Emergence of Electronic Single-Source Sales Channels
The emergence of electronic single-source sales channels can presently be observed within industry and is well described in the popular business press and trade journals. Little, however, is being reported with regard to the larger picture of the developments, i.e., the overall expansion of electronic markets. We would like to offer several explanations:
1. Impact of interorganizational value chains. Firms readily envision opportunities in electronic interorganizational value chains for improving their respective competitiveness. Thus they choose hierarchical arrangements rather than lower cost market transactions with less control of the factors noted above. In an effort to integrate supply chains electronically, buyer-supplier links such as electronic data integration transactions produce inventory and coordination savings for large purchasers and the suppliers, in turn, are forced to accommodate. Well- known examples depicting this development can be found with Wal-Mart's supply chain, as well as in the relationship with auto manufacturers and their suppliers. Single-source sales channels for travel agencies such as Rosenbluth Travel have expanded their business through agency partnerships in countries where they share a common process and database for tracking customers around the world. In this fashion Rosenbluth can provide them with the lowest prices and emergency services (Miller et al., 1993). This travel agency then is an example of the last evolutionary stage predicted for electronic single-source sales channels, a shared data base between partners.
2. Fear of profit margin deterioration. Firms can be expected to be very cautious about giving up their single-source sales channel profit margins, at least until a virtual market has clearly been created with enough participants to force their entry. This is especially the case when an oligopoly of relatively large firms controls a market in which each would risk sizable market share and profit margin in an electronic market. In the case of electronic markets for travel reservation systems, there is evidence that the profits of former sales channels (the airlines) are drastically reduced, while the profits of the market maker (e.g., SABRE, APOLLO) remain high.