(By Simon Burns in Taipei, November 30, 2000)
Far Eastern Economic Review
THE REVIEW'S E-BUSINESS survey shows that small and medium-sized enterprises tend to invest much less in doing business on-line than their larger competitors. Maybe one reason they aren't spending so much is that they can rely on on-line B2B market places. True, it means they surrender some control, but they can cut costs to a minimum and expose their products to large numbers of buyers all over the world.
That's certainly the need addressed by Hong Kong-based Alibaba.com, which, by a narrow margin, was voted the most popular B2B Web site by readers of the REVIEW's e-mail newsletter.
Alibaba.com's founder, Jack Ma, has always stressed that his target customers are small businesses -- in his own words, "shrimps" and not "whales." On a typical day, the on-line community trading on the Alibaba.com Web site will contain around 50,000 buyers and 120,000 sellers from more than 200 countries.
But it seems that, in absolute terms, the companies that provide B2B exchange software and services are still at the shrimp stage of development.
More than 70% of the 4,846 people who responded to the REVIEW's e-business survey said they simply didn't have a favourite B2B site in their industry. Of the 20 prominent sites we suggested, most ended up with fewer votes than they have employees. Alibaba.com got the most votes -- a little over 4% of the total. Four other companies, two of them based in Asia and two in the United States (ariba.com, asia2b.com, commerceone.com and globalsources.com) got around 3% each.
The lack of dominant players isn't surprising, says James Wang, an Internet analyst with Merrill Lynch Taiwan. It's a sign of an immature market. "You're seeing that some companies like Ariba and Commerce One are gaining some traction over local sites. Within three to five years we'll start to see the winners," he says.
Support from only 3%-4% of a market may seem like a tenuous toehold, but business-to-business transactions over the Internet are potentially a very big pie. The total value of global commerce is predicted to exceed $50 trillion by 2005, with as much as 10% of that being conducted on-line, according to various analysts. Operators of B2B platforms don't necessarily need to expand their market share beyond a few percent, but with competing market places a mere mouse click away, they do need to work hard to hold on to the customers they have.
Companies coming into the market late with a "me too" approach are unlikely to succeed, says Wang. "There are a lot of local and regional players who are trying to reinvent the wheel." And B2B service providers who fail to look for customers across national or regional boundaries may be trying to build a niche where none exists: "The market's global," he says.
Alibaba.com is a good example of this. The company has its roots in China, home of founder Jack Ma, and more than half of the exchange's participants are based in China.
However, the rest come from all over the world, with a notable proportion from developing markets and poor countries that normally don't figure very prominently in e-business statistics. During the past few months, Alibaba has hosted an Albanian buyer of motorbikes, an Algerian company in search of computer-memory modules, as well as sellers of silk in Cambodia and cashew nuts in Burkina Faso.
Copyright (c) 2000, Dow Jones & Company, Inc.