When success is not profit
When the US leader in business-to-business still can't make a profit what hope is there for lesser mortals? Will turning its attentions to Europe give it competitive advantage?

David Bicknell

E-business

One of the US leaders in the burgeoning electronic marketplaces is transferring its attentions to Europe.

Chemdex has launched its life sciences marketplace in Europe with support from PricewaterhouseCoopers and IBM. Chemdex, having built up a reasonably recognisable brand in its field, now wants to be known less memorably as Ventro as it expands into other areas.

These areas include the speciality medical products market, (Promedix), process plant supply (Industria Solutions), and healthcare supply (Broadlane).

Chemdex has become perhaps the leading electronic marketplace model since it was set up in 1997. It enables buyers and suppliers of laboratory products - such as chemicals, bio-chemicals, reagents, supplies, instruments and equipment - to trade with each other, while reducing the administrative inefficiencies usually associated with sales or purchase transactions.

Currently, Chemdex has 1.3 million products and 2,200 suppliers listed, accessed by 24,000 users, yielding a final quarter revenue of nearly $20m in 1999.

The company believes that however successful the marketplace can be in the US, it could be even more so in Europe, given a string of completely different tax and legal systems, plus a string of languages.

Building these marketplaces in themselves is no small project. Chemdex had 200 software engineers working to get the project up-and-running, spending between $40m and $50m in the process.

It provides a model for demonstrating how successful Internet-based supply chain management can be.

Chemdex has been up-and-running since 1997. It dominates its field, it has brought its marketplace to Europe, and - although it may have some local competition - is a fair bet to be a success.

And there's the rub, because Chemdex - or Ventro - is not due to turn a profit until the fourth quarter of 2003!

Actually, there's a good chance, the company says, that this could come forward a year. But that's still a good two-and-a-half years away.

If this successful example of business-to-business e-commerce won't deliver profits until then, what are the prospects for wannabes in other markets - without first mover advantage - achieving it?

Ventro needs to be successful to prove to others that these e-business models are not built on stilts in shifting sand.

If you were expecting to gain an e-business advantage in the rest of Europe thanks to some of the more clunky laws in place in countries such as Germany, you'll be sorry to hear things are changing.

The German government plans to abolish two outmoded retail-pricing laws that traditional businesses have used to hinder the development of cross-border e-commerce.

The two laws - Rabattgesetz, which forbids stores from discounting products by more than 3% below the manufacturer's suggested price, and the Zugabeverordnung, which prohibit retailers from granting bonuses to customers - both date from the early 1930s.

The idea is that Germany will now conform to EU e-commerce guidelines no later than the summer of next year.

Meanwhile, Sweden is planning a bill to introduce widespread broadband access to all parts of the country to ensure it keeps its e-commerce lead.

Here, we introduce the Regulation of Investigatory Powers Bill. Spot the difference?

David Bicknell

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This was first published in April 2000

 

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