Private trading exchanges come to life
Staff -- Modern Materials Handling, 11/1/2002
In 2000, electronic exchanges were riding high. According to the apostles of the new economy, no one but Fred Flintstone would ever do business in person again. Instead, we would all buy, sell, and trade over the Internet.
Fast forward to 2002, and most of those exchanges have turned to rubble. What changed? Most business is based on relationships. Early exchanges tried to replace those relationships, but the survivors learned to enhance them.
That's not the only reason public exchanges failed, adds Andrew White, a research director at Gartner Inc., Stamford, Ct. (www4.gartner.com/Init).
For one, the technology needed to connect many customers with many buyers in real-time was either non-existent or over-hyped.
For another, sellers quickly found that their customers weren't the only ones who could access their pricing information in real time. So could their competitors. One major chemical company went back to selling the old fashioned way when it realized the market price dropped every time they published their prices.
Finally, the business models just weren't sustainable. 'Too many exchanges assumed that if they built it, customers would come,' says White.
Here's a surprise: some good is emerging from the rubble. The rush to the Web exposed the lack of standards for doing business online. Now in development, those standards will reduce the costs and hassles of e-commerce. As a result, many companies are now digitizing their business relationships. But they're using private portals.
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