|[1.2. How do Electronic Markets affect traditional Market Structures?]
The Internet affects markets by changing the structure of product offerings, as for example: (i) Aggregation and disaggregation of information based product components. With electronic markets in place the role of intermediaries will be reduced or even eliminated, leading to disintermediation. It will become easier to match buyers and sellers, reducing the costs or market transactions. (ii) The costs of logistics are decreased when electronic marketplaces improve information sharing between buyers and sellers by promoting quick, just-in-time deliveries and reduce inventories. (iii) Increased personalization of product offerings.
[1.2.1 Information Phase']
[...] Lower search costs enable new markets to emerge, as for example creating a market for second hand cameras where otherwise the search costs would be too high to enable potential buyers and sellers to find each other on a conventional market (Bakos 1998).
Bakos, Y. 1998, "The Emerging Role of Electronic Marketplaces on the Internet," Communications of the ACM, vol. 41, pp. 35-46.
|How the Internet Affects Markets
Two major emerging trends distinguish products in electronic marketplaces from their traditional counterparts: increased personalization and customization of product offerings, and the aggregation and disaggregation of information-based product components to match customer needs and to support new pricing strategies.
The lower search costs enable new markets to emerge. For example, low buyer search costs and global reach allowed Onsale.com (www.onsale.com) to create markets in goods like secondhand cameras; otherwise the search costs would be too high to enable potential buyers and sellers to find each other in a conventional market.
Electronic marketplaces improve information sharing between buyers and sellers, helping lower the cost of logistics and promoting quick, just-in-time deliveries and reduced inventories.
It has been argued that as friction-free electronic marketplaces lower the cost of market transactions, it will become easy to match directly buyers and sellers, and as a result, the role of intermediaries may be reduced or even eliminated leading to “disintermediation” (see [9, 10]).
9. Gates, W. The Road Ahead. Penguin Books, New York, 1995.
10. Gellman, R. Disintermediation and the Internet. Government Information Q. 13, 1 (1996), 1–8.