No wonder. A recent Forrester Research Inc. report estimates that 30% of the $1.6 trillion chemical market will trade online by 2005.
Meanwhile, marketing executives in the chemical industry say their sales teams are going to be foot soldiers in a marketing assault aimed at getting companies to use the exchanges. Analysts say the importance of that marketing approach is paramount, considering that one of the top challenges facing these exchanges remains simply getting buyers and sellers to participate.
"Everyone’s finding it’s easier to get the big chemical companies to pump money into creating an exchange or marketplace than it is to get them to use it," said Tom Harwick, research director for supply chain management with Giga Information Group Inc., Cambridge, Mass. "They’re not using it extensively yet. Chemicals companies are still trying to figure out how they’re going to move product over the Internet."
Indeed, after failing to find a buyer for two struggling e-marketplaces, Ventro Corp. closed its Chemdex.com and Promedix.com e-markets in December. The company said it searched for a buyer for the two pioneering marketplaces, but in what some analysts said was an ominous sign for the entire sector, Ventro could not land a deal. The company still has four markets in its portfolio, but they are jointly owned with large brick-and-mortar players.
"The Ventro announcement is a reflection of the fact these companies are burning cash faster that the industry is willing to adopt their solutions," said Leif Eriksen, research director with AMR Research Inc., Boston. "Their expectations for a rapid transformation in the industry just didn’t come about."
But executives at the surviving chemical e-marketplaces remain optimistic. They said their marketplaces are suffering from some of the same growing pains experienced in e-marketplaces across all industry sectors. They pledged to learn from their competitors’ mistakes and survive the tough times by turning much of the job of marketing the exchanges over to their sales departments.
Getting message out
Richard Chvala, VP-chief marketing officer with Richmond, Va.-based Envera, said this exchange’s marketing focus has been, and will continue to be, on member seminars, presentations and the development of the Envera Web site.
"We’ve enjoyed some of the best word of mouth I’ve ever been associated with," Chvala said. "It’s a kind of viral marketing approach. Members gain members into the group."
As part of the campaign to sign up members, the exchange sponsored the "Envera Executive Summit" in Houston in early January, Chvala said. About 120 C-level executives from across the chemical industry attended the invitation-only two-day event, which sold the merits of using the Envera marketplace.
"We explained the value of the marketplace and why they should join," Chvala said. "It was part of our campaign to get the message out."
Other exchanges used print and other media to sell themselves to the chemical industry in the past. But they, like Envera, are increasingly asking their sales representatives to press the flesh and tout the value of using their exchanges at industry seminars and conventions around the world.
As part of that marketing shift, ChemConnect Inc. in San Francisco said it will rebrand itself this year, moving away from the ChemConnect name and instead pushing the name World Chemical Exchange. Linda Stegeman, senior VP-worldwide marketing, said the branding campaign will involve global online and offline media. She also said the exchange’s 25 sales reps will shoulder much of the responsibility of selling the exchange to decision-makers in the chemical industry.
"That’s still a big component of our mix because once we acquire a member, we move into more of a customer relationship management activity," Stegeman said. "Once we have information on a member, we know what their interests are and what their trading behavior is."
Relationships pay off
Houston-based CheMatch.com, a ChemConnect competitor, started with an aggressive print and direct marketing campaign that kicked off in early 2000 and aimed to gain name recognition. But Clay Jeansonne, VP-investor relations and business communication, said CheMatch is now counting on its 10-person sales team to market the exchange to potential and existing customers.
"That’s the primary way we do things," Jeansonne said. "Those relationships are very strong, and we’re starting to see them pay off."
Despite such optimism, Eriksen warned that there could be a continuing shakeout in the chemical e-marketplace in the year ahead. He said companies like CheMatch and ChemConnect will battle to the death because, it now appears, there is only room for one such marketplace to serve the industry.
"There’s only so much volume out there, and those guys are going to battle it out for liquidity and the lead," Eriksen said. "If 2000 saw the rise and fall of the independent trading exchange, 2001 is going to be the year of the consortium-based trading exchange."
That’s good news at Philadelphia-based Elemica, an Envera competitor, where the marketing emphasis will be on spreading the word throughout the industry that the consortium-based exchange, which opened in January, is up and ready for business, said VP Charles Gruber. Elemica is a consortium of 16 chemical companies, including BASF AG, Bayer AG, BP Amoco plc, Celanese AG, Ciba Specialty Chemicals, Degussa-Huels AG, Dow Chemical Co., DSM and DuPont.
Gruber said the company’s sales staff is already marketing Elemica at various industry conferences with videos and other materials. He also said a branding campaign is under way.
"From a marketing standpoint we have an incredible challenge ahead of us," Gruber said. "Our entire business model is Internet-based. We plan to be here for a long time."