We have also concluded that the new breed of slower-growing collaborative e-Marketplaces may prove more resilient than the rapidly propagating varieties of procurement-driven e-Marketplaces.
An Evolving Ownership Model
There are three basic ownership models for e-Marketplaces: independents, consortia, and private networks.
The overwhelming majority of e-Marketplaces — 92 percent of our total — were developed by independent entities or pure-play operators, generally with the hope of cashing in on the enormous dot-com valuations seen from 1996 through 2000. AutoTradeCenter.com Inc., founded in 1997 and ranked by Forbes as among the “Best of the Web” in July 2000, offers an excellent example. It provides an online forum where automobile dealers, banks, rental agencies, and fleet companies can obtain information on, buy, and sell preowned vehicles.
AutoTradeCenter is a publicly traded company, which makes it an exception among independent e-Marketplaces: Only 6 percent of these pure-play entities have gone public. The vast majority remain private, dependent on venture-capital funding to finance their losses as they build their infrastructure and seek members. With so many competitors, and with venture funding increasingly scarce, most privately held independents will quickly disappear. For the 6 percent whose shares are traded, the tombstones of Webvan Group Inc., eToys Inc., and dozens of other one-time high-flying B2C Internet companies are reminders that access to public financial markets is no guarantee of survival.
The consortium model, in which various industry players — including competitors — combine forces to create a common forum for the exchange of goods and services, has received broad press coverage. Yet these e-Marketplaces, which include Aeroxchange in aerospace, Covisint LLC in automotive, Trade-Ranger in energy, and Transora in consumer goods, account for fewer than 5 percent of the total — a mere 92 e-Marketplaces around the globe. This small group receives a wealth of attention because of its typically large and deep-pocketed founders and the often unique conditions that allowed competitors to band together to develop (and control) their own e-Marketplaces.
Take Transora, formed by a consortium of leading consumer-products companies — including Coca-Cola Company, Proctor & Gamble Company, and Unilever PLC — and the Grocery Manufacturers of America to facilitate e-commerce among suppliers, manufacturers, and retail trade partners. The idea for it originated at a March 2000 meeting of e-business leaders from the industry. In less than six weeks, 49 consumer-products companies, including 24 of the 25 largest in the world, had signed letters of intent for the creation of Transora, which eventually resulted in $238 million in funding.
Private networks represent an even smaller proportion of e-Marketplaces today: There were only 57 (3 percent of the total) in our worldwide survey. Private networks, like the Dell Computer Corporation’s e-Marketplace, facilitate e-commerce transactions up and down the supply chain — in this particular instance, between Dell, its corporate customers, and its suppliers. The most common function of private networks is online cataloging to facilitate sales from the sponsoring company, but some networks also support such supplier-focused services as supply chain planning and design collaboration. Private networks often evolved from in-house systems, and some have struggled to find the optimal value-added role in the vast landscape of e-Marketplaces.
Wal-Mart Stores Inc. is a leading example of the evolved private network. Wal-Mart chose not to invest in the two major consortia backed by other players in the retail industry, WorldWide Retail Exchange LLC and GlobalNetXchange LLC. Instead Wal-Mart decided to move its existing supply chain infrastructure, SupplierLink, to the Internet. SupplierLink, built over the last decade for an estimated investment of $1 billion, had given Wal-Mart unparalleled control over its vast network of stores and suppliers. The retail giant’s new private network enables its 10,000 suppliers to cull information about sales and inventory levels in every store. With the expanded Internet functionality, Wal-Mart plans to consolidate purchasing worldwide, create global collaboration, establish real-time information flows, bring suppliers online to compete for contracts, and negotiate better deals. Though clearly focused on the direct benefits to Wal-Mart, the private network also should benefit suppliers by providing consolidated forecast data and allowing them to bid online for new lines of merchandise.