Magazine article International Trade Forum

E-Business Marketplaces

Magazine article International Trade Forum

E-Business Marketplaces

Article excerpt

A Revolution in International Trade

A real revolution is happening in nearly every market in which you export that will change the way that trade support institutions (TSIs) operate.

The seat of this revolution is business-to-business (B2B) marketplaces. They bring together in one place all of the participants and associated services for international trade: suppliers, buyers, shippers, logistics, finance, inspection services, marketing news and software applications that facilitate digital catalogue production, purchasing and sales.

E-business marketplaces are essentially the virtual equivalent of a town market -- but open to buyers and suppliers from anywhere in the world who can connect a computer to the Internet. An e-business marketplace's objective is to be so easy and efficient to use that buyers and sellers will be willing to pay for the services offered. Such marketplaces exist in nearly all industry sectors. The leaders in these developments have been market-dominating businesses that could afford the million-dollar investments initially required. Now, more modest marketplaces that link together existing business communities can be built for a fraction of the cost of the earlier sites. In countries with slow and unreliable communication links, prospective users may have to establish temporary access through a site in another country or invest in their own, or shared, Very Small Aperture Satellite link (VSAT), a method that has been used by businesses in Nepal, for example.

Why a revolution?

Big changes are occurring in the cost of transactions and the way that all enterprises relate to each other. New technologies allow buyers to simultaneously communicate with many product and service suppliers, their supplier's suppliers, production and distribution facilities. This leads to a dramatic reduction in costs, order cycle times and working capital requirements and a big increase in efficiency and effectiveness as summarized in the table on the following page.

It also lets suppliers put together a seamless package of products and services to suit each buyer's needs. Typically, buyers have reported reductions in input costs of 10% to 30%, and suppliers have reported reductions in selling costs of 5% to 20%, according to a recent survey by Goldman Sachs. Transportation companies also benefit as they can arrange loads for their return journeys when they would normally run empty. Those enterprises that have restructured their internal processes, hierarchies and communications around the demands of a digital environment have benefited most. They have been able to manage their entire supply chains through the Internet and move from the traditional Buy-Hold-Manufacture-Hold-Sell process to a Sell-Source-Assemble-Ship model. In other words, they build-to-order, rather than build-to-stock.

From marketplaces to Internet Trading Exchanges

E-business marketplaces come in many disguises. A term commonly used these days, to distinguish them from single company sites, is "Internet Trading Exchange" (ITE). Some ITEs are restricted to a specific industry subsector, such as the Africa recycling exchange, http://africa.recycle.net/. Others have a wider scope. For example, http://www.goindustry.com covers surplus equipment sales for many industries; http://www.mmprocurement.com covers metals industries; and http://www.gofish.com for international seafood sales.

ITEs are not restricted to industrialized countries. There are examples based in Peru, Paraguay, Thailand, India, China, Mongolia, Uganda and other developing countries. There are currently more than 1,000 ITEs in operation, with many more planned to come online next year.

Prepare your country for Internet trading

At ITC's first Executive Forum (Annecy, October 1999), a number of national trade promotion organizations expressed doubts about the usefulness of the Internet as a tool for international trade. …

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