But contrarian Carpenter, whose metal products eventually end up in autos and airplanes among other finished goods, sat out of this game by its own choice.
A midsize metals-maker with $1.1 billion in sales in 2000, Carpenter believes it can better serve its customers, and grow its company, by selling direct via a pair of b-to-b Web sites that it owns and manages.
At least for now, it is ignoring the more than 50 exchanges serving the metals industry, including powerhouses such as MetalSite Inc., e-Steel Corp. and MetalSpectrum.
"Initially, exchanges all acted like dating services," Carpenter VP-e-business Scott Myers said. "We looked at a lot of marketplaces that just don’t add any value. We’re not against aligning with them if there’s a good strategic fit. But there’s chaos out there with exchanges right now. There’s just too many of them."
While analysts say there is a risk to such a strategy, they also agree that many Net markets provide questionable value today. "There are high risks, costs and stakes whether a business chooses to join or not," said William Brandel, analyst with Aberdeen Group Inc. He added that a lack of useful metrics for measuring the viability of e-marketplaces is holding the whole industry back.
Myers and Carpenter are not b-to-b Luddites, and they are counting on the Internet to transform their business in a major way. But for now, they are opting to go it alone.
The 112-year-old Carpenter has diversified itself over the past decade into a supplier of specialty steels and alloys, focusing mainly on so-called long products such as bar, rod and wire. As it diversified, it also placed a growing emphasis on its engineering prowess, spending millions each year on metallurgical research and development.
The company also made a decision—way back in the early 1900s—that would affect its Internet strategy today: It put in place its own distribution system, forgoing the third-party distributors that so many metal producers rely on.
Those two strategic decisions—to focus on customized, not commoditized products, and to own its own sales channel—forced Carpenter to think creatively about its b-to-b strategy, Myers said.
"Owning our distribution channel was important to our e-business strategy," he said, adding that Carpenter recently consolidated from 26 distribution centers down to seven, now reaching more than 90% of its buyers with next-day shipments. "Most mills don’t know their customers. A third-party distributor owns the customer relationship."
Carpenter kicked off its b-to-b e-business strategy in the summer of 1999. With technology and consulting partner IBM Corp., it pulled seven senior officers out of day-to-day activities for nine weeks of strategy sessions. From the start, Myers said, the emphasis was on extending the company’s legacy of selling directly to customers.
Carpenter also looked at the steel exchanges emerging at the time. "We looked at them all," he said. "But they had an entirely different value proposition. We didn’t want somebody in between [us and] our customers. We realized that we already owned a lot of customer relationships and that we could meet a lot of their needs directly and efficiently."
The result of the strategy sessions were a pair of sell-side Web sites: CarpenterCare, launched in December 1999, an extranet that serves the company’s largest customers with custom portals; and CarpenterDirect.com, launched in October, a catalog-based marketplace that lets smaller customers order specialty metals.
Interestingly, Carpenter realized it had such a preferred relationship with these online customers, it added metals products it didn’t even produce itself to the CarpenterDirect catalog, working in partnership with national distributors. Thus, customers can buy more products online from Carpenter than they can from Carpenter’s traditional sales force, Myers said.
Carpenter may have been uniquely positioned to pull off its Web-direct strategy, but Myers’ advice to other firms wrestling with whether to work with industry e-marketplaces is universal.
"Look at the ways to leverage the Internet to gain efficiencies and get value out to the customer," he said. "The more you can take an outside-in approach and do it on your own and grow with your customers, the better off you are."