Forrester Research comments on why Canadian B2B eCommerce will Take Off...FYI...
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<<Canadian B2B eCommerce Takes Off
March 21, 2000 // Forrester Research
Online business trade of hard goods in Canada is poised to hit C$218 billion in 2004 -- pulled along by the business-to-business and eMarketplace surge in the US.
by Matthew R. Sanders with Bruce D. Temkin
CANADA READIES FOR A B2B BOOM
Forrester recently projected that B2B eCommerce in the US would hit $2.7 trillion in 2004. But what's up in Canada? To answer this question, we spoke with Canadian industry experts and government officials -- and found that online trade in Canada is perking up as:
US behemoths pull in their northern partners. In 1998, Canada shipped 27% of the hard goods it produced to the US. With Canadian businesses so entrenched within international supply chains, these northern firms are forced to participate in the online procurement activities of their large US customers. When GM went live with its Commerce One implementation, for instance, Canada's Ball Machinery Sales was included as one of its early online suppliers.
eMarketplaces reach across the border. Online marketmakers are popping up across many industries -- trying to lure entire supply chains into their venues. But the aspirations of these B2B Dot Coms don't come to a screeching halt at the US borders. Net marketplaces like PlasticsNet.Com, for instance, already sell products from Canadian vendors Husky Injection Molding Systems and AT Plastics.
Canadian capital markets go venturing. Investments by Canadian venture capital firms grew to nearly C$2 billion in 1999 -- a 30% increase over 1998. This early stage financing is helping to boost Canada's Internet capabilities, as companies like Optel Communications, an Internet infrastructure provider that raised C$20 million, increasingly get the funding to expand their business.
CANADIAN B2B TRADE BLOSSOMS TO C$218 BILLION IN 2004
Canada is ready for a B2B boom. Based on our analysis of the supply chain characteristics in 13 hard goods industries, Forrester projects that online trade in Canada will hit hypergrowth in 2001 -- growing to C$218 billion by 2004 as The global automotive supply chain will put C$88 billion onto the Net. Borders are virtually nonexistent between the Canadian and US auto industries -- where more than 45% of all Canadian production is sold to US buyers. As a result, giants like GM and Ford will quickly bring their Canadian suppliers -- like auto body manufacturer Magna International -- into their online networks. By 2004, B2B eCommerce in the automotive sector will race to 24% of all trade.
The fast-moving technology sector moves more than 40% online. Computing and electronics industries, which have already hit hypergrowth, will see more than 15% of their total trade go over the Net this year. And by 2004, C$43.5 billion will be online. Fueling this torrid growth are companies like Nortel Networks -- which actively sells its data networks and switching equipment online.
Petrochemicals will pump C$17 billion into Net trade. Almost half of all petroleum extracted from Alberta oil and tar fields flow through Canadian pipelines to US buyers. This industry's highly standardized products, combined with its tight connection to the US market, will drive online trade growth among large producers like Chevron Canada from 2% today to more than 17% in 2004.
eMarketplaces help to pull 38% of utilities trade online. In five years, nearly C$17 billion of the natural gas extracted from western Canada and hydroelectricity flowing out of Ontario and Quebec rivers will be traded online. Utilities giant Westcoast Energy is already leading this industry online by partnering with the Natural Gas Exchange, a Calgary-based online exchange for natural gas.
eMARKETPLACE TRADE HITS C$102.5 BILLION IN 2004
Just as B2B eCommerce takes off, Canada will be hit by another wave -- eMarketplaces. By 2004, eMarketplace trade as a percentage of total online trade in Canada will range from 4% to 70%. Using our eMarketplace Opportunity Index, Forrester projects that online trade within an industry will flow through these new venues -- with the variance driven by product fit. eMarketplaces will deeply penetrate industries with standardized products like natural gas and high-volume/low-dollar items such as textiles. They will also prevail in industries with highly perishable goods like shipping capacity, where more than 70% of online trade will flow through Net marketplaces. Canadian National Railway, for example, has already partnered with Ariba and BCE Emergis to create an eMarketplace to make better use out of its railcar space.
Industry readiness. Supply chains characterized by high degrees of fragmentation, demand shock susceptibility, and distribution intensity will look to Net marketplaces to weed out these inefficiencies. For instance, the burgeoning yet fragmented Canadian computing and electronics industry will sell more than C$31 billion through eMarketplaces like NECX Global Electronics Exchange in 2004.>>
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***I feel that itemus is perfectly positioned to take advantage of many of the trends described above. IMO, Tobin and his team have the experience, the contacts and the capital to have a profound impact on the Canadian internet marketplace. Who knows, they might even be able to create 'the CMGI of Canada.'..;-)
Best Regards,
Scott |
