Page 220 - Marketing Management

ANALYZING BUSINESS MARKETS | CHAPTER 7 197

The world’s largest industrial
auctioneer, Ritchie Bros., sells
a wide range of heavy equipment.

Company’s multilingual Web site. In 2009, 33 percent of the bidders at Ritchie Bros. auctions
bid over the Internet; online bidders purchased $830 million of equipment. 38
• Spot (or exchange) markets. On spot electronic markets, prices change by the minute.
ChemConnect.com is an online exchange for buyers and sellers of bulk chemicals such as
benzene, and it’s a B2B success in an arena littered with failed sites. First to market, it is now
the biggest online exchange for chemical trading, with 1 million barrels traded daily.
Customers such as Vanguard Petroleum Corp. in Houston conduct about 15 percent of their
spot purchases and sales of natural gas liquids on ChemConnect’s commodities trading site.
• Private exchanges. Hewlett-Packard, IBM, and Walmart operate private exchanges to link
with specially invited groups of suppliers and partners over the Web.
• Barter markets. In barter markets, participants offer to trade goods or services.
• Buying alliances. Several companies buying the same goods can join together to form pur-
chasing consortia to gain deeper discounts on volume purchases. TopSource is an alliance of
firms in the retail and wholesale food-related businesses.

Online business buying offers several advantages: It shaves transaction costs for both buyers and
suppliers, reduces time between order and delivery, consolidates purchasing systems, and forges
more direct relationships between partners and buyers. On the downside, it may help to erode
supplier–buyer loyalty and create potential security problems.
E-PROCUREMENT Web sites are organized around two types of e-hubs: vertical hubs
centered on industries (plastics, steel, chemicals, paper) and functional hubs (logistics, media
buying, advertising, energy management). In addition to using these Web sites, companies can use
e-procurement in other ways:
• Set up direct extranet links to major suppliers. A company can set up a direct e-procurement ac-
count at Dell or Office Depot, for instance, and its employees can make their purchases this way.
• Form buying alliances. A number of major retailers and manufacturers such as Acosta,
Ahold, Best Buy, Carrefour, Family Dollar Stores, Lowe’s, Safeway, Sears, SUPERVALU, Target,
Walgreens, Walmart, and Wegmans Food Markets are part of a data-sharing alliance called
1SYNC. Several auto companies (GM, Ford, Chrysler) formed Covisint for the same reason.
Covisint is the leading provider of services that can integrate crucial business information and
processes between partners, customers, and suppliers. The company has now also targeted
health care to provide similar services.
• Set up company buying sites. General Electric formed the Trading Process Network (TPN),
where it posts requests for proposals (RFPs), negotiates terms, and places orders.