New Industry Marketplaces Drawing Interest

The industry-sponsored e-marketplace isn't dead yet.

The industry-sponsored e-marketplace isnt dead yet.

A food industry consortium is expected to be announced late this month. Discussions about forming new consortium-based exchanges are taking place in several industries, including telecommunications providers and telecommunications equipment makers, real estate, hospitality, the food industry and newspaper publishing, according to industry sources.

Exact details, however, are not forthcoming as partners work quietly to put marketplaces together.

"Activity is being pursued in all of them," said Kevin Costello, global managing partner of the market solutions line of business at Andersen.

The reasons why companies still want to band together in electronic commerce consortia, even as Internet stocks tumble and businesses scatter to form private exchanges, show that they believe they can find value in even the most discredited places — if they look hard enough.

Private exchanges are drawing attention now because businesses see them as the fastest and simplest way of achieving the elusive efficiencies long promised by the Internet. But some are also finding that its cheaper to work together, industry observers said.

"Its expensive to maintain and manage a private exchange. Supplier adoption is a problem. Getting the right data, managing that community all add up," said Pravesh Mehra, who leads the B2B consulting practice at Cap Gemini Ernst & Young.

Much of this depends on how the industry operates, said Kevin Murphy, an analyst at Gartner Group. While questions linger about whether the telecommunications industry players want to collaborate, it makes sense in some of the other industries.

Commodity-oriented goods are the most natural supports of an exchange, he said. Exchanges dealing in energy, like Altra Energy Technologies, have proven the most successful e-marketplaces for that reason.

The same dynamic could help consortia that want to form exchanges in hospitality. On the marketing side, "youve got the excess capacity problem" with hotel rooms, and on the supply side, hotels are looking for private-label goods like miniature shampoo bottles, which are more like commodities rather than branded goods.

In other industries, like real estate, consortia could be better positioned to provide value-added services. One neutral e-marketplace helps speed up real-estate projects by facilitating the entire development process from bidding through construction. A consortium might be able to do this better, he suggested.

Some of the opportunities lie with small and midsized businesses, which are the most threatened as larger rivals open private trading exchanges, said Matt Porta, head of eMarkets strategy at PricewaterhouseCoopers. The idea is that banks, consortia or co-op groups can organize group-buying pools, when the members dont have the resources to create their own private exchanges. But prospects here are more distant, he said.

While this co-op model has worked for the agricultural industry for years, most other industries deal with more complex goods than farm commodities. They need exchanges that will do more than squeeze price, but provide better information or links to the right supplier.

"Most major banks have looked at it over the last year. Some have experimented. I dont think anyone has cracked the code on it," Porta said.

Despite the difficulties, he thinks businesses are drawn to consortia as they seek to work better with customers and suppliers.

"This is the decade of market integration," Porta said.