Business Industry For Ecommerce

Essay by PaperNerd ContributorUniversity, Master's November 2001

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The tech-world fashion of hyping a new concept only to trash it a few months later played out with predictable reliability in the realm of e-marketplaces, which seemingly hurtled through their entire lifecycle and were left for dead before they had even been properly born. To be sure, scores of e-marketplaces have disappeared in recent months, including three major initiatives in the metals vertical in June alone.

But declarations of marketplace rigor mortis may have been misplaced. Perhaps the most convincing evidence was the huge online auction conducted in May by Covisint, the trading hub set up by the Big Three automakers. Covisint's lack of activity had been regularly held up in the media as proof that industry-sponsored marketplaces won't work, but that didn't stop it from holding a single auction for DaimlerChrysler that involved five suppliers, 1,200 parts and $3 billion in transaction value.

Meanwhile, UK-based consultancy Ovum, in a report entitled B2B Marketplaces Are Not Dead-Just Resting, warns that the consolidation of marketplaces shouldn't be mistaken for death rattles.

In fact, says Ovum Senior Analyst Mary Hope, some marketplaces left for dead will be rising from their graves.

"We are nowhere near a mature market," says Hope. "User take-up and revenues to date are tiny, and profits are years away for most marketplace operators. But revenues are growing steadily. Once supply and demand has been balanced, there will be plenty of scope for the survivors to make money." Given that background, will the scale of the DaimlerChrysler auction be the trumpet-blast that awakens the sleeping giant Covisint-and perhaps the entire e-marketplace arena? Analysts like AMR's Kevin Prouty seem to think so. "I was skeptical a few months ago, but now there's a potential for Covisint to be the auto industry's common denominator," he says.