Online Intermediaries


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Online Intermediaries

  1. 1. ARTICLE IN PRESS International Journal of Information Management 27 (2007) 63–74 Developing a framework to analyse the roles and relationships of online intermediaries David Barnesa, Matthew Hintonb,Ã a School of Management, Royal Holloway, University of London, Egham, Surrey TW20 0EX, UK b Open University Business School, Walton Hall, Milton Keynes MK7 6AA, UK Abstract Internet-based information and communication technologies (ICTs) have offered opportunities to reconfigure supply chains. A new kind of intermediary has emerged in many industries; the cybermediary—an online intermediary that only operates in the virtual environment. Many new types of online intermediary have emerged with differing business models. As yet, there have been few attempts to describe and categorise their e-business practices or to analyse the roles that they play within their supply chains. This paper seeks to address this deficiency by addressing both the theory and practise of online intermediaries. A two-dimensional framework based on the roles of cybermediaries and their relationships between supplier and buyer in the supply chain is developed from a synthesis of the extant literature. Five roles of cybermediaries are identified: informational, transactional, assurance, logistical and customisation. Cybermediary relationships are characterised in terms of their affiliation to customers and suppliers. Case studies of three online intermediaries are presented to illustrate and test the framework. An analysis of the empirical data from these cases served to demonstrate the utility of the framework in categorising online intermediaries and offering additional understandings of the rapidly evolving world of virtual supply chains. r 2006 Elsevier Ltd. All rights reserved. Keywords: E-business; Supply chain; Intermediaries; Internet 1. Introduction It has long been argued that information can be a source of competitive advantage when managed strategically along the supply chain both within and outside of the organisation (Porter & Millar, 1985). The advent of the Internet-based information and communication technologies (ICTs) of e-business has seen the creation of virtual value chains (Rayport & Sviokla, 1996) that many firms are still learning how to exploit to maximum effect. In particular, the Internet has offered opportunities to reconfigure supply chains in many industries (Brousseau, 2002). Bill Gates (2000) was amongst many in the IT industry who predicted that disintermediation would be a key feature of the evolving digital economy. Academics have also noted the financial benefits available from using the power of ICT to ‘cut out the middle man’ (Benjamin & Wigand, ÃCorresponding author. Tel.: +44 1908 655888; fax: +44 1908 655898. E-mail addresses: (D. Barnes), (M. Hinton). 0268-4012/$ - see front matter r 2006 Elsevier Ltd. All rights reserved. doi:10.1016/j.ijinfomgt.2006.04.003
  2. 2. ARTICLE IN PRESS D. Barnes, M. Hinton / International Journal of Information Management 27 (2007) 63–74 64 1995; Malone, Yates, & Benjamin, 1987). As well as reduced costs, it is also claimed that the Internet enables suppliers to get ‘an individualised knowledge of the customer’ (Jeff Bezos, quoted in Tassabehji, 2003, p. 175) which ‘creates valuable information [ywhich can be usedy] to leverage relationships with customers’ (Michael Dell quoted in Margretta, 2000, p. 73). Thus, many had come to believe that traditional intermediaries would become an endangered species in electronic markets (Strader & Shaw, 1997). Successful examples of e-businesses based on the disintermediation model include Amazon (books, CDs and an ever increasing range of other consumables) and Dell (computers). However, the inevitability of disintermediation has been increasingly questioned (Chircu & Kauffmann, 1999; Jallat & Capek, 2001) with Sarkar, Butler, and Steinfeld (1996), amongst those who predicted that a ‘new generation’ of ‘cybermediaries’ (Internet-based intermediaries) would emerge in a process of ‘re-intermediation’. A cybermediary can be defined as a business organisation that occupies an intermediary position in a supply chain between a buyer and a seller, and whose business is based on the use of Internet-based ICT. However, in the rapidly evolving world of e-business many new types of online intermediary continue to emerge with differing business models. This has hampered attempts to describe and categorise their e-business practices, and to date, little attempt seems to have been made to investigate and analyse the role of intermediaries in the virtual supply chain. This paper seeks to address this deficiency by addressing both the theory and practise of online intermediaries. It opens by developing a role-based five-part categorisation of online intermediaries from the extant literature. The relationships of cybermediaries with their suppliers and buyers in the virtual supply chain are also considered. From this a two-dimensional framework based on the roles and relationships of cybermediaries and is developed. Empirical research that investigates three such cybermediaries is then reported, in order to illustrate and test this framework. The business models of the three case companies are described in order to highlight their roles and relationships in their supply chains. The paper closes by assessing the utility of the framework and indicating future research directions. 2. Developing the framework In the fast burgeoning e-business literature, writers have noted the increasing number of attempts to present business models that can enable the different approaches to e-business to be categorised (e.g. Osterwalder & Pigneur, 2002). However, there is, as yet, no consensus on what constitutes an adequate framework for such modelling (Madadevan, 2000). Some writers have developed descriptive models for e-businesses. For example, Timmers (1999) lists 11 such models, whilst Rappa (2003) has identified nine. Weill and Vitale (2001) proffer eight ‘atomic’ e-business models ‘‘that firms can combine to create new e-business models’’ (p. 21). However, such approaches can make it difficult to succinctly catalogue the many new kinds of cybermediaries that continue to emerge. 2.1. The roles of cybermediaries An alternative approach is to classify cybermediaries in terms of the roles that they fulfil. Anderson and Anderson (2002) see the role of cybermediaries as threefold: Matching: Bringing buyers and sellers together by providing information about buyers, sellers and their products. This is essentially an informational role. Requisitioning: Bringing products to customers at the right time in the right place and at the right price to enable a transaction to take place. This role is twofold. Firstly, it is transactional, in the sense that it involves the facilitation of transactions, enabling buyer and seller to trade with each other. Secondly, it is logistical, ensuring that the product, or service, is made available to the customer whether in a physical or virtual environment. Problem solving: By ensuring quality (including providing trust in both the product and the purchasing transaction), offering anonymity to buyers if required and customising products. This role can also be viewed as having two components. Firstly, it encompasses an assurance role, through its promise of quality and anonymity to customers. Secondly, a customisation role, through the tailoring of products and services to better meet a customer’ requirements.
  3. 3. ARTICLE IN PRESS D. Barnes, M. Hinton / International Journal of Information Management 27 (2007) 63–74 65 This suggests a five-role classification for cybermediaries: informational, logistical, transactional, assurance and customisation. Sarkar et al. (1996), Brousseau (2002) and Giaglis, Klein, and O’Keefe (2002) have also considered the roles played by online intermediaries. Their analyses can all be contained within this five-role classification. Sarkar et al. (1996) identify 10 roles for cybermediaries: 1. search and evaluation 2. needs assessment and product matching 3. product information dissemination 4. purchase influence 5. provision of customer information 6. integration of consumer and producer needs 7. transaction economies of scale 8. customer risk management 9. producer risk management 10. product distribution The first six of these are, in essence, part of the informational role. ‘Transaction economies of scale’ is part of the transactional role, ‘customer risk management’ and ‘producer risk management’ fall within the assurance role, whilst ‘product distribution’ is a logistical role. Brousseau (2002) discusses four services that online intermediaries might provide: ‘information’, ‘logistics’, ‘transaction securitisation’, and ‘insurance and liquidity’. The first two are clearly informational and logistical roles, respectively, whilst transaction securitisation, and insurance and liquidity are assurance roles. Giaglis et al. (2002), who base their analysis on the work of Bakos (1998), identify three substantive roles that intermediaries might play in electronic marketplaces: ‘Matching buyers and sellers’ comprises the determination of product offerings, searching and price discovery. These are essentially informational roles. ‘Facilitating transactions’ role comprises settlement, trust and logistics. Each of these types of role fits broadly within our categories of logistical, transactional and assurance, respectively. Thus, all the roles of cybermediaries identified within the literature considered here, can be encompassed within a five part classification of: 1. Informational: This role involves the provision of information about buyers, sellers and their products. It can be argued that success of all intermediaries is based on their use of information. The advent of online intermediaries makes that totally explicit. Cybermediaries acting solely in this role have been termed ‘infomediaries’. Some writers argue that the most important, and perhaps only viable online intermediaries, will be those whose business models are based on the power of information (Hagel Rayport, 1997). Some of the most successful online intermediaries do operate in this information only role (e.g. Google, Kelkoo). 2. Transactional: This might be in a direct transaction in which the cybermediary acts as either a buyer or a seller. Most online retailers operate in this way. In some cases (e.g. Amazon), they will also buy as well as sell. Some cybermediaries act to facilitate transactions between buyers and sellers, the most well-known being eBay, the auction website. 3. Assurance: This role is one of providing assurance of the quality of the goods to be purchased and in the legitimacy of the purchasing. The online marketplace carries trading risks as much for sellers as buyers. Buyers need to be assured that they will receive their goods and that they will be of the expected quality. Sellers will need to be assured that they will be paid. Assurance can be achieved primarily in two ways. One is through reputation. It can take many years to establish a trusted brand-name, so existing bricks-and- mortar intermediaries that move online will normally be at an advantage to dotcom newcomers. An alternative approach is to offer a warranty guaranteed by a third party (e.g. VeriSign or Web Trust). 4. Logistical: This role involves delivering the goods and services to the customer. For digitised products this can be done online and so does not generally present problems for a cybermediary. For physical goods or personal contact services the cybermediary’s role is to facilitate delivery of the goods or services, whether using their own physical resources of that of a third party.
  4. 4. ARTICLE IN PRESS D. Barnes, M. Hinton / International Journal of Information Management 27 (2007) 63–74 66 5. Customisation: This involves the tailoring of products and services to better meet the needs of individual customers. For example, offer personal monogramming on some of their shirts and a finishing service for most of their trousers (exact length, turn-ups, etc.). A summary of the key points in the literature used as the basis for this is illustrated in Fig. 1. These roles can be seen as a ladder-like sequence, up which cybermediaries choose to climb as far as they wish. The first rung is the informational role that is the staring point for all cybermediaries. Pure infomediaries do not ascend beyond this point. The transactional role represents the next level of activity that a cybermediary might choose to engage in, enabling the purchase to take place. To some extent, the assurance role can be seen as an outcome of the successful discharge of the cybermediary’s role, as customers and suppliers gain confidence in their dealings with their intermediary over time. Cybermediaries can choose to undertake activities aimed at enhancing their assurance role. For example, this might involve providing some kind of legal guarantee (e.g. a warranty), or deliberately building their own brand-name (e.g. through advertising). However, it is possible that a cybermediary might choose not to emphasise its own role in the online supply chain to the customers, but rather rely on the reputation or brand-name of its product offerings. The final two roles, logistical and customisation, are the last in the sequence, as they are activities that the intermediary seem to have most choice in whether to undertake or not. Whether they do so, is likely to be influenced by the nature of the markets being served and the type of goods or services involved. To some extent, whether it is necessary for a cybermediary to undertake the logistical role depends on whether they are a direct party to the transaction or merely facilitate it. If they directly engage in the transaction there is likely to be an expectation that they also assume responsibility for delivery. Engagement in the logistical role may also depend on the type of goods or services involved. Digitisable products can be transmitted easily via the Internet, and so cybermediaries may be more prepared to deliver these. Customisation may be applied to the product or service supplied, or to any associated customer service activity. Customisation usually involves additional cost to the provider, so they need to be sure that offering this is likely to result in higher sales volumes or values, or is necessary to avoid a loss of sales to competitors. 2.2. The affiliation of cybermediaries Any intermediary must add value from the buyer’s perspective if it is to attract customers and be successful. However, in traditional business, intermediaries are usually perceived by customers as acting for the seller, as The roles of cybermediaries Anderson Anderson (2002) Sarkar et al. (1996) Brousseau (2002) Giaglis et al. (2002): based on Bakos (1998) Informational Matching Information Determination of product offerings Search and evaluation Needs assessment and product Searching matching Price discovery Product information dissemination Purchase influence Provision of customer information Integration of consumer and producer needs Transactional Requisitioning Transaction economies of scale Settlement Assurance Customer risk management Transaction securitization Trust Producer risk management Insurance and Liquidity Logistical Problem solving Product distribution Logistics Logistics Customisation Fig. 1. The roles of cybermediaries: a cross-literature comparison.
  5. 5. ARTICLE IN PRESS D. Barnes, M. Hinton / International Journal of Information Management 27 (2007) 63–74 67 they appear to form part of the seller’s supply chain. As Evans and Wurster (1999, p. 87) put it, ‘‘No company ever devised a way to make money by taking the consumer’s side.’’ Some writers claim that with the advent of the virtual supply chains of e-business this basis of intermediation is under challenge. For example, Anderson and Anderson (2002, p. 55) argue that ‘‘true intermediaries are neutral about suppliers (as) they represent the buyer.’’ Hagel and Rayport (1997) predict that in the online environment, only customer-orientated intermediaries will be successful. In their analysis, Weill and Vitale (2001) identify the ‘customer relationship’ as a key element in their model of e-business. They see this as an asset whose ownership needs to be understood and exploited, and view the strength of that relationship as a key determinant in the success of online businesses. However, an intermediary has to consider its relationships with its suppliers as well as its relationships with its customers. We will follow Evans and Wurster (1999) in using the term ‘affiliation’ to describe the balance of a cybermediary’s relationship between its suppliers and its customers. By this, they mean the extent to which a cybermediary represent the interests of its suppliers and the extent to which it represents the interests of its customers. They claim this will become a crucial element in the competitive strategies of online intermediaries. In the virtual world, the strength of these relationship will crucially depend on the how the cybermediary is viewed by its customers. The customer–supplier affiliation dimension can be seen as a continuum, with the position of a cybermediary being determined by an assessment of the strength of it relationships with its customers and suppliers, respectively. At one end of the affiliation continuum, the intermediary may act entirely in the interests of the supplier (100% supplier affiliation). At the other end it may act entirely in the interests of the customer (100% affiliation to customers). In the centre is a 50:50 position in which the affiliation is balanced equally between customer and supplier interests. Assessing affiliation is a further important element in understanding online intermediaries. Combining this with a consideration of the five roles (informational, transactional, assurance, logistical and customisation) creates a potentially useful framework that can be used as part of an analysis of cybermediaries (see Fig. 2). 3. The application of the framework This section of the paper will illustrate and test the framework developed above, by describing three empirical case studies of cybermediaries. These three companies were amongst a much larger sample of UK- based organisations engaged in e-business activities of various kinds, which were studied as part of a wider research project. This wider project investigated the impact of the adoption of e-business in a broad range of UK-based organisations using a case study methodology. Its objective was to explore examples of emerging e-business practices. The impact of e-business on the configuration of supply chains was one of the issues that was investigated. 3.1. Research methodology This research used a qualitative research methodology, namely that of the case study. ‘Qualitative research involves the use of qualitative data, such as interviews, documents, and participant observation, to understand and explain social phenomena’ (Myers, 1997). Although qualitative research methods were originally developed in the social sciences, they have been used in Information Systems (IS) Roles Customisation Logisticaz Assurance Transactional Informational 100% Customers 50:50 100% Suppliers Affiliations Fig. 2. A two-dimensional framework of the roles and affiliations of cybermediaries.
  6. 6. ARTICLE IN PRESS D. Barnes, M. Hinton / International Journal of Information Management 27 (2007) 63–74 68 research for many years. Similarly, case studies have a long pedigree in IS research (Benbasat, Goldstein, Mead, 1987) including some which are now viewed as classic studies, such as Markus (1983) and Orlikowski (1993). A case study is ‘an objective in-depth examination of a contemporary phenomenon within some real- life context where the investigator has little control over events’ (Yin, 1994). As Darke, Shanks, and Broadbent (1998) note, ‘Case study research has often been associated with description and theory development, where it is used to provide evidence for hypothesis generation and for exploration of areas where existing knowledge is limited (Cavaye, 1996)’. This is the situation in this research, which is exploratory and descriptive in nature, which as Meredith, Raturi, Amoako-Gympah, and Kaplan (1989) note is an appropriate start point in the ‘normal cycle of research’. In the earliest stages of research, ‘the best that researchers can do is to observe phenomena, and to carefully describe and record what they see’ (Christensen Sundahl, 2001). Such descriptions can then form the basis for an explanation that can then be tested until, through a series of research studies, a theory may eventually be built. To obtain the required level of detail, access to the organisations was a prerequisite for this study. The choice of case companies was heavily influenced by their willingness to provide access for interview purposes. As such, this must be seen as a convenience sample and not one intended to be representative in any statistical sense. Although case study research can offer high internal validity, the limited number of organisations that can normally be studied opens the way to criticisms of a lack of external validity. Unlike quantitative research, which uses statistical inference to generalise from a sample to a larger population, qualitative research relies on logical inference. As Yin (1994) points out ‘case studies are generalisable to theoretical propositions and not populations’. Semi-structured interviews were conducted with managers who had specific responsibilities for e-business activities from each of the case companies. The interviews were of between one and two hours duration. The questioning was based on the application of the framework developed by Barnes, Hinton, and Mieczkowska (2002) for investigating the impact of e-business on the management of business processes. Many qualitative researchers recommend that a theoretical framework should be used in research of this kind, to ‘focus and bound’ data collection (Miles Huberman, 1994). The framework draws on literature from operations management and information management. Its use helped to ensure that data was sought about the business processes and the information systems operating within each company and those operating between its suppliers and customers, and the business context within which e-business activities were taking place. Data analysis centred on the identification of the main points and themes that emerged from each interview. These were identified and articulated in a descriptive narrative for each case study under a set of broad topic headings. Cross case analysis was undertaken as the final stage of analysis to ‘deepen understanding and explanation’ (Miles Huberman, 1994). 3.2. The case studies Each of the cases is now reviewed in turn, and each company’s role as a cybermediary analysed using the two-dimensional framework outlined above. The companies have been given pseudonyms and some case information has been masked to maintain company confidentiality. 3.2.1. Legalco Legalco is an online business that provides a range of legal services to individuals and businesses. The company was founded in 2000 at the height of the Internet boom. It directly employs about 25 people, mostly lawyers, in its central London offices. Legalco was founded on the principle of making the law more accessible and offering better value for money. The company sees its target market as the many people who are worried about the law or who need advice during non-working hours. For them the web has the advantage of initially offering relative anonymity, before connecting on a face-to-face basis with legal service providers. Many people are also fearful about the costs of legal services, and Legalco has addressed these concerns by establishing complete transparency in its fees for legal services. It enables clients to access a range of free, low and fixed price online legal services. Legalco acts as an umbrella for a number of web-based businesses. It also acts as a conduit to other face-to- face legal service providers. Legalco operates a number of linked websites. One posts free basic legal
  7. 7. ARTICLE IN PRESS D. Barnes, M. Hinton / International Journal of Information Management 27 (2007) 63–74 69 information. Another offers annual subscriptions to a legal advice service and insurance cover for any legal problems that may arise during the period. It also offers fixed-price packages services such as conveyancing and will writing. Another enables customers to buy legal services and advice at fixed prices from a Legalco approved independent law firm in their local area. Such partner law firms pay an annual fee for listing on Legalco’s database. Legalco also operates a website through which companies can purchase legal advice and documentation for employment law, health and safety, data protection, etc. The website establishes the initial customer contact, which can pave the way for subsequent individual contact. Legalco block purchases legal services from a range of providers. It can then package these into bundles of off-the-shelf standardised products as well as offering more customised products. Bulk purchasing enables it to achieve lower costs, thereby benefiting its clients with lower prices. Such pricing helps generate greater volumes of business, enabling Legalco to remain profitable at relatively low margins. Another key aspect of Legalco’s business model is that it checks the reliability and quality of its suppliers so that its clients can purchase with confidence. As well as its legal expertise, Legalco’s business is also based on its considerable technical expertise. Most of the company’s systems have been developed as proprietary software to which Legalco owns the intellectual property rights. Legalco is perhaps unusual in that its products, professional services, are often thought to be difficult to deliver for a virtual supplier. Legalco has solved this problem by delivering what can be digitised online, and facilitating face-to-face delivery of those services that need personal contact. In some respects, Legalco goes beyond the role of a pure cybermediary as it supplies some (fairly simple) legal services itself directly to its clients. Nonetheless, it meets our definition of a cybermediary, as it is positioned between buyers and sellers in the supply chain and its business relies on the use of Internet-based technology. It can be seen to fulfil all five of the roles in the framework. Informational: Legalco’s series of interlinked websites provide copious amounts of information about the law and the range of legal services offered by the company. This enables clients to choose which of the services offered by Legalco will best meet their needs. Transactional: Legalco enables its clients to purchase their chosen services, either directly or from one of its suppliers. In all cases, the transaction is made or facilitated via the Internet. Assurance: Legalco offers its clients assurance in a number of ways. Firstly, it offers anonymity in their initial contact; this is important to some clients. Secondly, its pricing policy gives clients the confidence of either fixed price or a clear charging structure. Finally, by assuring the quality of its suppliers, it gives clients confidence in any face-to-face dealing with local lawyers facilitated through Legalco’s website. Logistical: Although it deals in services rather than physical goods, Legalco’s role includes arranging service delivery, whether online or face-to-face. Customisation: Legalco can provide whatever legal services clients require. This enables clients to customise Legalco’s services to meet their individual needs. It should be clear to all concerned that Legalco is seeking to make a profit both for itself and for its suppliers. In this sense, it represents the interests of suppliers. However, Legalco’s success depends on its ability to meet its clients’ needs for legal services at a price they are prepared to pay. Furthermore, Legalco offers greater transparency and user-friendliness in an industry renown for neither. As such, Legalco’s intervention in the legal supply chain between client and individual lawyers offers considerable benefit to the clients. In this sense it represents the interests of buyers. Thus, its affiliation overall must be viewed as being fairly central on the customer–supplier continuum. It is perhaps closer to the customers than to the suppliers, and so should be positioned to the left of the 50:50 mark on the affiliations axis of the two-dimensional framework (see Fig. 3). 3.2.2. E-insure E-insure is a dotcom that provides online risk management services to online traders and marketplaces. It was formed in 2000 as an e-business spin out from a large credit insurance company. It is based in London where it employs about 30 people.
  8. 8. ARTICLE IN PRESS D. Barnes, M. Hinton / International Journal of Information Management 27 (2007) 63–74 70 Roles Customisation Logistical LEGALCO Assurance E-INSURE RUSTLER Transactional Informational 100% 100% Customers 50:50 Suppliers Affiliations Fig. 3. The three case companies on the two-dimensional framework. E-insure’s business is based on its access to a vast integrated global database of credit management information on companies in all parts of the world. Its service is based on proprietary software that enables it to automatically perform credit checks on buyers, underwrites transactions for vendors, and chase payment when necessary. It operates as an invisible portal, through which its clients interface with their customers using the clients’ own websites. This enables e-business traders to utilise their own brand-names as they are the recognised trader, rather than operating using E-insure’s brand-name. However, all trade between the online seller and its customer is transacted through the software on E-insure’s portal. E-insure’s software provides a full range of risk management services including authentication, verification, encrypted communications, a payment guarantee and collections. Before trading commences, e-insure authenticates prospective buyers, runs detailed credit checks and approves an authorised credit limit for them with the seller. E-insure then covers subsequent transactions against payment default, ensuring that the sellers will receive payment in case of a protracted default or insolvency of the buyer. In the event of non-payment within 60 days by the buyer, E-insure guarantees payment to the seller, as long as E-insure has approved the buyer’s credit. E-insure then automatically buys the debt from the seller at a discounted price, typically 85% of the full invoice value. All of E-insure’s services are fully integrated into the seller’s software, so that transactions take place automatically without interruption, so that buyers are unaware of E-insure’s presence as an intermediary. The seller pays E-insure a fee for every transaction. E-insure monitors trading between buyers and a seller, automatically adjusting the credit limit upwards in the event of full and prompt payments, and downwards in the event of a poor payment history. E-insure is a cybermediary in that it is positioned between buyer and seller in the supply chain, and its business relies entirely on the use of Internet-based technology. Its activities can be categorised in terms of the five-role framework as follows: Informational: E-insure’s business relies on its possession and utilisation of information. However, unlike many intermediaries, its role is to provide information about buyers to sellers, rather than to provide information about products and sellers to buyers. Transactional: E-insure’s system facilitates online transactions between buyers and sellers. Its presence in the supply chain enables sellers to receive prompt payment, thereby smoothing the transaction process. Assurance: E-insure provides assurance to buyers and sellers by overcoming the distrust between buyers and sellers inherent in business-to-business e-commerce when it comes to payments. The E-insure system ensures that sellers receive their payments by financially approving buyers ahead of time. It lets sellers authenticate buyers, enabling them to participate in the online marketplace with confidence.
  9. 9. ARTICLE IN PRESS D. Barnes, M. Hinton / International Journal of Information Management 27 (2007) 63–74 71 E-insure does not play a logistical role. Neither does it play a customisation role in the sense of tailoring products to suit needs of particular buyers. However, it can to some extent customise its own product to meet the needs of the online sellers. A distinguishing feature of E-insure’s role as a cybermediary is that it is entirely invisible to the online buyers, who are unaware of the part that E-insure plays in their transaction with the seller. All its actions are directed at the sellers and its success is largely based on its ability to act on their behalf using information about buyers. All payments come from the sellers and it is difficult to see that it has much affiliation with the customers. Its affiliation must be viewed as being almost entirely with the suppliers. Thus, E-insure should be position well to the supplier side of the customer–supplier affiliation continuum axis of the two dimensional framework (see Fig. 3). 3.2.3. Rustler Rustler provides technology that facilitates online shopping. The company started life some 10 yrs ago as a software developer in the US. It employs around 120 people worldwide. This case concerns its European subsidiary, based in London and employing about 20 people. Rustler designs, builds and manages customised online shopping malls that enable online shoppers to purchase from multiple vendors on one website via a single virtual shopping cart. Rustler’s operating platform enables traditional cataloguers (i.e. remote merchants) to use the Internet as a new selling channel. The technology creates an Amazon-like shopping experience for buyers but within a website that offers a large number of products from multiple merchants. The shopping mall might house several hundred merchants and many thousands of different products, all available with a consistent navigational experience. In effect, Rustler brings together three supply chain parties within its virtual shopping mall: the shoppers, the merchants and the portal owner. Rustler designs the mall website, fills it with content and manages the whole shopping process for the portal owner. The virtual shopping mall model brings benefits to all parties. The shoppers get an easier shopping experience as they can access merchandise from multiple vendors on a single site and make their purchases via a single checkout. The portal owner gets significant traffic from the addition of a shopping mall to its website. Rustler’s network of merchants enables the portal owner to gain immediate access to a large number of merchants with established names. The portal owner receives a commission on every order placed through their mall. The merchants get access to a very large number of potential customers, whilst avoiding the large investment required in setting up their own website. Merchants pay Rustler a pre-negotiated fee for every order delivered via the Rustler system. This ensures that the merchant receives only bona fide orders, along with credit card and all the other relevant customer details needed to fulfil the order. As such, merchants are guaranteed a profit on every sale. This is much less risky for them, in comparison to the alternative pay-per-click method. Rustler’s management of the shopping mall website works as follows. Firstly, each merchant provides an electronic listing of its warehouse stock. Rustler’s software compares this to its existing database for that merchant and updates it if there is a change. All merchants can be updated every few hours. Once checked the content is then displayed on the merchant’s web pages within the shopping mall site. Rustler’s software automatically checks the site for faults like missing images, missing links data, content problems, etc. The purchasing process on the website is fairly simple. Customers indicate their purchase intentions on the relevant web pages before proceeding to the checkout. Rustler splits out the relevant product details of the customer’s order, and forwards these to the respective merchants, attaching the appropriate customer details. Merchants are required to respond to Rustler indicating the status of the order and to keep responding until the order has been dispatched. Rustler continues to track the progress of the order until it is delivered to the customer. The merchants charge the customer’s credit card. Rustler does not hold stock or have warehouses. Rustler is a cybermediary in that it operates in the virtual supply chain between buyer and seller. Its business relies entirely on the use of Internet-based technology and its success relies almost entirely on the functionality of its software. Its activities as a cybermediary can be described by the role-based framework: Informational: Rustler provides information to both buyers and sellers. Buyers can access information about products from the various merchant webpages within the shopping mall website. Rustler also provides buyers with information about the progress of their order. Rustler also provides information to the merchants in the form of the orders details.
  10. 10. ARTICLE IN PRESS D. Barnes, M. Hinton / International Journal of Information Management 27 (2007) 63–74 72 Transactional: Rustler’s system facilitates the online transactions between buyers and sellers. This is central to its role in managing the shopping mall website. Assurance: Rustler undertakes an assurance role with respect to both buyers and sellers. Merchants need to be assured that they will receive the orders that customers place on the shopping mall website, and that they will receive payment once they have fulfilled these orders. Shoppers need to be assured that they will receive the goods that they order. Only if the purchasing process proceeds smoothly, will buyers undertake repeat purchases and make recommendations to other potential customers. Thus, it is Rustler’s interest to establish and maintain a strong reputation for the websites it manages. Rustler does not play a logistical role except in so far as it informs buyers about the progress of their order. The delivery of goods to customers is the merchants’ responsibility. Rustler only plays a customisation role in the sense that it can customise the shopping portal webpages to meet the needs of the online merchants and the portal operator. Rustler’s activities are, in essence, invisible to the online consumers, as the site carries the brand of the portal operator. The online buyers are unaware of the part that Rustler plays in their transaction with the seller. For buyers, it may appear that the merchant or perhaps the portal operator is in fact performing the role actually being undertaken by Rustler. This is clearly problematic if Rustler is to establish a reputation on its own account amongst consumers. Interestingly, recently, Rustler has embarked upon a strategy of creating and promoting its own brand. In a campaign analogous to Intel’s Intel inside branding on PCs, Rustler now places a ‘‘powered by Rustler’’ icon on the portal operators’ websites, hyperlinked to Rustler’s corporate website. It can be argued that, like E-insure, Rustler’s main affiliation is on the supplier’s side of customer–supplier affiliation continuum. It is largely acting for merchants in promoting their products and securing orders from customers. It receives its income solely from the merchants. However, as it receives payment on a per order basis it has powerful incentive to ensure that customers are satisfied and return to make repeat purchases. Also, Rustler has some affiliation with customers as it manages their interests by actively tracking the progress of their order and keeping them informed until they receive the goods. Although its recent branding efforts seems mainly directed at recruiting additional merchants and portal owners, they also serve to raise Rustler’s profile and start to create a relationship with online shoppers. Thus, although it seems clear that Rustler should be positioned on the supplier side of the customer–supplier affiliation continuum, it is nearer to customers than E-insure (see Fig. 3). Fig. 3 shows the relative positions of the three case companies on the two-dimensional framework of the roles and affiliations of cybermediaries. The height of the bar for each of the cybermediaries corresponds to the roles that they undertake as indicated on the vertical axis of the diagram. Legalco undertakes all five roles, whereas both E-insure and Rustler only undertake the first three of these. The position of the bar on the horizontal axis indicates the respective affiliations of each of the three cybermediaries on the customer–supplier affiliation dimension. Legalco has a stronger affiliation to customers than to suppliers, and as such is positioned to the left of the 50:50 mark on the axis. Whereas, E-insure and Rustler both have stronger affiliations to suppliers than to customers and so lie on the supplier side. However, as Rustler has more affiliation to customers than does E- insure, it is placed to the left of E-insure on the framework. 4. Conclusion This paper has endeavoured to make a contribution to the advancement of understanding of e-business practise, and specifically in the case of online intermediaries. The first point emphasised is that not all cybermediaries are the same and they may attempt to conduct their business in a number of ways. The roles that they play in the virtual supply chain can vary considerably; similarly their relationships with their suppliers and customers can also vary. The framework developed in this paper based on these two dimensions offers a useful means of analysing and illustrating their behaviour. Existing approaches to classifying e-businesses more generally have been essentially descriptive and have tended to produce lists of varying length Timmers (1999)—11, Rappa (2003)—nine, Weill and Vitale (2001)—
  11. 11. ARTICLE IN PRESS D. Barnes, M. Hinton / International Journal of Information Management 27 (2007) 63–74 73 eight and so on. However, new forms of online intermediation are emerging all the time and e-business practise is evolving rapidly. Consequently, such lists may fail to grasp the complexity of unfolding events as entrepreneurs experiment to find the best ways to utilise the latest technology. The use of models has a long history in management to ‘‘impose order on chaos y to bring order, simplicity, consistency and stability to the world’’ (McCaskey, 1982). The framework aims to do this by focussing on an analysis of two important aspects of cybermediary behaviour, namely their roles and relationships. Applying the framework to the three case studies has demonstrated that an analysis based on these two dimensions can offer important new insights into the cybermediary phenomenon. As well as providing a visual representation of each of the case companies, the framework also provides the means of comparing one cybermediary with another. The framework also offers a way of comparing any changes to the roles and relationships of a cybermediary over time. The framework presented in this paper provides a new tool of analysis that should further explain and deepen understanding of the practise of online intermediation. However, e-business practise is very dynamic and new types of cybermediary seem certain to continue to emerge. Further on-going empirical studies are required in order to test and refine the framework. References Anderson, P., Anderson, E. (2002). The new e-commerce intermediaries. MIT Sloan Management Review Summer, 53–62. Bakos, Y. (1998). An exploratory study of the emerging role of electronic intermediaries. International Journal of Electronic Commerce, 1(3), 7–20. Barnes, D. L., Hinton, M., Mieczkowska, S. (2002). 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