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B2B exchanges: a fine balance
Try doing an Internet search on e-marketplaces, and most of the hits are from five years ago. It’s as though the concept was wiped completely off the board after 2001. One consultant I called was downright surprised that I was researching B2B exchanges. “I don’t get many requests to do interviews on e-marketplaces anymore,” was how he put it. It made me wonder why I was bothering to wade into this veritable ghost town of exchanges.
But I’m glad I did, because I discovered a few surprising things. First off, B2B e-marketplaces are down but not out. According to Quadrem, an e-marketplace company, there were 3000 exchanges operating five years ago. Today there are just 20. What a shakeout.
But for purchasers, it’s good the e-marketplace landscape is less populated. There’s enough uncertainty with e-commerce as it is. Why add to the anxiety by trying to choose an exchange out of hundreds of competing options? The portals still around today have come through the worst. Some make mention, with pride, of their brush with extinction. As one consultant put it, all the mistakes have already been made.
Sounds to me like it’s safe to go back into the water. Not that you should throw caution to the wind. On the contrary, be careful of e-marketplaces that serve only as a clearing house for buy and sell transactions. If you don’t, you might be disappointed to be left behind as your competitors engage in richer, more fulfilling exchanges—ones that handle logistics, purchase order generation, order consolidation and electronic payment. According to one consultant, that’s where it’s at. In fact, the good e-marketplaces of the future will be the ones that actually become your purchasing department. That’s a leap, but you never know.
It’s a good reason to give B2B exchanges their due diligence. Companies such as Noranda, Inco and Alcan have been using them for years, with proven success. Nestle is getting on board too. After chatting with purchasers, it seems the biggest benefit so far is the immediate access to hundreds of suppliers around the world. Without the exchange, these suppliers wouldn’t know about you, and vice versa.
Cost savings are a big advantage too, but purchasers in search of reverse auctions won’t find many on exchanges such as Quadrem. Reverse auctions comprise only five per cent of all its transactions, mainly because Quadrem doesn’t want to “gang up on suppliers.”
Therein lies the sea change. Using e-marketplaces to constantly beat down suppliers on price is a bit like a dog chasing its own tail. After a while, it’s time for a new game. The experts say the new game is all about process over price.
As the e-marketplace scene starts to populate again, keep you eye out for a good one that offers e-payment, automatic purchaser order generation, order consolidation and logistics. Make sure it has an extensive database of global suppliers for you to consider. Sell it to your vendors by stressing the ease of posting and maintaining catalogues. Go easy on price discounts or suppliers might be running scared again. There’s a fine balance between buyer and supplier here. Let’s learn from the shakeout and do it right.
Lisa Wichmann
Editor
We welcome your letters. Contact the editor at lisa.wichmann@pb2b.rogers.com.
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