To Market, to Buy a Fat Pig

May 11 2000

Business-to-business has gone from buzzword to business as usual. At least that's the idea set forth by writer Erick Schonfeld in eCompany Now, Time's new Web business monthly. Items like plastics, sand, wooden pallets and plenty of cows and pigs are now moving through business exchanges. Since the stock-market shakeout, these unglamorous businesses may no longer enjoy instant success on Wall Street, but they remain attractive business opportunities, and perhaps, necessary offshoots of existing corporations.

Schonfeld does readers the favor of defining exactly what an exchange is. "Think of an electronic bazaar, a place where buyers and sellers exchange information, bid on goods, seal deals and arrange delivery," he notes in "Corporations of the World, Unite! You Have Nothing to Lose But Your Supply Chains." These exchanges include auctions, which might help a seller get the best price , but can also work in reverse, making suppliers win contracts by bidding down the price . Another type of exchange for commodities or perishables offers "constant price adjustments as supply and demand ebb and flow."

Schonfeld spills ample ink discussing who might dominate this world of exchanges. It might very well be big guns from the old economy, with GE in particular singled out. For one, it has "what most dot-coms don't - paying customers," he writes. And when one of its businesses controls a market, as GE Aircraft does airline engines, it can negotiate the best deals with its suppliers. Not much chance of a dot-com moving in on that territory.

But in more fragmented industries, such as home construction , the dot-com exchanges could clean up, since they "offer great opportunities for rooting out inefficiencies and enlisting potential trading partners in a neutral, independent site." "Scores" of such markets exist, Schonfeld says, and markets that never existed before are also being created to buy and sell such goods as surplus medical equipment, unused patents and water.

Farming is also a fragmented industry, reports Business Week in the cleverly titled "Old MacDonald Has a Web Site." And that, writes Darnell Little, could make the "odd couple" of the Internet and farming a perfect match.

There's also a "thick layer of intermediaries adding substantial markups at each level." Currently, there are two dozen e-commerce sites serving small and midsize independent farmers anxious to cut out these middlemen. About $35 billion in farm-related commerce will move over the Web this year, says Goldman, Sachs & Co., and with major farm-product manufacturers like Dupont and Cargill seeing the Web opportunity, sales are predicted to reach $124 billion by 2004. And agriculture will make up over 8 percent of the entire business-to-business online economy, the fifth-highest industry sector. Sure, pigs and cows are unglamorous, but for those willing to invest in this area, it could be hog heaven.

Corporations of the World, Unite! You Have Nothing to Lose but Your Supply Chains!
Ecompanynow

Dear Supplier: This Is Going to Hurt You More Than It Hurts Me ...
Ecompanynow

Old MacDonald Has a Web Site
Business Week