Buyer centric and Seller centric E market

[ExamConditioning]

Hi William,

How does the Contract cost and control cost being reduced in a buyer centric E market and Seller Centric E market for buyers and seller?

[William Toh]

Seller-centric e-markets can help to reduce search costs for both buyers and sellers.  Sellers benefit since buyers will make themselves available at the seller-centric market, while buyers benefit since there is an official one-stop place to buy from the sellers.  We can say that seller-centric e-markets reduce even more search costs for sellers since they may not need to "search", but we must not forget that for this to happen, sellers must already have a well-established brand and market power to be sought out by buyers.  Otherwise, sellers will have to spend lots of money advertising for their e-market, which would only increase their costs.

Seller-centric e-markets can also help to reduce contracting costs for both buyers and sellers.  They can both benefit from the automation of the sales process (browsing the catalog, guided ordering and payment processes) which reduces bounded rationality and uncertainty for both parties.  Buyers get a clearer understanding of what is available (assuming sellers have listed all the products they are selling, along with detailed descriptions) and sellers get a good indication of what buyers are looking for by tracking their searches and feedback.  However, buyers will still have bounded rationality in terms of what is NOT offered by the sellers, eg. products from competing sellers who are not listed on the e-market.  In this respect, again, sellers' contracting costs can be deemed to be reduced more than the buyers'.

Seller-centric e-markets can help reduce control costs for both buyers and sellers.  For buyers, they gain the confidence of buying from a seller with strong market power, who is unlikely to resort to cheating them.  If the seller opens up their SCM system to be more transparent to buyers, that would also help reduce buyers' monitoring and control costs.  VMI will also help reduce the control costs of buyers by reducing their supply uncertainty.  However, there is a strong risk of lock-in if buyers continue to buy from the same seller-centric e-market.  It could result in them becoming overly dependent on sellers, which increases switching costs.

On Thu, May 5, 2016 at 1:05 AM, ExamConditioning <mrsing...@gmail.com> wrote:

Hi William,

How does the Contract cost and control cost being reduced in a buyer centric E market and Seller Centric E market for buyers and seller?

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[ExamConditioning]

Hi William, thanks for the detailed replies, I presume the Seller and buyer that you are referring to here is between the firm and supplier where firm is the buyer and supplier is the seller since there would be no 'consumer' in the b2b market. 

[William Toh]

Hi William, thanks for the detailed replies, I presume the Seller and buyer that you are referring to here is between the firm and supplier where firm is the buyer and supplier is the seller since there would be no 'consumer' in the b2b market. 

Yes, of course.  However, you should note that seller-centric markets are actually quite common in the b2c market.  Amazon.com, for example, is one.  Don't be too hard and fast on "rules" on the context within which concepts can be applied.  Understanding the concept - in this case seller-centric e-markets - is more important than that "restriction" that it applies more to b2b than b2c.  In the exam, uk examiners love to test students' ability to apply concepts to unconventional situations.  Be flexible!

[ExamConditioning]

On Thursday, May 5, 2016 at 7:37:27 PM UTC+8, William Toh wrote:

Hi William, thanks for the detailed replies, I presume the Seller and buyer that you are referring to here is between the firm and supplier where firm is the buyer and supplier is the seller since there would be no 'consumer' in the b2b market. 

Yes, of course.  However, you should note that seller-centric markets are actually quite common in the b2c market.  Amazon.com, for example, is one.  Don't be too hard and fast on "rules" on the context within which concepts can be applied.  Understanding the concept - in this case seller-centric e-markets - is more important than that "restriction" that it applies more to b2b than b2c.  In the exam, uk examiners love to test students' ability to apply concepts to unconventional situations.  Be flexible!

Thanks for the prompt reply.