When major franchises, discount wholesalers and mass merchandisers began to set up shop around the country, many skeptics predicted that small- and medium-size “mom and pop” operations would soon go the the way of the dinosaur.
However, the World Wide Web has changed all that. Each day, new sites debut that unite small- and medium-size companies to provide large-scale buying power, share marketing solutions and exchange successful ideas and strategies.
It’s a market that some say is just starting to benefit from the Internet’s growth.
“The small- to medium-size business category has previously been underserved, but now it is exploding,” said Eric Klein, senior analyst, Yankee Group. “There is a significant amount of activity out there and the category is now being barraged with information that can help it.”
Yankee Group defines small businesses as having between two and 99 employees. Medium-size business are defined as having a staff between 100 and 499 employees.
“The market is changing very quickly,” Klein noted. “More and more larger companies are heading toward the small business community to help it adopt technology and grow the bottom line.”
IBM Corp. launched the The Global Group Purchasing Program, a B2B buyer’s auction and Internet solutions program, in May in Hungary. The site is designed to meet the needs of IBM’s small- and medium-size business clients in Central and Eastern Europe.
“At the heart of the site is a reverse-auction e-commerce portal where businesses list the products and services they want to purchase and suppliers bid for the offer,” explained Gabor Mohai, director of sales, IBM Hungary.
“The site provides businesses with access to goods and services they never had before while establishing an Internet presence,” he added. “The system is free to buyers. Sellers pay a nominal commission. We feature a broad product range that includes the paper, electronic, agricultural and construction industries.”
Hungary and neighboring Slovenia have proved to be Internet powerhouses. Therefore, plans are under way for the site to expand its reach throughout the world, said Marc Schectman, president of GGPP.
“Our clients are the buyers,” he said. “They tell us what they want and we get the suppliers to compete in the reverse auction. We create a healthy competition among suppliers. Plus, the sellers pay a fraction of what they normally pay for marketing. The model is geared toward success throughout the world. We currently are setting up offices in Newport Beach, Calif., and Memphis.”
“The reverse auctions really work,” he added. “The benefit of working with vertical markets is that you gain and give expertise.”
Online auctions are a force to be reckoned with, according to edeal Services Corp., which offers AuctionEnabler, an online auction application.
“As many business struggle with the cost of e-commerce solutions, we bring online auction creation and management directly to the desktop,” said Colin Webster, chief executive officer of edeal. “AuctionEnabler lets any small- or medium-size business create and add a branded full-service online auction site to an existing Web site with no upfront development costs.
“While large businesses have benefited from the incredible growth of online auction sales, customized auctioned development costs that can easily exceed $150,000 have put this market far out of reach for many businesses,” he continued. “Since it is free, the product removes these barriers for small and medium-sized businesses and allows them to enter this fast-growing competitive e-commerce market.”
AuctionEnabler, which launched this summer, attracted 500 customers during its first two weeks online, according to Webster. “We are growing day by day and breaking down barriers,” he said.
Demandline.com uses reverse auctions to provide small and medium business with better deals on core services.
“We tend to offer what businesses need to survive, such a credit card or long-distance service” said Patrick Burns, chief executive officer, demandline.com. “We set up online auctions between the buyer and vendors. When the bidding is done, we hand the buyer over to the seller.
“We have established a venue in which the buyers receive vital services from nationally branded providers at corporate rates,” he said. “Bigger companies generally have been known to receive the better prices, selections and services while the smaller guys often pay top dollar for poor service, poor selection and no-name brands.
“In reality, businesses with fewer than 100 employees account for 90 percent of all companies and for more than one third of revenues,” he said. “They represent a formidable force, but divided their voices our drowned out by the din of big company marketing machines.
“Frankly, we are tired of seeing the little guy get smoked,” Burns said. “Our goal is to help the little guy who cannot make it on his own. We let the reverse auctions do the magic and we see the smaller operators benefit.”
Strength in numbers is the theory behind Goliath Falls, an online wholesaler for independent retailers, according to Steven Greenberg, chief executive officer.
The site is designed to serve as a one-stop shop for independent retailers, giving them the buying power of a large chain. It also serves as a digital marketplace.
“We procure, secure and settle logistics,” said Greenberg. “We don’t try to connect buyer and seller. We own the goods and we are responsible for the delivery.This way, the stores have only one contact to deal with.”
The company’s offerings include cosmetics and health and beauty aids, as well as home and office products. “We are putting the purchasing power back into the retailer’s hands,” he stated. “In many cases, products are moving off the shelves of Mom and Pop stores because they cannot keep up with the minimum order requirement. Many of them are struggling to compete against major entities such as Wal-Mart. Through this site, they can deal with major suppliers while saving money on the processing costs alone.”
“The responsiveness, to date, has been incredible,” Greenberg continued. “This site fills a huge void for both the retailer and the manufacturer. Face it, if someone has a small store in Boise, Idaho, it would may not be efficient to send sales reps out there to procure business. Now, we do that for them. We are meeting the needs of a substantial, yet forgotten, side of the retail marketplace.”
Further, goliathfalls.com offers exchange between network members. “We have created a virtual community of independent retailers who inform each other on failures and successes, hot and not-so-hot products and other information that can help each retailer grow their businesses. This site is about helping the small and medium business owner. We have taken a fragmented situation and made it whole.”
Capital.com provides small and medium businesses with expertise in an area that is crucial to us all: Money.
“We created this site to answer questions and provide assistance to middle
market companies looking for financing between $250,000 and $100 million,”
said Mark Opel, chief operating officer of capital.com. “We provide them
with choices and efficiencies, experience and insight.”
The site is an an online financial portal that allows small- and medium-size companies to expand, refinance or sell their businesses. It works by matching them with established providers in similar fields.
“We offer online tools, such as business valuation and financing models, while keeping the human factor in the relationship. We are not a faceless e
ntity. We are here to provide a service.”
The company aims to collapse the time needed to conduct searches for critical financial services, according to Opel. “We locate sources for mezzanine debt, provide information and strategic advice on a range of capital options to demystify the fragmented middle market finance arena, and give main street companies access to Wall Street financial services via the Web.”
BigVine.com, however, provides an online barter service where trade dollars, not money, is the rate of exchange.
“We created a marketplace for small businesses to exchange goods and services without cash,” explain Debra Chrapaty, chief operating officer, BigVine.com. “Barter is done with trade dollars, which allows businesses to buy and sell goods and services to anyone within the BigVine network. Network members price their goods and services in trade dollars as they would in the cash world.
“We help a network of businesses to branch out and intertwine,” she continued. “Goods and services bought and sold through the network include anything from raw materials to furniture to financial and legal services to airline tickets and hotel rooms.
“Benefits of using this site include providing members with access to new customers and an outlet for excess inventory and extra time,” she said. “Additionally, we provide creative ways to reach people, sell goods and advertise over the Internet. For instance, some members purchase restaurant or hotel gift certificate and present them to their best clients. This type of transaction helps to create and expand customer loyalty.”
Online marketing and advertising services are an area where small and medium businesses can truly benefit from the power of technology. In total, U.S. companies are reported to spend more than $1 trillion on marketing activities each year.
Yet, many middle marketers cannot afford to invest money in the time and talent and it takes to create a successful promotion campaign.
ThinkDirectMarketing.com Inc. aims to help small- and medium-size businesses understand and conduct a successful direct mail campaign.
“We aim to be a virtual list broker,” said Dean Eaker, the company’s chief executive officer. “We have established a disruptive technology that offers an alternative to dealing with traditional list brokers. Through us, businesses can afford and make use of targeted, up-to-date mailing lists delivered to their desktop while providing a super cost-efficient way of finding new customers.
“For example, we can provide a list of names of people who are in a five-mile radius of a business location,” he said. “We are enabling small businesses to market like a Fortune 1000 company. The users, through our guidance, help to target their name selections. We enable the end user to use the names directly.”
Meanwhile, the Yankee Group expects emarketplace transactions will generate $850 billion in 2004, while the Direct Marketing Association reports that Internet interactive marketing will grow 113 percent between now and 2004.
QuickMarketing was established to meet the needs of online marketers.
“Many companies are trying to become Web-enabled, but they are not getting the bang for their buck,” said John Christensen, chief executive officer.