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Brokerage services

Electronic Commerce is based on the reliable and secure exchange of information between Customers and Suppliers. It should enable the exchange goods, services, content, assets and money, between two or more participants using electronic tools and techniques. Stakeholders, in order to perform Electronic Commerce, have to be able to navigate, gather, search, filter, deliver, route information, communicate, exchange contracts, services and other commerce related objects.

In today's public network Electronic Commerce applications (on the WWW, or regional systems like Minitel or T-Online), the proactive role is mainly restricted to information consumers who search for information matching with a formal specification of their needs. To perform search, participants use search engines or catalogues, which typically navigate through the addresses of connected sites. Search engines perform syntactic matching or limited forms of semantic matching based on referenced content (e.g. web pages).

The current state of Electronic Commerce relying on open public communication networks, is quite far away from what is called an electronic marketplace. Although a huge and growing number of suppliers, manufactures and retailers offer their goods and services, no scalable, integrated and feasible way is currently available:

	for providers to reach customers,
	for customers to reach suppliers,
	for paying, billing accounting and security,
	for introducing new offers efficiently,
	for creating limited, structured electronic marketplaces, including mediation services

Whatever the roles a participant plays in an electronic market (e.g. consumer, customer, retailer, provider) they have to deal with information and play the roles of information providers and information consumers. Information consumers need to search, gather, filter information; information providers need to deliver and route information.

Resource Discovery services (RDS)

Electronic brokerage and the marketplace

What do electronic networks, supporting Electronic Brokerage services, provide, that is not present in non-electronic markets? Open public, communications networks like the Internet or ISDN and appropriate brokerage services should support new market-led relationships between producers and consumers where the large number of suppliers and customers are geographically separated, where there are many comparable products or where prices and product features or models change rapidly.

Another economic purpose of Electronic Brokerage is the reduction of costs of search and discovery mediated by a third party (the broker) for buyers and sellers of physical or logical goods and services within an open marketplace or for dissemination of public information valued as achieving bureaucratic goals and objectives.

Firms exist to reduce the costs of negotiating, monitoring and executing transactions that are necessary to produce or acquire goods and services on the open private market. The economic benefits to firms are participation and value creation in wider market-like relationships organised electronically while reducing costs through automation of a higher volume of transactions, thus achieving the benefits of externalities by spreading costs among larger numbers. Market-like arrangements (outsourcing) replace the costs of in-house co-ordination as a more efficient means of production. That is another benefit of Electronic Brokerage.

The electronic broker role in this new marketplace reduces costs of co-ordination across space and time through the creation of a virtual marketplace adding value by centralising the search, product/service matching and transaction functions. The electronic broker makes a firm's outsourcing a transparent process, since his catalogue reduces the opportunities for any producer to behave opportunistically (i.e. extract a higher price than necessary) by advertising choices from the goods and services.

During the transaction stages of commerce, the broker can see that issues of trust are correctly implemented (safe payment, anonymity of consumers, responsibility for feedback on delivery or quality, etc.) as well as organising outsourcing activities for the various parties who are responsible for transactions.

© Fretwell Downing Education, 1999.

Updated 07-MAY-1999

Send comments or questions to kriley@fdgroup.co.uk