Most retailers and manufacturers expect to participate in e-marketplaces by 2002, recent research by the Forrester analyst group has found.
The company recently interviewed US executives at 25 manufacturers and 25 retailers about their trading processes for finished goods. Today, 52% of retailers and 76% of manufacturers use electronic data interchange (EDI), a format for exchanging business data electronically, to transact, while only 12% of both groups use e-marketplaces for electronic transactions.
Both groups expect this to change: 48% of retailers and 84% of manufacturers expect to use e-marketplaces in 2002. Manufacturers were most enthusiastic on the impact of marketplaces, with 92% expecting them to be important by 2002. For retailers, more than half did not think they would be important.
"I haven't seen any e-marketplaces that I would consider seriously. But two years from now, they - and we - may be ready."
Opinions differed on the supposed economic advantages of participating in online exchanges; 82% of the manufacturers and retailers surveyed expected them to simplify transactions and reduce costs by streamlining the buying process. Examples cited included cutting overheads, travel times by sales staff and errors.
"Errors in the configuration process cause our biggest problems - 15% of orders have some type of issue. E-marketplaces cut down on mistakes and make the selling process more efficient."
However, less than 30% of those interviewed expected marketplaces to help them establish new trading partnerships in the long term, while just 22% thought they would be better able to manage their inventory.
"If orders for Hallowe'en products don't pan out, for example, we could use an auction to get rid of the excess merchandise and get a higher price than if we wait until the last minute and dump the products."
Fears raised by participation in marketplaces range from the loss of personal contact with business partners (42%), complication of the transaction process (32%) and loss of brand differentiation (10%) to a loss of competitive advantage (8%) and control over pricing (2%).
"Our buyers must work directly with vendors to get more unique products and see how we can add value to their merchandise. This human connection makes or breaks our business. E-marketplaces don't allow that."
"We need to see if there is anything lost in the translation of our brand in how a marketplace represents us before we use it."
No particular model of marketplace stood out, but 28% were in favour of using an independent marketplace, while 22% had no preference.
"Both retailer-driven and third-party e-marketplaces are appealing. From the retailer standpoint, it would be seen as customer-centric to participate in their private e-marketplace. But we could also see industry-specific advantages to joining one led by an industry coalition."
This was first published in February 2001