RealTime IT News

Happy Days for E-Marketplaces

The up and coming North American B2B e-marketplace market grew 171 percent in 1999, propelled by both "brick-to-click" distributors and established dot-com marketplaces, says a new study on this Internet business niche.

The report from research and consulting firm Gartner Group Inc. also says that e-market maker revenue reached nearly an estimated $500 million in 1999, an increase from 1998 revenue of $183 million.

A B2B e-market maker brings together buyers and sellers within a particular industry, geographic region or affinity group for the purpose of commerce. It provides content, value-added services and- often, but not always, transaction capabilities.

Gartner said that such new business intermediaries are "quickly evolving to a highly competitive market that includes a variety of players with previously disparate business models, including software, portals, distributors, application service providers (ASPs) and business service providers."

"Online operations of brick-and-mortar intermediaries like Ingram Micro dominated the market in 1999," said Leah Knight, research director for Gartner's e-Business Services.

"This evidences the relative ease of migrating an existing customer base to an online model over building a new customer base from scratch, which many of the dot-com marketplaces have been struggling to do," she said. "It also shows the strength in many industries of the value-added business services model (for example, providing demand generation, quality assurance and logistical services) vs. the transaction fee model. Still, many of the brick-and-mortar intermediaries are facing challenges themselves due to margin."

Gartner's report said that Ingram Micro commanded a dominant market share of 26.4 percent. Tech Data and Arrow Electronics ranked No. 2 and 3, respectively, followed by Avnet, Grainger, VerticalNet and Freemarkets. Grainger posted the strongest growth rate among the top-tier vendors with 633 percent revenue growth.

Three unique types of marketplaces are energing, Gartner said:

  • The commodity marketplace will support high-volume trade of products and services of commodity or near-commodity status, as well as financial instruments such as futures contracts
  • Business service marketplaces will be focused on supporting specific inter-enterprise processes, such as those related to logistics, financial services, and maintenance, repair and operations (MRO) procurement
  • Integration service marketplaces will emerge with a focus on linkages and process definitions, and to facilitate process-to-process integration between trading partners

"Through 2005, the competitive landscape will be significantly transformed to a hub-spoke-Web model of inter-enterprise e-marketplace engagement among the three marketplace models," Knight said.

"Marketplaces that try to support all three models will fail, but marketplaces that focus with rich software and services environments as required, and a strong base of partners, will dominate their segments."

The report was released in advance of a Gartner conference on e-marketplaces scheduled for Nov. 6 to Nov. 8 in Boston.