrong (1997), adding a new user to a digital B2B marketplace adds value to the system’s other users.
Undoubtedly, online electronics sales enable organizations to engage and engage with one another, facilitating stronger bonds (see Gemünden/Walter/Helfert 1996, Mohr/Fisher/Nevin 1996). Moreover, companies can collaborate on creating, testing, and modifying common goods via digital B2B marketplaces (Dudenhöffer 2001).
Another advantage that online B2B Marketplaces may have is another distinction over private apps: they provide features like encryption and cybersecurity to a wide variety of businesses while preserving anonymity.