- 1 - B2B Marketplaces: Establishing the right stuff Oliver Slesar, Jun 2000 © 2001 Sixhills Consulting Ltd & Author B2B Marketplaces: Establishing the right stuff As many as 10,000 new on-line B2B marketplaces will be launched by 2003, according to a presentation by B2B software vendor Ariba, Inc in 2000. This trend to rush into new economy business models is being accelerated by both multi-billion dollar forecasts for on-line B2B and the new business opportunities being created from the transformation to on-line commerce. However, taking a view on what the end-game for B2B marketplaces will look like in 10 or 15 years, it seems a safe bet that there will only be 3-5 winners in any B2B category, as the largest hubs will be able to attract ever more users due to the broader service and market liquidity they can offer. Large player’s competitive advantage will then be maintained via their network effect advantages over smaller players from both economies of scale and scope. Given this B2B end game view, therefore, the most important strategy question for companies that want to set-up a new B2B marketplace today quickly becomes: what is the best approach for a new B2B player to position itself to become one of the few ultimate winners? By definition, a winning B2B marketplace will be able to sign up many buyers and sellers. To do this, players will need to establish “the right stuff” for B2B marketplaces across several key success factors: 1) compelling customer value proposition, 2) neutrality as a marketplace, and 3) market power and knowledge. Obviously, both start-ups and well-established companies are rushing into the new economy, vying for ownership of the winning B2B marketplaces. However, because their relevant skills are quite different across these KSFs, new market entrants have invented several different marketplace forms that leverage their relative strengths as well as compensate for their relative shortcomings. All new entrants must offer a compelling customer value proposition to get out of the starting blocks, regardless of the form they establish for their marketplace. Buyers and sellers must be convinced that the offer of the new site is attractive enough to change from their existing offline transaction processes and adopt new internet-based processes -- some new feature or service must attract them to try a new site in the first place. Well designed business models are therefore offering a range of new and improved user value including: time savings, improved pricing, reduced paper processing, ability to link transaction information directly into the supply chain logistics or accounting or payments systems, and better market information from access to more buyers and sellers. Different marketplace forms that new players are establishing are being driven by their distinct abilities in terms of the other two
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