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"They probably aren't ready to make purchases through their computer. But we wanted the opportunity to get in on the ground floor of a communications medium that shows a lot promise for the future." After a couple of years as little more than a high-tech marketing tool, the Internet is finally becoming a viable sales channel for industrial marketers.

This is happening as Web sites that began as simple forums to bring buyers and sellers together evolve into true electronic marketplaces with transaction capabilities.

Two of these marketplaces, ProcureNet and General Electric Information Systems' Trading Process Network, already offer electronic purchasing online. Two others, Manufacturing.Net and Industry.net, will do so soon.

COMPLETE THE SALES CHAIN

Buyers of industrial products can find catalogs of distributors' offerings, and they can buy the goods online. Small manufacturers can take and fulfill orders electronically.

Already, business-to-business is leading the charge into electronic commerce. Forrester Research, Cambridge, Mass., estimates that by the year 2000, $66 billion in b-to-b commerce will be conducted on the Internet, with the number of businesses connected to the Net rising from 4% now to 33% by then.

Taken in the aggregate, these numbers can seem impressive. But for individual companies, Internet-based sales can still prove elusive.

EARLY STEPS

Norton Co., a Worcester, Mass.-based manufacturer of industrial abrasives, hasn't seen sales increase significantly since it opened for business on Industry.net last year. However, Dick Kennedy, VP-marketing, says he didn't expect the Internet to open the floodgates to a wave of new business.

"I really didn't expect a lot of sales to come from the Web and, to be honest, we haven't seen a lot of business. Actually, I don't think a lot of our customers -- industrial construction and maintenance companies -- are online yet," he says.

"And if they are, they probably aren't ready to make purchases through their computer. But we wanted the opportunity to get in on the ground floor of a communications medium that shows a lot promise for the future."

WHERE TO SET UP SHOP

Norton and other marketers face hard choices on where to offer their online catalogs. Each marketplace has its own story and outlook about business-to-business selling:

  • ProcureNet was launched by Fisher Technology Group in Pittsburgh, a major industrial distributor, and targets MRO (maintenance, repair and operations) purchases.

    Distributors act as "anchor tenants," says Bob Grzyb, VP-marketing. The service, which gets about 1 million hits a month, revolves around a cataloging and commerce application called Cornerstone that Fisher developed.

    ProcureNet, which went online in March 1996, has 30 seller sites with 100,000 listings in product catalogs.

    ProcureNet, which allows users to browse online catalogs, does not require registration. However, only users whose company information has been validated in advance can place orders with selling companies. The service also offers contract pricing.

    "We're not just another pretty face online, hosting advertising sites from our client companies," says Amelia Mills, Fisher's director-electronic marketing services. "Behind our storefronts is a robust transaction technology."

    ProcureNet storefronts cost about $10,000, depending upon the volume of product information listed at a site. ProcureNet can also link existing corporate Web sites to its mall storefronts, Ms. Mills says.

  • TPN, Rockville, Md., is a joint venture between General Electric Information Services, the large electronic data interchange network, and Thomas Publishing Co., publisher of the Thomas Register industrial directories. GEIS is just opening up its massive commerce network -- which various GE units used last year to place and pay for $500 million in orders from vendors -- to include outside marketers. It expects the network to handle $1 billion in trade by midyear.

    Per Lofving, corporate sales manager for Thomas Publishing, calls the Web "another way to distribute our clients' information to buyers" and says its free use by buyers is "controlled circulation" for the directories.

    In 1986, Thomas Register put much of its product listings on commercial online services, including CompuServe, Dialog and Prodigy, and produced a CD-ROM-based directory.

    In 1994, it added its database to its Web site and began developing Web sites for Thomas Register advertisers.

    The Thomas Register site lists 153,000 manufacturers in its database and has links to 2,700 manufacturer Web sites. Online advertising, which includes a company home page with 1MB of data storage, costs about $8,000.

  • Industry.net, based in Cambridge, Mass., has the highest profile among the group, with former Lotus Development Corp. head Jim Manzi as chairman and major stockholder. It also acquired AT&T's Business Network for stock last year, renaming itself Nets Inc. in the process.

    "We view the business-business relationship as more than a financial settlement," says VP-Marketing Ian Richmond.

    "There's a lot that precedes the deal -- comparison of vendors -- which services like Industry.net can provide," Mr. Richmond says

    Industry.net has about 275,000 members from 36,000 organizations. The service receives about 10,000 visitors a day to 53 seller company sites. Industry.net charges participating sellers from $2,000 to $250,000 for Web home pages, searchable online catalogs and ordering links with corporate buyers.

    The company is experimenting with online transaction technology but does not yet allow most participants to exchange cash online, Mr. Richmond says. However, buyers with contractual relationships can place orders with e-mail forms.

    Nets Inc. also offers intranet consulting to participating companies, which may provide the most immediate reward to companies like Norton Co., Mr. Kennedy says.

    "We are looking at intranets as a way of firming up our relationships with distributors and providing an exclusive and efficient ordering channel for them through an Internet/intranet connection," he says. "In the immediate future, that may give us the most advantage."

  • Manufacturing Marketplace, based in Newton, Mass., is owned by Cahners Publishing Co. and is centered on that company's trade magazines, with catalogs based on each publication's editorial content.

    "At the core of our site is a buyers' guide with detailed information about companies and products," says Mike Cole, exec VP for Cahners Electronic Media. The site plans to beta test catalogs and commerce functions later this year.

    The mall features information from more than 50,000 manufacturers and distributors, links to more than 3,500 seller Web sites and a searchable buyer's guide with more than 30,000 product categories. Advertising rates vary.

    In January, Cahners announced a strategic partnership with Boston-based Waypoint Software Corp., an Internet catalog developer.

    "After surveying the limited universe of business-to-business catalog developers, we determined that most catalog development tools were designed for relatively unsophisticated consumer applications," says Mr. Cole.

    PROCURENET HAS THE EDGE

    Right now, it's the MRO segment pioneered by ProcureNet that holds the most short-term promise, says Chris Selland, research director for the Yankee Group, a Boston market researcher.

    "That has tremendous potential," he says, and Industry.net is now focusing heavily on it as well. For now, ProcureNet has the advantage, analysts say.

    "Fisher's got a scalable technology" and "they've had the ability to do transactions a long time," says Mr. Selland. "There's a lot to this market beyond transactions and they have it."

    The challenge for all players, Mr. Selland adds, is to serve buyers' needs for "due diligence" and understand the difference between consumer and business buyers. "Companies care very much who they buy from and the upfront work is the real value-add."

    For that reason Barry Wilderman, VP for the applications delivery strategy service at the Meta Group, a Stamford, Conn., market research company, expects winning marketplaces to develop vertically based on industry niches.

    An example is AspectOnline from Aspect Development Corp., Mountain View, Calif.

    Its Component Supplier Management system allows manufacturers to increase margins by sourcing from multiple suppliers.

    "It's the knowledge base, not just the software, which makes the difference," he says.

    Craig Palmer, VP-Internet products and services for Aspect, agrees that the challenges facing all marketplaces in the future may be editorial.

    "People spend 10% to 30% of their time getting the information needed to make decisions. We can help them do that instantly," Mr. Palmer says.

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