Web Emerges As Ultimate Intermediary In Commerce
ROB PRESTON
August 2, 1999
For a medium that was supposed to eliminate or marginalize dealers, distributors and other commercial go-betweens, the Web is flush with hundreds of new companies whose main purpose is to hook up sellers and buyers.
"Infomediary" is the fashionable label, but these companies also are referred to as aggregators, hubs, auction sites, portals and exchanges, depending on their specific focus. What they have in common is that they improve the market-clearing dynamics of capitalism by leveraging the accessibility, efficiency and information-richness of the Web.
You've seen their success in bringing consumers to sellers. Among the biggest brands, eBay lets you bid for just about anything-from luxury items to knick-knacks-from your computer. Priceline serves as a clearinghouse for surplus airline seats, hotel rooms and other services. Autobytel doesn't sell cars; it matches discriminating buyers with the right dealer, model, features, price, financing and other amenities. Yahoo isn't just a glorified search engine; it herds consumers into an online bazaar of information and merchandise.
But infomediation is an even more powerful phenomenon as it applies to business-to-business sales-mainly because businesses buy more online than consumers do. You've seen the Forrester Research projections: U.S. businesses will do $1.3 trillion in e-commerce by 2003, compared with $108 billion with U.S. consumers. The larger the sales volumes and the more fragmented the market or industry, the greater the opportunity for Web intermediaries to add value.
These modern-day middlemen create liquidity by making real-time information on availability and pricing easily accessible. They serve as a channel of only resort for excess or perishable goods. In the process, they adjust prices more closely to demand, and they often handle settlements.
As editor-at-large Richard Karpinski notes in his page 1 story, there's plenty of room for more than one or two Web intermediaries in most industries. For instance, the $1.6 trillion chemicals industry, which already has several online middlemen, will get another one this week when ChemConnect brandishes a site that lets industry players buy and sell large volumes of unrefined chemicals via an open exchange rather than static catalogs. The start-up is even considering ways to let players place bets on chemicals futures.
Web-based intermediation has already taken hold in several industries. Companies sell electricity, natural gas and international telecom minutes via online exchanges. Web middlemen are sprouting in metals, timber, steel, transport, plastics, food services and computers. But just as any industry is ripe for more efficient means of matching buyers with sellers, so too are their conventional channels vulnerable.
The key, of course, is to add value. If all you're good at is stocking merchandise, marking up prices and selling to accounts, you won't be much use in today's Internet economy. The Web also is good at helping companies sell direct to their end customers.
Is your industry ripe for new Web intermediaries? How are the old channels changing or being phased out? Let us know at the address below.
Robert Preston is editor in chief of InternetWeek. He can be reached at rpreston@cmp.com.
