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e-Markets: Rebirth or Still Dying?

February 8th, 2007 · by Tim Minahan · 2 Comments · On Demand/SaaS, supply management

Say the word e-marketplaces to most people and you’ll get one of two reactions: involuntary wretching or, if they have a sense of humor, laughter. (As a former analyst and self-affirmed cynic, I always take pleasure in recalling Gartner’s now-infamous prediction that there would be 20,000 e-marketplaces.)

However, over on the European Leaders Network, cc-hubwoo President and CEO Alain Andreoli provides an unemotional assessment of the past, present, and future of e-marketplaces. According to Alain, “Between 2000 and 2005, more than 1,000 e-marketplaces sprang up. Today, there are about three dozen, with five representing half of the market [volume],” including cc-hubwoo.

It doesn’t take an industry or financial analyst to figure out what went wrong. (In fact, many would argue that the analysts were a key part of the problem.) Overfunded, unrealistic business plans with irrational growth projections and little consideration for the reluctance (resistance?) of community participants.

As head of an e-marketplace survivor, Alain states that even today “the current relative fragmentation still implies that a supplier should connect to several networks.” He suggests that this fragmentation is still causing many suppliers to sit on the sidelines until it is clear which will be the last e-markets standing. He projects further e-marketplace consolidation, resulting in ”two or three global supplier networks within three to five years.”

Future growth will be driven by mass onboarding of suppliers and rolling out network-delivered value-added services, such as electronic invoicing and matching. Alain envisions that the remaining global networks will function as parents to several smaller marketplaces that have a regional or vertical expertise. ”The compelling value to the mainstream mass of businesses will come through the size of the club membership itself,” argues Alain, suggesting that this new cyberspace Sam’s Club will encourage further adoption by consolidating demand (i.e., buyers) and simplify and reduce transaction costs for suppliers.

While seemingly far-fetched years ago, this roll-up strategy is not only likely, but it is a necessity for the e-marketplace world. Electronic marketplaces will certainly live on, but only after a Darwinian right sizing of their ranks. Alain is right. There will be fewer e-marketplaces by year end. But the survivors will have connected more trading partners, and will deliver greater efficiencies and functionality than their idealistic predecessors.

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2 responses so far ↓

  • 1 Kevin Brooks // Feb 8, 2007 at 3:00 pm

    “…the remaining global networks will function as parents to several smaller marketplaces that have a regional or vertical expertise.”

    Hmm. The ghost of CommerceOne continues to haunt e-commerce! Can the rebirth of the Global Trading Web be far behind?

  • 2 Supply Excellence » The Top 5 Worst Supply Management Moves of All Time // Aug 9, 2007 at 8:20 am

    [...] e-Marketplaces: I’m sure I’ll get heat on this one. People will claim that certain retail and energy marketplaces still survive and are processing more transactions than ever. True. Yet, few can dispute that e-marketplaces failed to live up to their initial hype. Of the thousands of online marketplaces launched, only about 30 survive today – with just five of those representing half of the market volume. And you’ve got to agree that the idea that CPOs from fierce competitors could create an effective virtual purchasing environment was misguided at best. Supply management is a competitive differentiator. (Just ask Honda or Toyota.) Commoditizing this activity with your chief competitor may have temporarily elevated market caps for certain e-market ventures. But it certainly didn’t help the competitiveness of participating parties or their suppliers in the long run. In the supply management realm, decisions to found or join e-marketplaces were based more on the hopes of a quick stock-market payoff rather than sound business improvement principles. [...]

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