E-commerce is not just about buying books, CDs and airline tickets over the Internet. With everything from chemicals to electronic components and industrial machinery already being bought and sold online, it’s becoming increasingly apparent that Internet shopping will be dwarfed by business-to-business (BTB) online trade. “In general, the BTB e-commerce opportunities are going to be far greater than for the consumer markets, says Joe Sawyer, senior analyst of European Internet services at Forrester Research in the Netherlands. Our research shows that by 2001, e-commerce will be worth 62.3 billion US dollars overall in Europe, of which USD 57 billion will be BTB.” The US is ahead of Europe in most areas of e-commerce, and BTB is no different. By 2003, some 24 percent of US BTB trade will take place online, compared with 11 percent in western Europe, according to the Boston Consulting Group. The group also predicts that just six industries – retail, automotive, shipping, industrial equipment, high-tech and government will account for 65 percent of BTB e-commerce.
Of course, electronic trading between businesses is not new. Many organisations have been using electronic data interchange (EDI) for 10 years or more to transfer information about orders and payments electronically. However, Internet-based trading offers vastly increased transparency, interactivity and functionality. Goods can be displayed, real-time communication and ordering are possible, and the progress of orders can be tracked and market news and information made available. As a result, Internet-based e-commerce is expected to take over from EDI-based trade.

Cutting on costs
The opportunity to make cost savings is what initially drives businesses to adopt e-commerce, according to the Boston Consulting Group. Companies may move their purchasing online so that they deal with suppliers through intranets or extranets. This cuts down on transaction costs, and the exchange of information boosts efficiency across the supply chain. Also, the deeper relationship with suppliers may produce additional benefits sharing knowledge may help both parties to develop better products, for example.
BP Amoco, the oil and gas giant, expects e-commerce to have a profound effect on its business. We are actively looking at e-procurement taking our basic procurement requirements and bringing them online,” says a BP Amoco spokesman. The group aims to have 95 percent of its basic procurement online by the end of 2000, a move that is expected to save USD 200 million a year. But the impact of e-commerce won’t be limited to procurement. We think e-commerce has the potential to change the way that we do business and potentially change the business that we do,” the spokesman says.
New online marketplaces are having a profound effect on BTB e-commerce. The Gartner Group has identified the rise of “e-market makers” – organisations that develop a BTB, Internet-based marketplace of buyers and sellers within a particular industry, region or affinity group – as a key catalyst for the growth of BTB online trade. According to the Gartner Group, e-market makers have played a key role in accelerating the adoption of e-commerce in both the chemicals and electronic components industries.

Online marketplaces
A number of online marketplaces are already established in the US, but the phenomenon is also emerging in Europe. Among the US e-market makers is ChemConnect, at www.chemconnect.com, which is used by chemicals manufacturers, buyers and intermediaries to find partners, negotiate prices and trade online. Set up in 1995 as an online directory of suppliers, ChemConnect introduced online trading and launched the World Chemicals Exchange, an online chemicals marketplace, in August 1999. ChemConnect reported in January this year that 27,000 metric tonnes of petrochemicals had been traded through the World Chemicals Exchange over a six-week period. BP Amoco Chemicals took a stake in ChemConnect in February.
eLabsEurope, a new European online marketplace, is targeting the life sciences market, estimated to be worth around USD 5.3 billion a year. The sector is highly fragmented, and most purchasing of laboratory supplies is currently conducted though an inefficient catalogue-based system. eLabs-Europe estimates that its open electronic marketplace, which is due to go live early in the second quarter of 2000, could cut transaction costs by USD 800 million a year. The Village, a community area within eLabs-Europe’s site at www.elabseurope.com, went live in December 1999. Buyers stand to benefit from eLabs-Europe’s online market in two main ways – purchasing is consolidated and thus easier to administer, and the site brings together a range of manufacturers in one place. “They can have as many suppliers as exist in the marketplace, but they get the benefits of simplified administration,” says Sotiris Lyritzis, co-founder and vice president for sales and marketing at eLabsEurope. Meanwhile, suppliers will be able to cut the huge marketing and logistics costs that they currently incur.
Another new entrant is Endorsia, at www.endorsia.com, an Internet-based marketplace that connects industrial manufacturers, distributors and end users. Endorsia went live at the end of 1999 and is to be rolled out across Europe in early 2000. Although it is provided by SKF, Endorsia is intended to be an independent marketplace, and it is open to other branded manufacturers. Dow Corning’s industrial sealants and silicone fluids as well as Molykote, Dow Corning’s lubricant brand, already have a presence on the site.
To date, Dow Corning and its country distributors have dealt with their dealers primarily via fax and phone, says Håkan Svensson, European distribution manager at Dow Corning, so the participation in Endorsia will make a significant change. Endorsia is expected to become the standard platform for its European distributor network, although Svensson emphasises that this is just one route to market for Dow Corning. “Endorsia is a nice fit for the way that we operate,” says Svensson. “We will meet more of the dealers’ requirements [by providing] easy access and easy selection – and we will be seen as a provider of high-quality products.”
However, in order to be attractive to dealers – and underpin its own long-term credibility and success – the site must offer a range of brands.

Matthew Reed
a business journalist based in London