levy, another long answer. But should be interesting...its about power (and your neom investment.)
The underlying technology is the same. The database structure is the same. The products and prices are the same.
The portal format is different. The portals add their own environment, like webmarket puts up the standard links you see on all gnet sites.
Some portal sites do change a bit the search structure of the shopping engine. Looksmart might add some of its own categories.
If you compare the search engine with the shopping engine:
inktomi runs yahoo's searches. So who get's paid for it. Why has inktomi a smaller market cap than many of the search portals it is delivering to?
Merchants selling commodities over the web pay Yahoo to get their product come up first when people do a search. E.g. type in "car" for search.
The underlying search engine is neutral, but portals change the priorities and get paid for it.
The shopping engines are neutral as well. They deliver without priority setting to the portals who carry the shopping engine. Portals might charge for priority placement. Yahoo is doing this with featured products.
However it is a discussion how the power in the virtual supply chain will be divided. Or who is able to put the highest mark-up on its services. Compare it to a bricks and mortar supply chain.
Their are four players:
- Manufacturers-Merchants
- Distribution system
- Store/Portal
- Final customer
Who has the highest margins/mark up power/buying power
In the virtual world:
Merchants will win because they are able to communicate better with their final customers. Now they depend too much on the salespeople in the store to pass over detailed product information. Most of the info is lost and the sales person in the store advises the client based on the merchant incentive scheme. The merchant will increase sales volume and can plan better to have less stock in the chain.
Customers will gain, larger range of products, lower prices, better service.
So the struggle is between the distribution system and the portal.
Distribution system = the shopping engine: amazon, inktomi, altavista
Portal = amazon, webmarket, cnn-powershopper, yahoo shopping etc.
Amazon is very powerful because it is a shopping engine and a portal.
Shopping engines are only successful if they have a large range of products, low cost of operation, accurate and fresh data. They need many operational contacts with merchants in a totally standardized way. To comply with those requirements, scale is the only answer and therefor we see only a few shopping engines who operate as OEM to portals who deliver the content under private label.
Portals have the eyeballs and they get a commission for every sale.
It is a win-win situation for shopping engines and portals. However, Yahoo and AOL developing their own shopping engine and not using the engine of inktomi shows that the portals do not want to depend on third party shopping engines. It would give them to much power. Only the very large portals will be able to get their own shopping engine, the rest will use a private label shopping engine (inktomi, altavista, on-display).
It is a traditional powerplay in a network environment, as defined by Charles Perrow in the 70's. Or in general, it is game theory.
So what will merchants do, they don't want a shopping engine or a portal to get to much margin power. They will deliver the same quality data to all shopping engines. An effort by one shopping engine to define a sophisticated database with xml, pictures, language dependent product description etc, will result in the merchant, delivering the same content to other shopping engines (otherwise they get hooked up).
One of the core problems in the virtual supply chain, as in the real supply chain is to maintain a fresh database with product information. Recently there is a trend in the retail world to hand over the product database to a third party. This third party operates between the merchants and the supermarkets. It reduces the need for communication in the chain to only transactional data. The common data are shared over the internet. There is a company in the UK which is getting a dominant position in this space (UDEX -still private). They have the objective to become the global product database to be used in the real world AND as the content in all the shopping engines. Here b2b and b2c meet, because it are the same products traveling through different parts of the supply chain.
Standardization of product information and operating the shopping engine is a highly complex task. One of the main problems is localization (language and place).
UDEX is working to become the global product database ("Udex inside") and it is forseeable that there will only be a couple of shopping engines. They don't have real mark up power but gain their share by large scale.
(I'm setting up a business in this area as well)
If the shopping engines become more standardized it will be possible to create a "metashopper", so more work for Oren and his team.
....hope this helps....
Regards,
Pareto |
