Consolidations, Business-to-Business Auctions Coming
The booming market of electronic commerce, both in retail and business-to-business, will face a raft of public policy, technological and marketing challenges as it continues to mature next year.
Perhaps the first development in e-commerce in 2000 will be the folding or consolidating of marginal companies that didn’t quite draw the traffic or sales they expected during the holidays and have run out of venture capital.
ShopNow.com last week announced it has acquired WebCentric Inc., which operates online shopping agent BottomDollar.com, for $50 million. ShopNow.com also agreed to acquire Ubarter.com Inc., an online bartering company, for $45 million. Both are all-stock deals.
While the stock prices of “dot-com” companies soared this year, with a few exceptions, profits have eluded them and will continue to do so next year.
“There are an incredible number of dot-com businesses that don’t have a clue about how to get to a sustainable profit business model,” said Philip Evans, a senior vice president at Boston Consulting Group, a market research firm.
Jupiter Communications predicts that retail electronic commerce will jump to $23.1 billion in 2000 from this year’s $14.9 billion, while Forrester Research expects even steeper growth in online transactions between businesses, growing from $109 billion this year to $251 billion next year.
Online auctions on consumer Web sites grabbed the spotlight this year, with the likes of EBay Inc. and Priceline.com Inc. forcing other Internet giants such as Yahoo, Microsoft Corp. and Amazon.com Inc. to begin their own auctions.
Next year, the auction model will move to the business-to-business space. One such example is the launch of General Motors Corp.’s GM TradeXchange, the auto maker’s belated entry into e-commerce transactions with its suppliers.
But whereas online auctions among consumers tend to be a bit of a free-for-all, with ratings systems and a few escrow companies acting as referees, wholesale business auctions will be more organized.
“The procurement professional who has developed deep relationships with their suppliers is not necessarily interested in throwing a big party open to the world,” said Kit Robinson, spokesman for Commerce One Inc., which provides business-to-business electronic commerce technology. “They want to control the process. The lowest bidder may not win because there may be other, more important factors such as quality and speed.”
The question of whether and how to tax Internet transactions will also continue to hang over the e-commerce industry. The next meeting of the Advisory Commission on Electronic Commerce is scheduled in March in Dallas and its recommendation is due to Congress in April.
Internet companies have been arguing that any tax would hinder the innovation of business on the Net. But traditional companies argue that it’s only fair that every sale be taxed the same, no matter what channel is used.
In deciding this matter, the commission has to tackle thorny issues relating to world trade, privacy, the impact on state and local governments that rely on sales taxes, and whether universal Internet access should be subsidized like telephone service.
