An Approach to Reducing E-Commerce Coordination Costs in Evolving Markets Using a Semantic Routing Protocol

Attending the rapid growth of B2B e-commerce is an equally rapid fragmentation of what was once—and still is, in many quarters—conceived of as a global marketplace. Indeed, the most successful examples of B2B ecommerce have taken place in niche markets with specialized vocabularies and processes. Relative to the ideal of a universally accessible global marketplace, specialized markets represent significant coordination inefficiencies. We propose that electronic markets are open systems in the general systems theory sense of the term, and that any electronic commerce architecture must deal with open system semantics to avoid progressive segmentation into isolated sub-markets. Reducing buyer search costs represents a special but important case of reducing coordination costs to improve market efficiency and decrease the pressure for fragmentation. We analyze the components of buyer search cost to identify core issues that must be handled by any electronic commerce architecture intended for evolving markets. We propose XML record types arranged in an autonomously defined type hierarchy and a semantic routing protocol as potential mechanisms for reducing message processing and buyer search costs in this open system environment. We suggest the method is potentially generalizable for coping with other problems introduced by Web marketplaces with evolving semantics.