From Steel to Semi-Conductors:
Are new trends in e-commerce changing your B2B marketing approach?
From ADV Magazine and ADVMag.com
By Allen Silveri

If I were a Nostradamus of the Internet, I would have invested heavily in eBay – a company that has experienced a 1550% stock price gain in only four months and has grown to a community of more than 1.3 million members. Oh well…instead of sipping pina coladas in the South Pacific, I’m forecasting how the next major trends in e-commerce will affect business-to-business (B2B) marketing strategies.

E-commerce is growing faster than a speeding train – and it’s about to hit the B2B world head-on, altering how companies bring their products and services to market. For some B2B companies, e-commerce is already influencing distribution channels, customer service, and pricing strategies. E-commerce is creating marketing opportunities within online vertical industry portals, as well as exposing challenges for companies trying to establish or maintain their "preferred brand" identity in a new electronic marketplace. No one really knows which way e-commerce will turn, but one thing’s for sure…it’s here to stay.

Check out these new trends and the promises they hold in store for B2B companies.

Online Auction Sites

According to industry analysts, B2B commerce in 1999 will be characterized by the growth of online auction sites and vertical electronic marketplaces. Originally, auction software was designed as an inventory management tool. Companies used auctions to set the price for surplus – a broom to sweep out warehouses before new models arrived. Today, the act of selling products through auctions is termed "dynamic pricing." Just like a real-world auction, B2B buyers can bid on products and the highest bid is usually awarded the sale. However, different sellers can award bids based on different criteria. For example, a seller can award the sale to someone other than the highest bidder in order to fill a truck and maximize the seller’s logistics efficiency.

MetalSitesm, which launched in August 1998, is a good example of the type of site analysts expect to see more of in 1999. MetalSite is a vertical industry portal enabling buyers to contract for a variety of steel slabs and sheets via sealed-bid auction. Using a structured-data product catalog that manages approximately 8,000 possible product variations, MetalSite has processed orders from hundreds of business buyers for over 100,000 tons of steel valued at $30 million. Currently, sites
that auction commodity products seem to be the most prevalent, but it may only be a matter of time before "brand-name" products and services find their way to the B2B auction block.

Vertical Electronic Marketplaces

Electronic marketplaces are more than just venues for auctions, they also allow business buyers to find and purchase products among multiple industry suppliers at set prices. Think of them as virtual business trading posts aligned with specific vertical sectors such as healthcare, metal, software, or trucking. In essence, these sites offer a place for like-minded B2B buyers to go for one-stop shopping. Visitors can review products and pricing, run demos, get specs, and make purchases. Some sites provide industry news and chat rooms, which serve as industry forums. Most vertical electronic marketplaces also sell advertising space and publish industry articles, allowing advertisers and public relations practitioners to reach the same niche audiences that they could by placing print ads or feature stories in industry trade publications.

Smart Catalogs

Electronic smart catalogs (and other interactive media) are growing in popularity and functionality. Currently, most catalog sites are text-based with limited multimedia capabilities, only incorporating still images. They also tend to be proprietary, storing all data in one database management system. One of the hottest new programming languages being used in e-commerce catalogs is Extensible Markup Language (XML). It’s helping to change how B2B marketers sell products and services online.

Robust languages, like XML, are affecting electronic catalogs and e-commerce in two ways:
1) Provide increased functionality with full multimedia capabilities, including audio and video, and
2) Allow interoperability among a number of distributed catalog systems that can be reused by multiple buyers, while adding more automation to indirect purchasing management applications.

Smart catalogs allow companies to make it easy and cost-efficient for customers to do business with them – the essence of keeping customers loyal and reinforcing the promise of your brand.

E-commerce is changing the B2B landscape. Businesses are realizing that what has worked with Beanie Babies in the consumer marketplace may also be tailored to work in the B2B world of steel and semi-conductors. But, there’s a lot of work to be done. B2B leaders need to learn about the new medium and look for ways to leverage new technology to increase sales, profits, customer loyalty, and brand preference. Some companies may have to take a few risks, travel through uncharted territory, and even make a few mistakes along the way. But the potential for reward is great. Just ask eBay investors…that is, if they haven’t already left for the islands.


© 1999 Allen Silveri. All rights reserved Schubert Communications

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