E-marketplace ? Facts and Fictions

Not long ago, industry pundits were touting B2B marketplaces or exchanges as Internet era panacea for productivity and cost-cutting problems of corporate world. Buoyed by excessive investor interest and driven by a desire to cash in on the enormous dot-com valuations of late 90s, marketplaces were sprouting like autumn mushrooms. With the collapse of stock market, it did not take much time for burgeoning B2B marketplaces to come to a screeching halt!

When in 2001 high profile marketplaces like Chemdex, a life science marketplace started to tumble down, and most of the marketplaces started to show sign of disappointing growth rate, it became clear that something is wrong with the prevailing business model of b2b e-marketplaces.

Optimists claim nothing is wrong with B2B e-marketplaces, as a new technology, it is merely going through the normal evolutionary stages. Others feel that business processes are way too complex an issue, substantially based on human behavior and intricate relationships; and this complexity will prevent wide spread implementation of online supply chain mechanisms through B2B exchanges.

But, the truth is probably somewhere in between! There is no doubt that any business, irrelevant to its size, is able to create some sorts of value if they use B2B marketplace effectively. As far as B2B E-commerce is concerned, most agree, that eventually businesses have to do significant part of their transactions online. The only thing is - it might take a bit more time for widespread adoption, than initially expected.

Slow implementation of B2B e-marketplaces is a natural consequence of some inadvertent stumbling blocks.

  • The investment in B2B sector started to dry up at the end of 2001 as unrealistic expectations of many investors and funds did not materialize. As a result of this, many exchanges were forced to close down; and much needed transformation in the technology process slowed down in existing ones due to liquidity challenges.

  • Many early marketplaces were built in a hurry to exploit prevailing at that time budding stock market. For these marketplaces, value creation for the participants was not a priority. By the time they realized that members need something more than comparison shopping and product display ability, it was a bit too late for quite a few of them.

  • Contrary to popular believe, buyers did not start flocking on to the e-marketplaces as expected. As it became clear, buyers require real incentives in order to go through the complex process of online dealing. In most cases, in order to get integrated to an e-marketplace, buyers are ready to learn, hire professionals, and invest on technology if they know that most of their offline suppliers are available on a particular exchange. But, until then, they prefer to refrain from changing their way of doing business.

  • There are number of reasons why suppliers don't expedite the process either. They are mainly scared of comparison shopping and brand dilution. Complexity of back end office integration and product catalog conversion also creates major impediment in mass adoption of e-marketplaces within the supplier community. Suppliers with websites, who previously had disappointing e-commerce experience, are also quite skeptical about the benefits that they might achieve from exchanges.

  • Many exchanges' revenue depends on the percentage-based transaction fee, imposed upon the participants. Some companies consider that these fees will reduce their net profit margin, especially, in a down market. This is another cause, why many are not very keen to participate in e-marketplaces.

    All these conditions are maybe right and, probably mass scale adoption of e-marketplaces won't take place another several years. However, don't think that companies should relax. As some industries are more advanced in their adoption of B2B technology, companies should constantly check where they stand. If their competitors are already practicing e-business actively; or many of their suppliers are by now on some sorts of exchanges, this is the right time for these companies to consider their online business approach seriously.

    The sooner companies understand the benefits that they can reap from B2B exchanges the better it would be for them. For suppliers e-marketplaces offer benefits like liquidity improvement, cost savings, better inventory management, demand forecasting, dynamic pricing etc. Buyers benefits include: cost reduction, real-time purchase, best available price and many others. Research indicates that companies, thanks to B2B exchanges, can gain remarkable cost reductions: 20 to 40 percent of overhead expenses, 5 to 15 percent of buying cost, Purchase Order processing cost from US$ 75 to just US$ 6-8; and decrease of document errors from 20 percent to less than one percent.

    Apart from these benefits, early adoption of B2B marketplaces also has great implications for companies. Early birds get considerable information advantage over their competitors; have enough time to learn from trial and error and participate in setting the rules for the exchanges as opposed to - forced to abide by the rules as it would be the case for late-comers.

    Whatever approach the companies decide to take in their quest of B2B technology, one thing is for sure that the e-marketplaces are here to stay. Over time, they will definitely evolve and their business models will also change, however, there is no doubt that a major portion of e-business will transact through e-marketplaces in near future.

    About The Author

    Nowshade Kabir is the founder, primary developer and present CEO, of Rusbiz.com, a global business to business e-commerce portal with feature like storefronts, aggregated catalog, e-marketplace, trade leads, internal messaging system supply chain solutions, etc. With a doctorate in Information Technology, Dr. Kabir has worked an advisor to government projects and has over 12 years experience in International Trade. An author of many B2B and business related articles; he publishes a bi-weekly E-zine for online business community. You can subscribe to his newsletter free of charge from http://www.rusbiz.com.

    nowshade@rusbiz.com

    In The News:

    • pen paper and inkwell


    cat break through


    The Wisdom Of Giving Away Something For Nothing

    If you're new to Internet Business, this might be hard... Read More

    Internet Marketing Help

    If you're looking for Internet marketing help you've come to... Read More

    The Secret Of Discovering Your Own Profitable Passion

    Many people have stated that they would like to create... Read More

    Make Your Real Estate Website Visible!

    So, you've created a Website to highlight your realty services... Read More

    The Website Marketing Strategy that Never Fails

    Developing a successful web site takes more than simply building... Read More

    Internet Marketing Secrets Spiel

    Wouldn't you like to know all the Internet marketing "secrets"... Read More

    The New Marketing Landscape

    Many of us in the marketing services and/or agency business... Read More

    What is the Flavor of Your Website?

    When I mention, "flavor", I mean the appeal of the... Read More

    How Quality Content Will Increase Your Traffic and Sales

    Are you aware of how vitally important and valuable CONTENT... Read More

    Never Underestimate the Value of Giving Things Away

    "Never underestimate the value of giving things away." I remember... Read More

    10 Ways to Exceed Your Clients Expectations Every Time!

    The following tips are just a few of the things... Read More

    Viral Marketing! Are You Missing Out?

    Many of you are reading this article because you would... Read More

    Online Marketing Law! Whats Happening?

    You read that right. There's a new law in California... Read More

    Truth and Lies

    How low can one get? The number of encounters I... Read More

    Automatic Internet Marketing and Business Success On A $25.00 Budget

    There are plenty of free tools online for marketing. And... Read More

    Why Have An Internet Marketing Business?

    "The Internet Gold Rush is under way" Bill Gates, chairman... Read More

    Internet Marketing is Changing Right Before Your Eyes!

    There's no doubt about it . . .Big changes are... Read More

    Twenty Ways To Profits Online

    1. Offer to write exclusive articles (that means you only... Read More

    Internet Marketing Basics

    Almost all of the articles on Internet marketing lacks coverage... Read More

    The Deadly Sin Of Inaction

    "There is difference between knowing the path and walking the... Read More

    Did You Say Free?!

    There are books and web sites for the translation of... Read More

    The 2 Step Lead Generation Machine

    Cold calling doesn't work, it's no fun and often you... Read More

    Increase Sales: The Secret To Using Offline Advertising To Magnify Your Online Sales

    Since the internet happened, and everybody went for the gold... Read More

    The Free Viral Marketing Technique You Cant Afford to Pass Up

    Have you ever seen the movie "Pay it Forward"? This... Read More

    You Gotta Think -- Strategic Internet Marketing!

    Have you ever been lost in the woods - wondering... Read More

    Ten Simple Tips To Create A Money Magnet Web Site!

    Staying awake at night wondering how to pump up your... Read More

    Internet Secrets Revealed - Six Easy Steps to Build a Website to Success

    Internet Secrets Revealed! Six Easy steps to build a website... Read More

    FREE Classifieds-Advertising: Your Online Work From Home Business

    If you are on a shoestring budget and need to... Read More

    How to Use Tracking to Keep Income Incoming

    The use of tracking links in the following scenario puts... Read More

    The Most Valuable Asset in Marketing - Do YOU have It?

    The single most important attribute for a successful Network Marketer... Read More

    Do Your Words Need Protection?

    Recently, attending a local event, I found myself chatting with... Read More

    Online Sales: 10 Mind Boggling, Electrifying Tricks To Ignite Your Sales

    Do you want to unleash a tsunami of sales at... Read More

    How to Leverage the Internet in MLM

    Most people who try to leverage the Internet to build... Read More