Infomediaries

Many have been disabled by unexpected barriers that incumbents had long learned to live with. These constraints serve as isolating mechanisms that impede competitive moves. Protected niches within a market - stemming from longstanding relationships or regulations designed to protect some players in a value chain - are among the signals of these killer constraints. These signals were frequently downplayed by ecommerce challengers during the optimism of the boom period:

George S. Day and Katrina J. Bens Volume 20 ■ Number 4/5 ■ 2005 ■ 160-168

Table IV Which B2B firms see the internet as a major (minor) opportunity (continuous ratio logit analysis)?

Independent variable Major opportunity vs rest (n = 160) Minor opportunity vs no impact or threat (n = 121)

Customer-relating capability - 0.47* 0.31

Market share rank 0.39* - 0.21

Focus of strategy - 0.38* 0.22

Customer perceptions of differences 0.12 0.08

• The on-line auto infomediaries like Autobytel, Auto Web, and Cars.com, face restrictive state-level regulations that bar anyone from clinching the sale. Some states go further to require a new car buyer to pick-up their car at a dealership. Without the ability to make a sale the online buying services are left with only the revenues from lead generation for dealers.

• VerticalNet.com created a diverse e-marketplace in areas that ranged from aerospace technology to pulp and paper. Suppliers were provided with a customizable platform that allowed them to quickly get their products and services on line, while buyers were able to easily find multiple supply options. After a high of $148/share, VerticalNet.com stock is trading at about $1.25/share. In a search for profitability, the company has shifted its focus to software for automating business activities with suppliers.

• While the concept of Brandwise.com, a comparison-shopping website for appliances was appealing, it was unable to overcome two killer constraints. Up to 80 percent of sales to consumers of appliances are immediate replacements of broken units, leaving no time or inclination for careful comparison-shopping. Another impediment was the inability of geographically dispersed and incompatible retail systems to communicate inventory status or fulfill orders. The existing system had long adapted to these rigidities and had little incentive to change.

• Pure play online pharmacies' were hobbled by the relationship of pharmaceutical benefit managers (PBMs) and pharmacies with major employers and health plans. These were never opened up. Further constraints were the unwillingness of consumers to wait for their prescription to be delivered so they could begin treatment, and hesitations about credit card security and sharing of their personal information.

The nature of on-line interactions imposes further constraints. Many products are unsuitable because their quality or reliability cannot be readily described or communicated in digital terms (Figueredo, 2000). There are inherent delays in navigating sites, finding information and making choices that are exacerbated by the volume of information and plethora of options. The lack of human contact eliminates opportunities for clarification, problem solving, reassurance and negotiation. These limitations don't negate the internet, but often relegate it to a supportive and subordinate role in a market.

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