While online eMarketplaces will thrive as business-to-business venues, the mystique of their operating models will dissipate — resulting in an industry shakeout in 18 to 24 months in the US. According to a new Report from Forrester Research, Inc. (Nasdaq: FORR) these eMarketplaces must evolve from today’s isolated niche offerings to become highly interconnected one-stop shops.
Comparing offerings across suppliers today requires either multiple phone calls to various suppliers or enlisting the costly support of a broker. These practices will be replaced by granting purchasing agents instant access to comparisons of various products. As the technology landscape matures, entrepreneurs will acquire sophisticated marketplace software or entirely offload the building of their Web sites to a growing list of experienced eCommerce integrators.
Forrester predicts that many vertical industry eMarketplaces will be forced to sell out or close up shop. This is due to virgin markets disappearing and channel masters like Ford and GM jumping in, as well as feature-function races escalating to satisfy increasingly demanding buyers and sellers. To survive and prosper, eMarketplaces will be forced to play by new rules. Sites will begin to diversify revenue streams beyond transaction fees, and they will create alliances aggressively with other sites while tailoring product and service bundles to unique buyer segments.
“Today’s vertical eMarketplaces are mere infants on the business maturity scale,” said Varda Lief, senior analyst in eBusiness Trade Research. “Forrester believes that the changing business rules will push these young eMarketplaces from isolated niche offerings to highly connected one-stop shops.”
Starting in 2001, eMarketplaces will move beyond basic issues of critical mass and begin integrating more intensely with other product and service providers. They will fulfill customers’ expectations of one-stop shopping by connecting the process of product research information all the way through to trade settlement and clearing. These sites will tie together services like risk management, financing, and logistics into a single, integrated purchasing flow that is orchestrated with other sites. In the push for new revenue sources, eMarketplaces will cash in on the mass of data streaming through their sites, charging participants for tools to access data and levying additional fees to analyze the data for meaningful trends.
“eMarketplaces will become an enduring reality in the business landscape,” added Lief. “While the growth of these venues will spur continuous change, firms shouldn’t wait another minute before jumping in.”
For the Report “Net Marketplaces Grow Up,” Forrester interviewed executives from 50 online vertical eMarketplaces as well as marketplace software vendors, integrators, and services companies. These eMarketplaces transacted a minimum of $250,000 over the last 12 months and are expecting their transaction volumes to mushroom by more than seventy-fivefold in two years — with 41% of eMarketplaces interviewed expecting their annual transaction volumes to reach $500 million or more by 2001.