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In the News "Online Auctions Finding a Home in Business-to-Business Marketplace" By Judy Silver Best known for selling everything under the sun to consumers at sites such as eBay, online auctions are now being targeted toward the business-to-business marketplace. San Jose, Calif.-based eBay itself last week closely aligned itself with Ardsley, N.Y.-based TradeOut.com, an online auction house for corporate surplus goods; global business-to-business trade provider Commerce One bought out CommerceBid.com; while DoveBid.com was launched to provide online replication of onsite auction services. Things obviously are beginning to heat up. "There's opportunity to reach large audiences via online auction sites as opposed to traditional auction methodology," says Michele Pelino, senior analyst at Cambridge, Mass.-based Yankee Group. "We'll probably see more online auctions in the future as it catches on and the successes are clearer at the business-to-business level." Businesses already engaged in e-commerce at one level or another are becoming more comfortable with online trading in the secondhand and surplus markets. They are seizing this opportunity to further streamline their processes. "They're squeezing the transaction cost out of what today is an inefficient process," says Bob Parker, e-commerce service director at Boston-based AMR Research. "Typically, it's a win-win situation for both sides of the transaction. The people who are the longer-term losers are the liquidators and brokers who don't realize that this is a much more efficient way of moving goods and put the blinders on and ignore the trend. There is going to be some transformation, where we see a mix of physical and electronic trade, but by the end of 2001, the majority of [this kind of] trade will go electronic." This translates into a huge opportunity for e-commerce vendors and users alike. Business to business online auctions, specifically, are expected to grow from $8.7 billion in 1998, to over $52 billion by 2002, according to figures out from New York-based investment house Goldman Sachs. "From the sell side, people were frustrated by the current channels of getting rid of products - making numerous phone calls and sending faxes back and forth," says Dermott Ryan, TradeOut.com vice president of marketing. "From the buy side, people were frustrated by not being able to find quality products." In TradeOut.com's model, a selling company can liquidate non- performing assets and improve return on assets (ROA) via the online auction. Consider the experience of Great River Energy in Minneapolis, which became a TradeOut.com customer during its effort to unload fiber optic cable. "At first we were skeptical," says Mike Finley, Great River's manager of administrative services. "But TradeOut.com assembled a marketing team and researched the marketplace for potential buyers. Within a few days, we got several hits and made more than $1 million in sales." Birds Of A Feather . . . "It's not us going online - it's us going online with our 125,000 clients," says DoveBid Chairman and CEO Ross Dove. "We're taking all the services we had off the Web and putting them on the Web. We're working with the logistics, the shipping, financing, valuation, and using the same vendors [we have been using] offline for 20 years." Last year, DoveBid.com sold $120 million offline, assisted by Web marketing. Now with the auction engine, DoveBid.com officials expect this figure to grow exponentially, adding that about 95 percent of the assets are un-aggregated - they couldn't be sold in groups before the rise of the Internet. New alliances and partnerships will be formed in response to the growing demands of business customers. "Once sites like DoveBid.com or TradeOut.com build dominant sites, I think there will be a lot of value-added services and the Web will create more opportunities for global movers, escrow companies and other verticals," Dove says. Some of those vertical markets, like a plastics market community, will look to partner with online auction sites to provide the surplus auction functionality. As a corporate strategy, online auctions probably will be added to other buying channels. Off-line auctions will remain important for items a buyer must see, but for things like office equipment they will go online. How does the competition stack up? It's too soon to tell, but AMR's Parker observes that DoveBid.com has what every electronic exchange site needs - liquidity, neutrality and domain expertise. "The established folks have the trust of the community," Parker says. "They have the mailing lists and they can do combination auctions.The existing folks bring domain expertise to the table, as well, because they know who buys knitting looms in North Carolina." |