While the debate about e-commerce rages around the issues of security, profitability and market capitalisation, some interesting noises are being made in the business-to-business (B2B) marketplace.
To many, B2B simply implies supply chain management and customer relationship management. For others it has come to mean the setting up of business-related trading exchanges. While the flashy business-to-consumer marketplace may gain most of the headlines, it is these trading exchanges that are making real money, creating sales avenues and communities for decidedly less glamorous industries such as food ingredients, paints and coatings, and adhesives. There is even a B2B community for bull semen.
One of the leading exponents - VerticalNet - has already partnered with Microsoft (with Microsoft investing $100m in the company), and recently followed that up with a deal with BT for the European marketplace, part of which will see the creation of VerticalNet UK.
Sectors which are set to benefit from the two deals include: technology - where exchanges include Digital Broadcast-ing.com, Fibre Optics Online and Wireless Networks Online; food and packaging - Bakery Online and Dairy Network.com; and environmental - Pollution Online, PublicWorks.com and Solid Waste.com. Other non-VerticalNet exchanges include Chemdex, Altra Energy Technologies, Paper Exchange, Instill, PlasticsNet and Commerce One's Marketsite.net.
Chemdex was developed for the pharmaceutical and biotech industry in 1997 and is said to be reducing sales and distribution costs industrywide by 20% - or more than $4bn of the total $20bn global life sciences research products market. It does not give industry news, which is offered by a string of other sites, but puts the industry's unwieldy catalogues online to reduce the time it takes to locate the exact beaker or chemical agent from among 240,000 products offered by roughly 100 suppliers. Then, it collects 6% or so per transaction.
According to one US analyst, Chemdex is effectively turning to chemical producers and waving a $4bn cheque at them. "These guys have not seen their costs structure improved like this - ever. It's a tectonic shift."
It is estimated that almost every American industry is now represented by at least one exchange. The fundamental idea is that the Internet will enable buyers and sellers who have never met offline to move increasing amounts of the most basic goods between each other.
Analyst Forrester estimates this business procurement marketplace will reach $1.3 trillion by 2003 or 9.4% of total US business. Garner goes further. It predicts the B2B e-commerce market will reach $7.29 trillion by 2004 from $145 billion in 1999.
Currently, according to Net Market Makers, there are around 300 players in the marketplace, but by the end of this year, there could be more than 1,000. Even television networks are getting in on the act. CBS bought one third of Office.com, a brand set up to address the new Internet-driven way of work. Original and aggregated content informs Office.com customers of industry trends, news and gossip in 16 industries, 120 sub-industries, and 10 business management-focused areas. A community area brings people together to share information and contacts, and another part of the site allows small businesses to take advantage of the new office technology and broadband-enabled services.
In the UK, a number of exchanges are up and running. Band-X offers telecomms bandwidth - while E-Exchange - is a market for IT equipment. Both were featured at a recent meeting of the First Tuesday venture-capital-meets-entrepreneur organisation. The key for European-based exchanges such as these is now to make the most of their local knowledge, before large US-based operators like VerticalNet can muscle in. To overcome those barriers they will partner European-based operations, with the VerticalNet-BT deal being among the first.
So, if you are looking to set up a B2B commodities exchange in Europe - for chemicals, paints and coatings, or even bull semen - you had better get going.