Net Markets Are Attracting Small
Businesses
(11/22/00, 4:23 p.m. ET) By Antone Gonsalves, TechWeb News
Independent online marketplaces are becoming good
targets for corporations looking to reach small
businesses, a recent study shows.
IMT Strategies Inc., Stamford, Conn., an affiliate of
technology research firm Meta Group, surveyed more
than 300 small businesses and found 8 percent had
become an early participant in Net markets.
Those businesses reported that at least 25 percent of
their sales were generated through online marketplaces.
The same group anticipated marketplace sales to
exceed 50 percent by 2002.
The numbers are significant because there are 8 million
small businesses (fewer than 50 employees) in the
world, growing at an annual rate of 40 percent, IMT
analyst Steve Diorio said.
In addition, the percentage of sales is far greater than
most companies, which do 95 percent of their sales
offline.
The study shows online marketplaces emerging as a
place for larger corporations to gather market data on
small businesses and find potential customers.
"If I'm selling to small businesses I want to learn to a
higher degree of detail what they're looking for, because
either I can build the marketplace they want to
participate in or go to the marketplaces where they're
playing," Diorio said. "I think these guys [large
corporations] have been looking for a silver bullet for
years to reach this market."
Global 2000 corporations have a "significantly lower"
level of participation in marketplaces because of greater
risks, including loss of control over profit margins and
customer information, and potential conflict among sales
channels, the study found.
For example, participating in a marketplace could draw
business away from longtime distributors.
On the other hand, small businesses see marketplaces
as an opportunity to take customers away from larger
players and as a chance to expand their reach beyond
regional markets.
"Little businesses don't care [about the risks]," Diorio
said. "They've got everything to gain. They're going for
it."
The study also found that software and professional
services were sold more often in marketplaces than
products, which are logistically more difficult to sell.
"The factory [buy and sell] processes are so rigid, that
you have to get it 100 percent right," Diorio said,
"whereas hiring a person or contracting a person may
be a little bit more channel ready, easier to do online."
Despite the findings, the study did not disprove
expectations by most analysts of a major shakeout
among independent marketplaces that will eventually
leave only a small handful operating in each vertical
industry.
Among the 2,000 to 2,500 vertical marketplaces
expected to be operating by 2001, the "vast majority
have little or no liquidity," Diorio said.
"A lot of times they have sellers, but there's no buying
going on -- no transactions," Diorio said. "That's what
we mean by liquidity -- no critical mass of transactions.
As a consequence, there will be no profits." |
