Home‎ > ‎6 pm class pages‎ > ‎

Charles Tran

The Businesses of Auctions, Clearing House, and Electronic Exchange

How to Search on Ebay

Electronic Commerce 

    According to David Kroenke, electronic commerce (e-commerce) is defined as the actions of buying and selling of goods and or services over public and private computer networks. E-Commerce must include the following:  group of buyers and sellers, products and suppliers, a place to “meet”, marketing to attract the buyers, and accept and process the order.

Advantages of Using E-Commerce

    The advantages of using e-commerce could be endless. The advantages for the sellers are the following: they offer their products and or services 24/7, the sellers can offer their products and services from anywhere that they desire, the seller’s virtual inventory is cheaper and extensive than the traditional inventory, the seller’s can lower transaction costs when using e-commerce, the sellers are able to focus on particular group of customers, and sellers can build an order over time. On the other hand, advantages for the buyers are also extensive. The advantages for the buyers are the following: the buyer can shop any time of the day that they desire, buyers do not have to leave home to make any purchase, the buyers can easily view and explore product line that the sellers have to offer, the buyers can easily make comparison between products and services, seller’s website can offer particular products and or service, and consumers’ can build their order over time.

Types of Companies that use E-Commerce

According to David Kroenke, merchant companies are those companies receive the title to the products or service that they sell. For instance, they buy goods and resell another party.

According to David Kroenke, there are three types of transactions that merchant companies utilizes

1)  B2C transactions. This generally happens between a retail customer and a supplier. The supplier generally uses a Web storefront.

2)   B2B transactions. This generally happens between a company and another company.

3)   B2G transactions. This generally happens between governmental organizations and companies. 


According to David Kroenke, non-merchant companies are those that arrange for the sale of goods without ever owning them or taking title.

Three types of non-merchant e-commerce companies


like eBay.com, are able to match a particular group of buyers and sellers by using the e-commerce version of a standard auction. This process allows the auction company to receive a commission on each product that they sold.

Clearinghouses,  like Amazon.com, are able to issue goods at a given price, and arrange them for a  delivery. However, the companies never takes the title to the goods that they sold. Yet, the companies receive a commission on each product that are being sold.

 Electronic exchanges, like Priceline.com, is similar to clearinghouse. At the same time, it has the resemblances of a stock exchange. Whenever the company are able matches up with a particular buyers and sellers, this is when the transaction happens. Then the exchange takes a commission.


How do Companies Use E-Commerce Improve Efficiency?  

    In a e-commerce, the companies are able to utilize disintermediation. This process allows the company to take out the middle layers in the supply chain. Then the consumer are able to use e-commerce or to buy from a retailer by going directly to the manufacturer. E-commerce are able to improve price information. For example, you can go to any number of Web sites that offer product price and compare them as you please. The added information allows the consumer to pay for the lowest price and reduce additional vendors.  From the seller’s side, e-commerce are able to produce information about price elasticity. According to David Kroenke, price elasticity is defined as the change in demand that accompanies a change in price. For example, using an auction, a company can learn not just what the top price for an item is, but also learn the second, third, and other prices from the losing bids. The companies are able to manage the prices by direct interacting with customers yields better information than managing the prices by watching competitors’ pricing.

Potential Problems of Using E-Commerce

    There are economic factors that play against businesses that use e-commerce. For example, channel conflicts may occur. This is when a manufacturer competes with its traditional retail outlets by selling directly to the consumer. Another conflict that business may encounter is the price conflicts. This is may occur by a manufacturer selling directly to consumers and undercutting retailers’ prices. Another issue that business sees is the logistics expenses. This is when the price increase when a manufacturer must process thousands of small-quantity orders rather than a few large-quantity orders. Lastly, businesses may encounter the customer-service expenses increase. This is when a manufacturer must begin dealing directly with customers rather than relying on retailers’ direct relationships with customers.

The Three-Tier Architecture

Business that participated in e-commerce technology required using the three-tier architecture, with each tier using a particular class of computers. The first tier is called, the user tier, which uses personal computers and browser software that requests and processes Web pages. The web page documents are coded in HTML and are transmitted using HTTP protocols. The second tier is called the server tier, they uses Web server computers and processes application programs that help manage HTTP traffic between Web servers and users. This involves with two materials. The first materials is the web farm, where it facilities that houses numerous Web server computers. The second material is the commerce server, which is part of the server tier. This is an application program that receives requests from users via a Web server. When the program receives a request, it takes some action, like coordinating a customer checkout process, and then returns a response to the user via a Web server. The last tier is the database tier uses computers that run a DBMS to process SQL requests for retrieving and storing data.