The online B2B marketplace is a crowded island, and only the strongest – and savviest – players will survive.
Over the next two years expect the struggle for B2B Net market survival to reach epic proportions – a great example of e-commerce Darwinism.
B2B Net markets have radically transformed the buyer/seller relationship. In just a matter of years, industry structures that withstood decades of competition have been completely redefined.
Within many sectors, once-fearless market leaders have teamed up with former rivals to form cooperative alliances, while emerging third-party companies have announced bold plans to mediate trade between buyers and sellers. In many cases, these pronouncements can be viewed as early jousting, as the combatants attempt to become the dominant trading platform of an industry.
According to Forrester Research, there are some 1,400 Net marketplaces that serve nearly 630 industries. It’s safe to say there is saturation of the B2B Net market concept. As attrition and consolidation become commonplace, B2B Net markets will be a game where only the fittest will survive.
Characteristics of a Strong B2B Net Market
What defines a strong B2B Net market? I’ve listed a few characteristics you should look for when selecting a Net market to participate in:
- High degree of collaboration: Net markets are all about collaboration across the value or supply chain and extending services to participants.
- High value or utility: Net markets need to become an everyday business tool for all participants – if there is an absence of obvious value, the Net market will not survive.
- Strong integration and plumbing: Without these, seamless transactions and the adoption of electronic trading will never occur.
- High quality of services: How many business processes are supported through a Net market? How easy is it to integrate services into everyday operations?
Key Factors for Survival
For Net market owners or planners, here is a list of survival tactics that should become a standard trading platform for your industry:
Survival Factor 1: Balanced Operating Structure and Ownership
To survive in the B2B Net market space, you’ll need to retain a critical mass of participants and transaction volume – this is the most important metric determining long-term viability. The key to ensuring critical mass relies on creating a level playing field for all participants. For industry-led consortia, this can be a sticky challenge as ownership structure can be based on trade volume brought to the Net market. Independent, third-party exchanges may want to consider co-opting industry ownership in order to achieve a threshold of trade volume for survival.
Survival Factor 2: Regulatory Compliance
You’ll need to learn how to avoid the long arm of the law. Government bodies like the FTC are investigating the impact industry consortia, like Covisent, will have on fair trading practices within the auto industry. In order to avoid regulatory intervention, a Net market must ensure there are no unfair advantages for buyers, sellers, or intermediaries.
Survival Factor 3: Scale
In order to achieve critical mass, you need to support large-scale transactional volumes between buyers and sellers. To this end, consider the global trading requirements, geographic locations of traders, and demand for comprehensive services and support from all participants. Scale provides marketing benefits. Sellers will see value in serving the widest array of buyers. Buyers will see value in selection and price competition. And intermediaries will be drawn to Net markets that provide the greatest reach. Large-scale Net markets, like Transora, must support the demands of more than 70 leading product companies that operate in all geographies of the globe in order to survive.
Survival Factor 4: Technology
Finally, you need to deliver a robust technical architecture. B2B Net market makers need to lead the integration of their services into their participants’ system infrastructures. This demands an elegant use of integration technology and application of industry standards for electronic trade.
So, Who Will Win?
Any participant in the B2B Net market arena will conclude that a process of natural selection is occurring across several industries. Closures of Net hubs in the chemical, aviation, and steel industries, as well as several other industries, indicate that the weak are being culled from the herd.
Going forward, expect this to be the trend, with the number of competitors leaving the space exceeding those that attempt to enter it.
Survival will go to the fittest B2B Net markets: those that serve their constituents well, understand the rules of the game, and provide the highest-quality IT solutions for their industry.