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E-marketplaces 2001: size will still matter
E-marketplaces will go through many phases in the coming year.

By editorial@silicon.com

Published: Wednesday 18 October 2000

While the last 12 months or so has seen some fighting talk from all types of companies wanting to get involved, next year and beyond will see some casualties, whether they're platform providers or those businesses trying to use and control e-marketplaces.

That's to be expected. For all the hype, setting these things up isn't easy. They're a leap forward from past trading relationships, and even the complex EDI systems many firms have employed for years.

However, it is becoming clear that a lot of the received wisdom about e-marketplaces often won't apply.

For one thing, many people believe they will concentrate so much power in the hands of large buyers that suppliers will suffer. That was why the EC sniffed around MyAircraft.com earlier this year and the US Federal Trade Commission (FTC) investigated Covisint, which has DaimlerChrysler, Ford, GM, Renault/Nissan and Toyota behind it.

The ventures were given the anti-trust green light. And one reason the regulators may have done the right thing is that there are now a host of software providers targeting the supply side of the equation, which means the smaller software suppliers will be able to up their clout by forming supply-side hubs.

That's a good thing for the overall competitiveness of markets. Suppliers will increasingly have to differentiate themselves on factors other than price.

Dr Martha Rogers, the well-known e-marketer from the Peppers and Rogers consultancy, explained this well. She said: "In a world of perfect information flow, in this frictionless world, the thing that will have trouble getting traction is profit margins."

One company preaching supply-side ecommerce is California-based Ironside. Its CEO talks about "levelling the playing field for suppliers" and "supplier enablement". But whether suppliers are in classic e-marketplaces or not, it's looking more like power will still come down to one thing that's historically nearly always mattered - size.

Some of the emerging e-marketplaces and exchanges have caused concern because a few large buyers may be able to dominate thousands of small suppliers. Take examples where there are a handful of suppliers with thousands of customers - and there are quite a few - and the situation is reversed.

E-marketplaces and other B2B models have a lot of maturing to do, and we shouldn't be dismissing all old business maxims just yet.

For a comprehensive look at the e-marketplace phenomenon check out silicon.com's Guide to E-marketplaces at www.silicon.com/emarketplaces