If you're in an industry with thousands of competitors, prospective customers will not beat a path to your Web site.
That's the rationale for the growing number of "micromarket" sites, which bring buyers and sellers together for transactions. The sites are also called "digital marketplaces" or "vertical portals," because they host several partner companies within a specific industry.
GartnerGroup, a Stamford, Conn.-based research company, estimates there are 300 to 400 of these sites. Chuck Shih, Gartner's online commerce research director, says that will increase to more than 20,000 within three years.
"These things aren't hard to get going," he says. "Every venture capital company has four or five in the pipeline. The key is how many of these are going to be significant."
Digital marketplaces differ from online catalog sites, which aggregate and warehouse thousands of products from hundreds of vendors, post prices and handle order fulfillment directly.
One such marketplace site exemplifies the difference.
"E-Steel allows for private negotiations, is future-oriented -- steel is made to order -- as opposed to inventory-oriented, and [for confidentiality] does not require 100% price transparency. An online catalog site does," says Deborah Katzenellenborgen, marketing director of New York-based e-Steel Corp., which is set to launch officially next month.
Also, digital marketplaces don't maintain or ship any of their partners' inventory. They route orders to participating vendors, who then take care of shipping and fulfillment.
Marketing the marketplace
If you're marketing a vertical portal, brand awareness is the first step. To provide a boost, many of these sites bear the name of their industry, such as MetalSite L.P. (www.metalsite.com), Pittsburgh.
For visibility, several marketplace sites rely heavily on advertising in trade publications that reach their markets. MetalSite, for instance, regularly buys space in American Metal Market, Metal Center News and Modern Metals.
Other sites emphasize a more personal touch. For its part, "e-Steel is speaking at and attending numerous industry events, advertising both on and off the Internet, and is making personal visits to industry leaders along the value chain," Ms. Katzenellenborgen says.
One easy, safe stop
Regardless of industry, the pitch is the same: We're an all-under-one-roof destination for interested buyers in your industry, and we'll help you obtain the visibility you couldn't possibly achieve if you went at it alone.
"We're about the whole idea of one-stop shopping, comparing one seller to another," says Maggie Bray, director of communications for MetalSite.
Two other powerful pitches that digital marketplaces use to attract businesses are confidentiality and freedom from technical hassles.
"There are technical issues dealing with bugs that have to be worked out. Let us worry about those," Ms. Bray says.
Concerns about the security of the Web have been the most difficult to address, she says. Companies may not be used to doing anything but e-mailing over the Internet.
"This is their most secret information, but we make the point that our system is highly secure, with the most sophisticated architecture," Ms. Bray says.
Most of these sites make their money on transaction fees charged to participating vendors.
MetalSite charges 0.025% to 2% per transaction. That's on the low side but not surprising, given the big-ticket nature of the business done there.
That site gets more than 100,000 page views a week and, with partners including LTV Steel, Cleveland, and Weirton Steel Corp., Weirton, W.V., facilitates the sale of nearly 60,000 tons of product a month.
Mr. Shih says: "The key to being successful is to attract the sellers or subscribers. Then, as the marketplace gets established, they will raise their fee to 10% to 15%."
At e-Steel, vendors will pay commission of less than 1% on completed sales; buyers will never be charged fees, Ms. Katzenellenborgen says.
For an additional price, marketplace sites provide extra services, such as Web site design consulting and hosting. Some charge monthly listing fees, which Mr. Shih says can range between $200 and $2,000.
E-Steel plans to eventually allow companies to establish a "mini Web site" framed within e-Steel, where company and product information, but not e-commerce, will be available. And MetalSite plans to have entire billing-cycle order tracking and invoicing capability.
Mr. Shih sees marketplace sites someday offering enhanced services such as auctions and "buyer aggregation," where a number of buyers would be brought together to get a better per-buyer price on a common purchase order.