Business Models  «Prev  Next»
Lesson 9 The supply Web: B2B
Objective Describe the impact of B2B e-marketplaces.

Supply Web and B2B

E-marketplaces in B2B

The potentially explosive and market altering impact of e-marketplaces comes in the B2B space. B2B e-marketplaces typically involve some kind of qualifying criteria such as a line of credit, proof of inventory, or shipping partnerships.
Often buyers and sellers experience structured negotiation, where all parties discuss and compare terms and conditions. E-marketplaces support both e-procurement (where the buyer has the "power") and supplier enablement (where the supplier has the power) transacting scenarios. Tight security is a must, and suppliers and buyers must prepare to offer all kinds of supporting information.

Vertically Integrated e-marketplaces

Though generic e-marketplaces for B2B exist where any kind of product or service may appear for sale, more often an e-marketplace grows out of a particular market or vertical industry. For example, the chemical manufacturing and automotive industries have both launched projects to develop gigantic vertically integrated e-marketplaces. A vertically integrated e-Marketplace involves the specific business-to-business practices and transactions of a specific vertical industry. For example, the contracts, payment practices, and method of representing inventory in the automotive industry may differ from the financial services industry. Thus, vertically integrated e-marketplaces are optimized for an industries business practices - even lingo. Often these e-marketplaces will take years to complete, but they add dramatically to the overall effectiveness of the supply chains in those industries. Small, more specific, versions of such e-marketplaces can be found in sites sometimes known as "trade exchanges." These sites provide buyer/seller access to a certain class of goods, perhaps building supplies, or industrial tools, or cleaning chemicals.

Web Security
Three industry sectors consisting of buyers and sellers
Three industry sectors consisting of buyers and sellers

The effect of e-marketplaces in some markets

Many smaller B2B suppliers have expressed concern about the evolution of e-marketplaces and e-procurement. They complain that the supplier becomes a "number" or a price, and they lose their branding. While the net effect of e-marketplaces in some markets will be commoditization, which means buyers make decisions on purely tangible characteristics like price and availability, and less on intangibles like reputation, in most cases branding will remain extremely important. For example, in trade exchanges and vertically integrated e-marketplaces, the players are usually known entities. In addition, these e-marketplaces provide smaller suppliers access to entirely new buyer communities. As in any major business model shift, the spoils will go to the swift and wise.

E-marketplaces and ROI

As in B2C, it does not make sense for B2B companies to dive head first into e-marketplaces unless they feel competitive pressure. At the same time, some companies will try to improve their market position by becoming the first movers in e-marketplaces, and even becoming the hubs of e marketplaces. Ultimately it comes down to return on investment (ROI): Does the steep investment and technical risk associated with participating in or even creating e-marketplaces pay for itself? Over the long-run, almost every major and minor supplier, local and global, will feel the effects of the proliferation of e-marketplaces. The winners will be the companies that act the quickest and have the best technical implementation teams.
The next lesson wraps up this module.