B2B Internet Trading Platforms - EDIS

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Since an e-marketplace needs both sellers and buyers, it is essential for its success that it offers added value to both groups. For example, cost savings due to electronic processing or process improvements usually benefit both groups. On the other hand, it is primarily the sellers who benefit from the creation of new markets or the expansion of existing markets, while buyers benefit most from an increase in market transparency or lower prices due to a more efficient price finding process (Figure 2). A marketplace that puts too much emphasis on the benefits for buyers – and many did that in the beginning – could have serious problems in attracting a sufficient number of sellers. In a market dominated by very few sellers their participation decision can make or break a marketplace. Figure 2 – Marketplace value added for buyers and sellers Buyer value added Reduction of Product Prices Better Price Finding Process Increased Market Efficiency Process Support Transaction Cost Savings Creation of New Markets Market Expansion Seller value added 1.1.3. The revenue models for e-marketplaces Depending on the e-marketplace type, its targeted user group and its actual value proposition, different revenue streams are possible. Each revenue stream has its advantages and disadvantages for operators of and participants in marketplaces. The most important revenue models are: – Commission fees were initially the most important source of revenue. They reflect the value of a concluded contract very well and are easy to understand. In addition, they have the advantage that the users are only charged if a deal is actually concluded. In other words, they do not represent a barrier to using the site. A disadvantage, though, is that participants are tempted to take evasive action, particularly in the case of large transactions. This is particularly serious if the first contact leads to a long-term trading relationship, and subsequent orders are transacted without further reference to the marketplace. – Value-independent transaction fees, e.g. charges for publicising a Request For Quotes (RFQ) or for fixing a contract, are easy to levy, as participants have no incentive to lie about the contract value. They are also easy to understand by participants. They also do not represent a barrier to using the site. However, they might not adequately reflect the utility of the e- marketplace for large transactions. – Membership subscriptions have been the second most popular revenue stream. They have several major advantages: They are easy to calculate and understand; the technical cost of payment collection is comparatively low, and they are easy to sell to the customer, especially if the e-marketplace also offers transaction-independent benefits. The disadvantage, however, is that the users must pay their fees irrespective of whether they actually use the site or not. The subscription can thus act as a usage barrier. This effect is most significant when fees are high and the participants are small and medium-sized enterprises. In case of 10
doubt they will be unwilling to pay a relatively high contribution for the chance of concluding transactions at a later date. – Licensing software, which has been developed in-house by the operator of the e-marketplace, can also be a source of revenue. Software licensing is particularly promising if components have been developed for the site that can be used outside of the e-marketplace, for example for corporate supply-chain management or if the software can be used to set up private e- marketplaces. During the last year or two, several e-marketplace operators made software revenue their major income stream and slowly mutated into software companies. For these companies, the e-marketplace is sometimes only operated as a showcase. A comparison between subscriptions on the one hand and transaction-related fees or commissions on the other hand shows that they are suited to different types of e-marketplaces. Transaction-related commissions or fees are most suitable for highly priced goods since individual marketplace participants rarely place buy or sell orders for these products, and commissions are normal practice in this field. However, subscriptions seem more appropriate if the goods traded are not so highly priced, and if the marketplace is geared toward many regular transactions. 1.2. The development of B2B e-marketplaces in recent years The purpose of this chapter is to analyse the recent development of the B2B e-marketplace landscape in Europe. In recent years, many business models failed, giving rise to great scepticism and even pessimism about the future perspectives of e-marketplaces. Nevertheless, Internet trading platforms seem to have become a fixed element of B2B trading in many sectors and among them e-marketplaces play an important role. 1.2.1. The quantitative picture During the dot.com boom of 1999-2001 the number of B2B e-marketplaces increased considerably. While market researcher Berlecon Research counted 332 e-marketplaces world-wide in late 1999, this number tripled to 1090 by mid-2000 and – despite the beginning of the end of dot.com bubble – increased further in 2001 3 . Since then, however, the number is continuously falling. Much of the strong overall increase in numbers was driven by the boom in the establishment of e- marketplaces in the United States, as fuelled by venture capital. The number of B2B e-marketplaces in Europe was at the beginning much smaller. However, the motivation to move into this business was in 2000 and 2001 even stronger in Europe, as there was a considerable potential to catch up. For example, according to Berlecon Research, the number of European e-marketplaces more than quadrupled from 54 in 1999 to 230 in 2000. In Europe, the e-marketplaces boom started 1-2 years later than in the US. Therefore, many e- marketplace projects in Europe ran directly into the bursting dot.com bubble. As a result, many planned or even announced e-marketplaces in Europe did not materialise in the end, which also implied a lower rate of closures. In April 2002, the e-marketplace database of Berlecon Research showed 469 e-marketplaces that are no longer active plus an additional 76 that have merged or have been bought by competitors. The number of failed ventures was much higher in North America (388) than in Europe (140). This tendency is confirmed by numbers from the eMarketServices directory. Between April and August 2002 this directory shows a decrease in active marketplaces of 20 % in the US and of only 8 % in Europe. As a result, the number of identified e-marketplaces is meanwhile approximately the same in both regions. 3 See Berlecon Research (1999): Virtual Intermediaries – B2B Marketplaces on the Internet; Berlecon Research (2000): B2B Marketplaces in Germany – Status quo, Opportunities, Challenges; Berlecon Research (2001): Vom Vermittler zum Dienstleister: B2B-Marktplätze in Deutschland 2001. 11
Page 1 and 2: B2B Internet trading platforms: Opp
Page 3: TABLE OF CONTENTS INTRODUCTION ....
Page 6 and 7: As a follow up to the e-Economy com
Page 8 and 9: e-marketplaces are geared to the ne
Page 12 and 13: Currently, around one thousand B2B
Page 14 and 15: are one aspect. Potentially higher
Page 16 and 17: much slower than expected and seems
Page 18 and 19: should use Internet platforms. Ther
Page 20 and 21: and comprehensive set of standards
Page 22 and 23: The main trust challenges for B2B e
Page 24 and 25: As acknowledged by the e-Economy co
Page 26 and 27: CONCLUSIONS This working paper anal
Page 28 and 29: TYPE OF MARKETPLACE NUMBER Environm
Page 30 and 31: ACTIVITY ON E-MARKETPLACES Table C
Page 32 and 33: 2.1. General comments In general, t
Page 34 and 35: (7,1 %), hotels, restaurants, touri
Page 36: launched without having the intenti

B2B Internet Trading Platforms - EDIS

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