Revenues from e-marketplaces have slumped 95 per cent since November 2000, but a rebound is imminent, according to Accenture.
Online B2B exchanges suffered the same fate as many dot-coms, said Frank Young, a senior manager
with Accenture: poor business planning and overhype gave way to a market correction. “”Yesterday’s gut instincts turned out to be nothing but indigestion,”” said Young, who addressed an audience of executives Tuesday at Royal Bank of Canada’s eBusiness Intelligence Forum.
“”This is happening because a lot of people weren’t able to generate liquidity,”” he said. “”Any good strategy will seem ridiculous by the time it is implemented . . . everybody was mesmerized by the vision.””
That vision, proposed by numerous e-marketplace vendors, was the Internet as a universal platform to sell, exchange or buy a limitless inventory of goods. Online marketplace vendors like Commerce1 and Ariba suffered from this vision, said Young. It didn’t come to fruition because buyers “”treated it like a learning experience. . . . (Their) business objective was not a scenario when all companies in a value chain would be working collaboratively.”” It was far more niche — targeting specific goods in specific verticals — than anyone expected.
The model itself was flawed from the outset by focusing too much on the needs of suppliers over the needs of buyers, added Young. Too many restrictions placed upon buyers drove them away, and the rise of enterprise software from companies like Oracle and PeopleSoft could do the job of online purchasing and inventory management without all the hassles.
Tom Wolf, senior vice-president for RBC Financial Group‘s e-business division, agreed with Young up to a point. But, he said, suppliers were often made to meet unreasonable demands as well. “”Some of the exchanges were founded on the proposition of beating up suppliers (on price). The suppliers aren’t going to want to do this,”” he said.
Despite the decline in the popularity of e-markets, there are still significant savings to be had. According to Accenture, buyers can save five to 10 per cent on items purchased through an exchange. That’s lower than most people anticipate, said Young, but using them can help reduce administration costs by 70 per cent (the exact amount depends on how many administration staff a company dedicates to purchase management).
Overall, the consulting firm predicts that e-marketplaces will grow 50 per cent annually until 2005. In order for that to happen, they will need to reinvent themselves, said Young. EDI VANs (Electronic Data Interchange Value Added Network) should be tied in more closely, he said, and financial services companies will have a larger role to play in the financial transaction portion of online marketplaces.
Wolf said that RBC is already involved — the bank bought a shareholder interest in Montreal B2B e-commerce company Mediagrif Interactive Technologies Inc. in 2000. “”What makes them really unique,”” said Wolf, “”is they are making money.””
Mediagrif, with partner RBC, launched a marketplace for Societe des alcools du Quebec (a state-owned corporation responsible for the trade of alcoholic beverages), and is also involved in tracking cattle via RFID (radio frequency identification) receivers. The information is stored in a database to help stop diseases like foot and mouth from spreading.