Independent of procurement
is the marketplace known as the B2B exchange. The B2B
exchange is a place where suppliers, buyers, and
intermediaries congregate and offer products to each other
within an agreed framework of business rules. Despite many
cries of disintermediation in the B2C market, it seems the
calls were made too early.
In the B2C market, it took some time for Intermediaries to
enter the market, but when they did, they provided
valuable services for Web consumers. Comparison shopping
and relevant review sites that point consumers to the
right location have become very popular. Services such as
Consumer Reports (consumerreports.org) provide consumers
with unbiased advice to assist in the shopping process.
Operations such as edmunds.com provide detailed
information that assist potential car buyers before they
make the decision to purchase a particular vehicle,
including pricing, margins for dealers, test comparison,
and recommendations for purchasing.
In the business space, we have routinely
witnessed margins being affected as market conditions
change. Take the role of large suppliers of computer
hardware and software through huge distributors such as
TechData. with sales in excess of $20bn annually. These
suppliers continue to provide a valuable service to the
marketplace, but at the same time have caused the margins
of many products to fall from the previous companies in
the distribution channels. The result of this was a change
in business strategy of the vendors in this channel. Many
were disintermediated and with good reason - they were not
adding enough value in the chain.
B2B distribution channels are having the
same impact. The difference with B2B is that many new
companies will not have the desire to protect an existing
channel or business practice, in fact, they may want to
deliberately eliminate them, so that the new business
model benefits from slower moving players in the market,
which cannot take advantage of a digital market for
whatever reason.
Each digital marketplace can have many
vendors and business models. Some will be closed and only
available by invitation only. others will be open to a
wider range of players. Many products and services are
finally becoming suited to this model. Adoption is taking
more time in some industries than in others. This model
benefits not only the owner of the digital marketplace,
but can also improve margins for participants (at
different membership levels). In its ultimate form, the
digital marketplace model provides a fully automated
business exchange for partners looking for products,
places, and partners to sell them.
Some digital markets operate based on
rules that are defined by the owner or by the participants
(if this option is given by the host). The marketplace
host often builds an exchange based on the requirements
for a particular market sector, and then determines the
services that will offer value to its members. Creation of
exchanges requires money and patience. Many of the early
players without a solid business model are clean out of
business. Others have modified their strategy, such as
VerticalNet.com. providing the software systems rather
than the exchange to support an industry operation.
Most exchanges are predicated on big
changes or optimization of the way that supply networks
operate. Some companies have started out with a strategy
to build business partnerships in volume, at attractive
fees to their clients, then. as the market starts to
evolve, the business model changes. Suddenly, participants
are expected to pay large commissions and the lucrative
contracts arc funneled to exchange members willing to pay
the fees.
The B2B exchange model is likely to
result in several different
models, each with its own revenue stream. These include:
1. Membership or subscription: fixed
annual fee. or usage subscription base.
2. Percentage of transaction: share of transaction based
on pre-agreed business model.
3. Referral fee: percentage based on agreed fee basis.
4. Auction: based on auction rules for buyers and sellers
of products in the exchange.
5. Purchase of products/service: based on transaction
rules determined before entering and participating in the
exchange.
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