While they celebrated their ventures with unbridled enthusiasm last year, today many business-to-business (B2B) entrepreneurs are looking for ways to survive. "It's a tough Christmas for a lot of people in this space," says Tim Clark, a senior analyst at Jupiter Research.
For independent Net marketplace entrepreneurs, the gathering at the Jupiter Net Market Makers' Ground Zero conference looked like a funeral, with talk of consolidation, bankruptcy filings, closures and funding running out. During the conference, one of the Net market maker pioneers, Ventro, announced plans to close two of its Web marketplaces, resulting in write-offs of US$380 million to $410 million and the loss of 235 employees.
Under the Chemdex name, the company was a pioneer in promoting the idea of linking buyers and sellers on the Web. The publicly traded company saw its stock soar to $243.50 in late February, only to slide to under $2 per share. The company said it will close Chemdex, a life sciences marketplace on the Internet, and Promedix, a special medical products marketplace.
It was the latest in a series of blows that have beset B2B electronic commerce.
Earlier in the year, analysts predicted online marketplace numbers would reach 3,000 to 10,000, but now Deloitte Consulting predicts that during the next two years more than 1,000 of today's 1,500 online marketplaces will fail or merge globally.
Already, a handful of high-profile sites have failed. Among them, Efdex, a marketplace for the food and beverage industry, closed its U.K. operations after blowing through $65 million in venture capital during its five-year life span. In early November, Hsupply.com, an e-services company aimed at simplifying procurement for the $50 billion hospitality supplies industry, closed shop. Pandesic, a joint venture between giants Intel and SAP, announced plans to close its doors this summer because it couldn't turn a profit. The application service provider, launched in 1997, had about 400 employees in its offices in Japan, the U.K. and the U.S.
Dozens of other Internet marketplaces have been acquired by competitors as the industry consolidation continues.
The beneficiaries of the consolidation have been industry-sponsored, or consortium, marketplaces. The party is just beginning for dozens that have sprung up this year in just about every industry, from automobiles and airlines to chemicals and food products.
The big dogs have largely eaten the lunch of the smaller independent exchange operators.
"Companies that we thought were dinosaurs a year ago are players on the market today," Clark says. "The independent Net markets answered badly to some very serious questions. They offered too little and charged too much."
The independents that look most vulnerable are those in sectors dominated by two or three multinational companies, such as aerospace, auto parts and food processing. They are also the companies that don't have any proprietary technology to offer industry customers.
