The biggest potential market, the business-to-business sector, has always been more important in dollar terms than the business-to-consumer market. Although the Myers and Woolworths of the world creat
The biggest potential market, the business-to-business sector, has always been more important in dollar terms than the business-to-consumer market. Although the Myers and Woolworths of the world create a disproportionate level of awareness among consumers, its the major utilities, financiers, suppliers and their suppliers, constructors and administrators that generate much higher turnovers. The same is true on the net. For every end product brought to market, there are many more companies whose work went into making the delivery possible.
While the consumer e-tail market is tipped to hit $US29.2 billion this year, the B2B market is immensely more important in dollar terms. Already on course to break the $US100 billion mark this year, B2B commerce is tipped by Forrester to reach $US1 trillion by 2003 and others put the figure considerably higher. The B2B market is expected to thrive, but much of the business will see on-going development of supply chains already in place. Many experts believe that while exchanges and facilitators will be able to cream a percentage, businesses will establish links with regular suppliers, circumventing the middleman.
The e-communities model, where groups of like-minded companies clubbed together to improve their purchasing power, spawned a new breed of broker. Called gatekeepers by some, the powers that sit at the top of these societies - putting buyers in touch with sellers and taking a commission from both - were tipped to clean up.
Much of this early enthusiasm has since died down, but the concept is not dead, and many people believe that a less fragmented market will prevail. One such newly-launched example heralds from China, where collective marketing has long been encouraged. Retek and MultiAsia are currently signing up customers for their electronic exchange that serves as a gateway to Asian retailers. The retail exchange is expected to automate the end-to-end processes for procurement, logistics and payments in the Chinese marketplace, but will aim
to make money from North Americans and Europeans sourcing products out of China and other Asian countries.
While exchanges are seen by many as among the most feasible Internet enterprises, UK B2B dot.com E-Exchange - which for its short spell in the limelight was tipped by the UK media as being an e-wunderkind - last year shut down all operations under administration.
E-Exchanges business model worked like an auction in reverse, where vendors and resellers posted volume orders and suppliers then fought to win the contract. Despite positive media, the company found itself short of funding and went to the wall, another example that no matter how good the idea, bad asset -management will be punished just as harshly online as in the traditional world.
This isnt the only example of failure in the UK market, Altogether also tried to crash in on the business other people were doing over the net, acting as an intermediary for groups that bought and sold in large-scale batches.
Its model failed because potential users found it more efficient, cheaper and quicker to deal directly with the companies that provided the goods. Why use a middleman, or machine as the case may be, when - once the contact is made - you can deal directly with the supplier.
The brains behind the idea still, perhaps predictably, believes there is space for the middleman. I still need to be convinced that this model doesnt work, says Paul Ashford, founder of the UK gatekeeper Altogether. What we were trying to do has a place in the market, but that market simply wasnt ready.