E-Marketplaces Slow To Launch

With plenty of fanfare, big industry players introduced online marketplaces for everything from planes and automobiles to hotel rooms last year. But months later, many dont have much to show.

Major air carriers American Airlines, Continental Airlines, Delta Air Lines, Northwest Airlines and United Airlines announced plans to launch T2, now known as Orbitz, a consumer airfare site in November 1999. But management problems and technology snafus are creating impatience among Orbitz members, said sources familiar with the company, which has delayed its launch until June.

Partly out of frustration, Orbitz partners American, America West Airlines, Continental, Northwest, United and US Airways invested $75 million in Hotwire last October, a smaller site that sells unused seats. It is now up and running.

In late November, four large hotel chains announced plans to move toward an online booking supersite called Honestbroker.com. The site would take reservations and also give hotels a way to sell “distressed inventory,” or vacant rooms.

Hotel heavyweights Bass Hotels & Resorts, Hilton Hotels, Hyatt and Marriott International are backing the site. The industry players think the Web site could attract travelers interested in discounts more than brand names. So far, the site is not doing much. It has an “under construction sign on it and no mention of plans.

Regulatory concerns arent helping the situation.

The American Society of Travel Agents has filed an antitrust complaint with the Department of Justice against Orbitz and also may oppose the hotel site, said Paul Ruden, senior vice president at ASTA, in Alexandria, Va.

These marketplaces bring up all kinds of antitrust and price collusion issues, said Joshua Friedman, a senior analyst for online travel at International Data Corp. “Consumers might be better served by getting these discounts directly from the travel industry,” he said.

Orbitz also faces antitrust scrutiny from 20 states attorneys general, who lodged objections with the U.S. Department of Transportation citing concerns about the sites competitive impact in an industry already facing a sweeping round of consolidation.

In a letter, the state officials acknowledged they were still in the early stages of their antitrust review.

However, the attorneys general noted “striking features in the Orbitz scheme that may produce negative consequences outweighing any benefits to consumers.” Among them: restrictive contract terms with the five founding airlines and 30 other carriers that may limit the airlines ability to offer low fares to competing agencies.

Meanwhile, Covisint, the 11-month-old e-marketplace for automobile parts created by DaimlerChrysler, Ford Motor and General Motors, still lacks a chief executive and permanent headquarters.

KPMG researchers reported the project is bogged down by suppliers skeptical of sharing purchasing or design information with competing automakers and rival suppliers.

Today, more than half of the Fortune 1,000 companies recently polled by Forrester Research are involved in some sort of electronic marketplace. Forrester predicted online business trade will top $2.7 trillion in four years. Already, business-to-business (B2B) transactions account for 80 percent of all e-commerce.

Yet, Forrester also predicted that only one in 20 marketplaces will survive and just 181 B2B ventures will be operating by 2003.

The Federal Trade Commission has scrutinized some industry-sponsored marketplaces on antitrust grounds, but in the end it is likely to approve most of them, said Tim Clark, senior analyst at Jupiter Research. Last September, the FTC gave provisional approval to Covisint.

One new marketplace bucking the trend is Transora, the site backed by the Coca-Cola Co., Kraft Foods and Procter & Gamble, which appears to be running smoothly.