If you are a small to medium size company and selling or planning to sell products and services over the Net and still did not try out emarketplaces, you are simply loosing a great opportunity!
Research firm eMarketer predicts that worldwide B2B ecommerce revenues will surpass US$ 1.4 trillion by the end of 2003. In the United States alone revenues will total US$ 721 billion. By 2004, the US B2B ecommerce revenues are expected to reach US$ 1.01 trillion and studies show that a significant portion of these transactions will be conducted through emarketplaces.
What is an Emarketplace?
In a broader sense, business to business emarketplace is an online platform where buyers and sellers come to communicate, collaborate and make business transactions. Emarketplace caters a large number of participant companies as a community. The main objective of an emarketplace is to create a venue, filled with features that allow members to efficiently conduct significant portion of business processes on the Net. Emarketplaces are also known as B2B exchanges.
Types of Emarketplaces
There are varieties of emarketplaces available on the Internet to suit your company’s specific need.
Public: These emarketplaces are open to all companies. Virtually, anybody can become a member and conduct business through these marketplaces.
Private: Membership is restricted and owners of the marketplace decide according to which criteria they will select participants. For example: a large trading company can have its own emarketplace limited to its buyers or suppliers only.
Horizontal: If the emarketplace works with a large numbers of products and services from different industries, it is called a horizontal marketplace.
Vertical: Industry specific emarketplaces are called vertical markets. An emarketplace, working solely with suppliers and buyers of cars is an example of this kind of marketplace.
Can your company benefit from an Emarketplace?
Whether you are primarily a buyer or a supplier, participation in emarketplace can generate enormous benefits to your company: both in cost savings and productivity increase.
Benefits that you can have as a buyer
Automate the purchasing procedure Emarketplaces allow you to send request for quotes to a prospective supplier, receive quotes, send purchase orders and receive invoices within the marketplace system. You can virtually consolidate all your procurement processes in one single place. This process of automation brings significant efficiency to you and saves your transaction processing cost. According to Aberdeen Group, a research company, thanks to B2B procurement systems, businesses can reduce these processing costs up to 70%.
Comparison shopping at its best Since you can see all the suppliers of a particular product, that you are planning to buy, in one place, it is easy for you to see which one among the suppliers suits you best in terms of quality, delivery time, geographical location, costs etc.
Reduce sourcing time cycle Most emarketplaces allow you to select multiple offers from different suppliers and create purchase orders in one shot and send. Since you handle all your procurement related correspondence from a consolidated working page, you can see right away answers to requests for quote, invoices, etc. This helps you react instantly and reduce you time in document processing.
Community participation You can receive valuable feedbacks from other fellow buyers, receive industry-related information, build new partnerships and use the networking ability of a community.
Real time access to current product information Current information of a product is vital for an accurate buying decision. 24 hours access to supplier’s catalog helps you getting most up-to-date information any time you need it.
Control rogue spending Consolidated and automated procurement and approval method stops maverick buying in a company.
Benefit that you can have as a seller
New sales channel By becoming a member of an emarketplace, you open a low cost, highly functional and easy-to-use sales channel for your company. You expose your company to a new targeted audience that otherwise would have been untapped to you.
Low customer acquisition cost Your mere presence in the emarketplace might bring you new customers. Since the buyers come to emarketplace themselves your cost of getting customers through this channel is relatively low in comparison to other traditional channels.
Improve customer service Ability to have constant interaction through the emarketplace allows you to serve your customers better. You can track the whole ordering process from payment to delivery and bring greater efficiency in customer service.
Efficient information sharing method When needed, you can instantly update your catalog and inform your customers about changes. Whether you are launching a new product or having a web seminar, through emarketplace you can share the information more efficiently.
Reduce supply chain cost According to eMarketer, automated supply chain process through emarketplaces can reduce your overhead costs 20% to 40%.
You may ask, if participation in an emarketplace is so beneficial, why companies are not flocking to emarketplaces.
The slower adoption can be blamed on various inadvertent factors:
- Many companies had fall short to generate significant sales from their own websites and look at emarketplaces with a dose of skepticism. But as studies show ecommerce endeavors fail, mainly, due to lack of proper planning and marketing, as many site managers take the attitude that build-it-and- they- will-come.
- Many conservative suppliers claim that their business depends on close relationship with local buyers. In reality, you can also get access to local untapped market through emarketplaces. Another aspect – you can bring efficiency to your business by co-adopting an emarketplace along with your buyers.
- Many elderly executives are not very tech-savvy and afraid of adopting new technologies considering them too complex. In reality, e-business is virtual implementation of real life business processes and not very difficult to embrace.
- Fear of price shopping by buyers is another factor, why suppliers are reluctant to use emarketplaces. The ability of emarketplace to emphasize all characteristics of the product in product content and demonstrate buyer-specific pricing should eliminate this fear.
- Many, mistakenly, consider that participation cost in emarketplace is very high and will hurt their bottom line. The expenses related to emarketplace membership are, usually, a mere fraction of what you can save from the use of its different features.
What to look in an Emarketplace?
As an online venue, where participants expect to conduct substantial part of their business processes, emarketplace has a large range of useful features:
- Product catalog based on an industry-standard classification system
- Product search capability within the marketplace and e-catalog
- Buyers and sellers search capabilities
- Supply chain process, i.e. request for quote, quotation, purchase order, billing system, etc.
- Directory of members
- Shipment tracking
- Simple system of adding and editing products
- Simple offer posting system
- Ability to promote products with special offers, sales, and discount
Apart from these, some emarketplaces boast other interesting features like auction and reverse auction, new product listing notification, business forum, XML interface, Internal messaging system. Naturally, implementation of these features may vary significantly emarketplace to emarketplace.
Where to look for Emarketplace?
The best place to find an extensive list of emarketplaces is the B2B directory site: http://www.bocat.com.
The open directory project DMOZ has a good list of emarketplaces. However, not all listings in both of these places are, in reality, emarketplaces. Some of them are simple trade boards. This list is located at http://dmoz.org/Business/E-Commerce/Marketplaces/
Yahoo! directory is not organized well enough to locate emarketplaces. They are scattered under the subcategories: Vertical marketplace builders, Trade directories and even Trade.
Forbes magazine has a quality list of many B2B companies including some emarketplaces. You will find the list at: http://www.forbes.com/bow/b2b/main.jhtml
Selecting the right emarketplace
Although, IT spending has been staying flat for the last several years, corporate spending in e-business is gaining significant ground and at present surpasses 20 percent of overall IT budget.
This means, more and more businesses are undertaking ecommerce initiatives, and as a result increasing sales, streamlining business processes and dramatically boosting productivity.
Most experts agree that average business, which is slow in adopting e-business applications, risks loosing its competitive edge to their more progressive rivals.
Emarketplaces provide with a great opportunity for small to medium size companies to test online business for a minimal risk. This is due to the factor that the e-business applications that come along with an emarketplace membership package are prohibitively expensive to develop in-house by most companies, and require large professional workforce to operate. As an example: product content development with required attributes, suitable for e-business, itself might feel like a daunting task for most offline companies.
So, as a company, what should be your first step in starting e-business through emarketplaces?
Naturally, out of hundreds of emarketplaces available today, you have to find one that matches all your requirements. Choosing right kind of emarketplace
In best case scenario, if yours is a large enough company, you should build your private emarketplace with all the necessary features specific to your business. The potential of having your own emarketplace is amazing!
- Ecommerce will add value to your existing business transactions
- Your present suppliers will be able to post most updated information on their products via e-catalog and their storefront
- You can build community from your present buyers and supplier, or invite members on the Internet
- Real time marketplace will allow you to take quick buying and selling decision
- Both buyers and sellers can contact you through Instant Messaging System
- Your entire supply chain process can be managed from one place
- You can issue real time purchase tenders with either limited access only to your community members or open to public
- Sell your stock lots through online auction
- Brand you emarketplace and establish your company as a serious online player within your Industry
However, as I mentioned earlier, if you are not a very big company, you will probably be better off with a membership in an established emarketplace.
If you are a manufacturer, wholesaler or a buyer of certain industry specific products or services, your best choice would be a vertical emarketplace that caters specially your industry. For example: if you buy or sell fish, you should look for an emarketplace that deals with this product only. Another thing that you should keep in mind is how geographically limited your business is. If you buy and sell fish within the locality of your state or region, if available, get an emarketplace that works in your region.
Totally different story, if you carry large number of products from different industries; for you a horizontal marketplace that cater a range of industries is a better choice. If you are an international trader involved in import or export, you should select a global emarketplace, which has members from the countries you deal with. Features that are must
A good emarketplace amasses various features in order to facilitate smooth transactions of business deals. However, there are some key attributes that are absolutely necessary for any emarketplace to become successful; and as a prospective member you should look for these features and characteristics while choosing an emarketplace for yourself.
Product catalog based on an industry-standard classification system While it might not look so important from the surface; to have accurate, well-defined and timely-updated product content is extremely crucial for any online business. Since you have to integrate your product catalog to the aggregated electronic catalog of the emarketplace, which could be a very complex task, you should make sure that the classification system that they have is widely used online; and if necessary you can use same product content with other emarketplaces or e-procurement applications.
The best option, as I believe, is based on The Universal Standard Products and Services Classification (UNSPSC), which is a global coding system that classifies products and services. This categorization scheme covers the broadest collection of industries and commodities available today, and designed to facilitate e-commerce transactions by providing geography-independent common nomenclature system.
Product search capability within the marketplace and e-catalog Members of the emarketplace should be able to locate any product or service, whether in the auctions, marketplaces, or in the catalog with ease. Advanced search function should allow finding required items using precise query.
Supply chain process, i.e. request for quote, quotation, purchase order, billing system, etc. Efficient supply chain management is the number one strategic priority for many businesses. In 2001, Cisco System alone had to write off US $2.5 billion in excess inventories due to poor management of its numerous outsourcing contractors. E-marketplaces can help streamlining your supply chain process if the required features are embedded in their system.
Directory of members
Usually most emarketplaces incorporate a searchable directory of their members. The members get an added opportunity of creating new business relations and increasing sales thanks to this feature.
Product content adding and editing interface
In order to make product content adding and maintaining easier for sellers, the marketplace must have an uncomplicated tool. The tool could be a wizard-based combination of simple forms. To integrate larger catalogs speedily and efficiently the emarketplace should have XML based interface.
Ability to promote products and services
The process of posting an offer for sale of a product or a service on the marketplace should be simple and easy but sophisticated enough to create dynamic offer, offer with time limit, variable pricing based on quantity, etc.
Apart from the above mentioned functionalities that facilitate conducting e-business, other key characteristics of a quality e-marketplace should include:
- Simplicity – An emarketplace should be easy to learn and use.
- Large Community – The quantity of members should be big enough, so that new participants can expand their business.
- Flexibility – Emarketplace functions should be flexible enough to modify or add with new features when necessary.
- Neutrality – The emarketplace should be an unbiased venue for both sellers and buyers. No member should have any privilege at the expense of others. Providing an open and transparent market for all the participants is an important constituent of the value proposition of an emarketplace.
Cost of doing business through e-marketplace
In general, thanks to the large member base, e-marketplaces charge a reasonable subscription fee if you would like to participate in it. Many emarketplaces also charge a nominal fee for each trade made using their facilities. Other costs involved, that you should consider, are internal workforce needed to handle business via emarketplace, catalog integration and maintaining, etc. In any case, the cost of doing business through emarketplaces is negligible for most businesses compare to the gains they make.
Get your partners involved
If you just build a corporate website and don’t spend required time and money to promote, it won’t bring any business. Same goes for emarketplace! Mere participation in an emarketplace also will not produce any significant benefit if you don’t convince your existing buyers and suppliers to work with you through your chosen emarketplace.
Nowshade Kabir is the founder, primary developer and present
CEO of Rusbiz.com. A Ph. D. in Information Technology,
he has wide experience in Business Consulting, International
Trade and Web Marketing. Rusbiz is a Global B2B
eMarketplace with solutions to start and run online business.
