Buyers Wary Of B2B Marketplaces

By Michael Alexander

Corporate buyers aren't using B2B marketplaces in a big way, and that's not going to change anytime soon, according to a new study.

The problem is that B2B e-marketplaces haven't attracted the suppliers that some 60 percent of purchasing agents already do business with offline, according to the Jupiter Media Metrix survey.

"Purchasing agents understand why they should be using the Internet for their B2B purchases, but they're not quite ready to move online," said Jupiter analyst Jean Gabriel Henry. "They will get there once suppliers that they currently purchase from move online and educate them on how to use their system."

Still, purchasing agents cite several motivations for buying online, including cutting paper costs, finding products faster, speeding cycle times and reducing inventory.

Moving to a "paperless purchasing environment" was a key reason why Graham Packaging Co. recently put its buyers online, said Martin Sauer, vice president of global sourcing. The plastic containers maker is using Commerx Inc.'s eBuy software for online purchasing of direct and indirect materials for 38 North American plants. Automating the procurement processes should increase efficiency and reduce costs, Sauer said.

Most B2B buyers will eventually purchase online, but it will be a while before transactions reach a significant level, according to the survey, which had responses from purchasing agents at 83 corporations. Respondents said they are planning to conduct just 20 percent of their transactions over the Internet by 2002.

Jupiter predicts that two distinct online B2B markets will emerge: one for buyers seeking existing suppliers and one for buyers seeking new suppliers. The two camps have dissimilar needs, and savvy Net sellers will be equipped to serve only one market, Jupiter said.

As a result, private marketplaces that support existing relationships stand to benefit first when purchasers move online. Jupiter predicts that 85 percent of B2B transactions will be made between existing buyers and sellers online, compared with 95 percent offline.

The market for existing customers will be the bigger opportunity for sell-ers, according to Jupiter's Henry, because they have already established trust with buyers--many of whom are waiting for their favored vendors to move online. "The market for new customers is smaller but will grow over time, largely because Internet search capabilities will assist buyers in finding vendors."