Bare Markets

 
 
By eweek  |  Posted 2001-02-26
 
 
 

Business-to-business marketplaces are struggling not just because few companies are buying through them — suppliers are reluctant to join for fear of becoming indistinguishable from their competitors.

It is the latest problem exchanges are experiencing, as they try to pool a large enough group of buyers and sellers to become successful marketplaces. And it is slowing the adoption of e-commerce just as marketplaces try to broaden their reach from large enterprises to smaller companies and from simple goods to more complex goods, industry experts said.

The bottom line is that suppliers are struggling with the difficulties of publishing large volumes of content to exchanges that dont have room, as well as a lack of reliable ways to update catalog information to even a single e-marketplace, let alone several.

"Thats the No. 1 fear — that our products will be commoditized. It will be a catalog listing with the name, a short description and price. We dont want anything to do with that," said an executive at a medical device manufacturer who wished not to be named.

"Sellers have no idea of the dynamics theyre putting into place by listing on an exchange," said John Fontinella, an analyst at AMR Research.

Suppliers are more often forced by their buyers into private and consortium-backed trading exchanges than into public Net markets, Fontinella said. The buyers see savings in purchasing costs and logistics in electronic commerce, so they tell suppliers to move with them to a marketplace. When the buyer is a big company like Dell Computer or Wal-Mart Stores, suppliers can either convert or lose big customers.

According to Tom Mescall, executive vice president at Comergent Technologies, a marketplace content management company, suppliers can respond two ways when buyers say they want to automate purchasing: They can hook directly to the customers procurement system or join an exchange that can plug into the customers system. The latter appeals to some customers, especially when they may want to tie into multiple exchanges.

"There is some resistance by market leaders to put products into an exchange," Mescall said. "One way to protect against that is to do their own private exchange, where they control who comes in. They can focus on their products and protect their price. Weve done it for Seagate [Technology]."

Making their own private exchange also keeps suppliers from becoming too dependent on the customers procurement system, said Mike Morgan, director of marketing at Fourthchannel, another content management company. "They can learn what its like to sell on the Internet," he said.

Many suppliers are holding off joining exchanges until more reliable ways exist to publish and update content to exchanges, Morgan said. "Everybody is in a little bit of a wait-and-see mode. Its similar to EDI [electronic data interchange] in the 80s. Until there were customized solutions for smaller companies, you didnt see large penetration in EDI," he said.

Still, sellers are more subject to the whims of buyers in this area, Fontinella said.

While all industries seem to be moving toward electronic purchasing through exchanges such as Covisint and Transora, its hard to tell how much the addition of this new sales channel is affecting the companies that have to use them. "There are no real hard numbers," Fontinella said.

In the short term, sellers will do what they must to hang onto important customers.

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