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Chapter 2  Marketplace analysis for e‑commerce

Summary

1 

The constantly changing digital business environment should be monitored by all 

organisations in order to be able to respond to changes in social, legal, economic, 

political and technological factors together with changes in the immediate market‑

place that occur through changes in customer requirements and competitors’ and 

intermediaries’ offerings.

2 

The online marketplace involves transactions between organisations and consum‑

ers (B2C) and other businesses (B2B). Consumer‑to‑consumer (C2C) and con‑

sumer‑to‑business categories (C2B) can also be identified.

3 

The Internet can cause disintermediation within the marketplace as an organisa‑

tion’s channel partners such as wholesalers or retailers are bypassed. Alternatively, 

the Internet can cause reintermediation as new intermediaries with a different pur‑

pose are formed to help bring buyers and sellers together in a virtual marketplace 

or marketspace. Evaluation of the implications of these changes and implementa‑

tion of alternative countermediation strategies are important to strategy.

4 

Trading in the marketplace can be  sell‑  side ( seller‑  controlled),  buy‑  side ( buyer‑ 

 controlled) or at a neutral marketplace.

5 

A business model is a summary of how a company will generate revenue identify‑

ing its product offering,  value‑  added services, revenue sources and target custom‑

ers. Exploiting the range of business models made available through the Internet is 

important to both existing companies and  start‑  ups.

6 

The Internet may also offer opportunities for new revenue models such as commis‑

sion on affiliate referrals to other sites or banner advertising.

7 

The opportunities for new commercial arrangements for transactions include nego‑

tiated deals, brokered deals, auctions,  fixed‑  price sales and pure spot markets, 

and barters should also be considered.

8 

The success of Internet start‑up companies is critically dependent on their busi‑

ness and revenue models and traditional management practice.

Firebox received £500,000 of investment from New Media Spark, with further funding from private inves‑

tors. Sales grew 156% a year from £262,000 in 2000 to £4.4 million in 2003 and £8 million in 2004 from 

175,000 orders. In the same year, it received 4.5 million page impressions and 680,000 monthly unique 

visitors, according to the Nielsen// Netratings panel (eSuperbrands, 2005). Firebox.com became profitable in 

2001.

One of the reasons for the success of Firebox is the way it has embraced traditional channels to market. 

Silicon.com (2004) reports that head of PR Charlie Morgan explained: ‘In a marketplace that was fast becom‑

ing cluttered there was a strong need to both expand the customer base and ensure that Firebox itself grew 

as a brand. By building in a programme of catalogue drops, Firebox aimed to recruit many new customers 

who had not thought of the Internet as a purchasing medium, increase turnover and of course grow the 

brand.’

In 2009, the company reported that the Firebox.com website attracted nearly 10 million visits in 2009 and 

served 48 million page impressions according to Google Analytics. The email newsletter is sent twice a week 

to over 700,000 recipients while over 1 million copies of the catalogue are circulated annually. In 2010, the 

revenue of the business was £14.4 million. By continuing to look for a niche in the market and playing to 

its strengths, the company has continued to be a profitable, growing, independently owned company. In 

2013 the company continued trading with a mobile responsive site. (See Chapter 11 for more details on this 

approach.)

Source: Company website, About Us, eSuperbrands (2005) and Silicon.com (2004). With thanks to www.firebox.com.

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Part 1  Introduction

Exercises

Answers to these exercises are available online at www.pearsoned.co.uk/chaffey