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B2B: Entering a New Phase in Plastics Marketing

An overview of B2B marketing plus suggestions on ways to harness the power of the Internet as part of your marketing strategy and business development tools.

By Margaret H. Baumann
G.H. Associates

The earliest and most publicized entries into the e-commerce arena have been largely in the consume
B2B/e-commerce Web sites

Listed below are some of the B2B Web sites for online purchasing of plastics materials, equipment and supplies.

Materials & Stock Shapes
albisNA.com: Sales of materials.
apexq.com: American Plastics Exchange’s site for molders and extruders to bid on virgin resin.
ariba.com: Formerly suppliermarket.com, online marketplace matching buyers and suppliers of manufactured direct materials.
chematch.com: For buyers and sellers of materials.
chemconnect.com: Exchange service connecting buyers & sellers.
commerxplasticsnet.com: Trading & supply-chain management.
dsmepp.com/polymers: DSM EPP’s site for sales of stock shapes.
e-resin.com: Materials & shapes trading, negotiate with suppliers.
eastman.com: Eastman’s site, information on sales of plastic resin.
efodia.com: Online purchasing of compounds, chemicals, additives, etc.
elastomersolutions.com: Trading of elastomer products & services.
freemarkets.com: Reverse auction site for parts, materials & services.
gepolymerland.com: GE’s site for plastic resins & materials.
getplastic.com: Online distributor of materials.
i2i.com: Industry to Industry’s site, sales through classified ads, auctions, etc.
omnexus.com: A portal for the materials industry.
onechem.com: Transactional storefront for chemicals, plastics, etc.
plasticlink.com: E-marketplace of the plastic shapes industry.
plasticsonline.cc: Source for corrosion & mechanical materials.
plasticsandchemicals.com: Bid-based marketplace.
plasticspds.com: Plastic Distribution Services’ material sales.
polymersite.com: PolymerSite/PolySort exchange site for resins.
supplierone.com: Marketplace for manufactured components.
theplasticsexchange.com: Bid/exchange for trading commodity resins.
worldwideplastics.com: TheBuyersNet.com’s e-commerce network.

Machinery & Services
assettrade.com: Used equipment & machinery.
dovebid.com: For bidding of used equipment & other assets.
i-comindustry.com: B2B auction site.
machinepoint.com: For buyers & sellers of used equipment & molds.
plasticlink.com: Section on site for buyers & sellers of new or pre-owned machinery.
protomarket.com: Marketplace for the rapid manufacturing industry.
thedock.com: The Dock Exchange’s site for buying & selling.

Cutting tools & misc. supplies
onsrud.com: Onsrud Cutter’s site for buying industrial cutting tools.
thermwood.com: Thermwood’s site for CNC router supplies.
wkwinc.com: Wisconsin Knife Works’ site for industrial cutting tools.

r services (B2C) area. Highly publicized market capitalization successes are in books, (Amazon.com), auctions (e-Bay.com) and travel (Priceline.com, Travelocity). There are also many Internet-based businesses in financial services (e-Trade), computers and software, office supplies, toys, health care items, etc.

However, Business-to-Business EDI (Electronic Data Interchange) has been in practice for over 10 years. Most EDI has been on company intranets. The expansion of the Internet, however, has offered additional efficiencies. It is now possible to integrate small or foreign companies more closely into the supply chain, increasing savings and speeding up innovation. Many industry observers predict that B2B will continue to dwarf consumer e-commerce and in fact will move ahead at an extremely rapid rate.

According to the market research firm International Data Corp., $80.4 billion was spent on B2B e-commerce in 1999, compared to $31 Billion in B2C sales for that same year. The B2B numbers are expected to increase to $1.1 trillion by 2003, a 1,418% increase; B2C commerce, on the other hand, is expected to grow by a mere 574% to $177.7 billion. A recent study from Giga Information Group Inc. argues that the cost savings globally through business use of e-commerce will rise from $17B in 1998 to $1.25 trillion in 2002, with U.S. companies reaping half the long-term benefits.

Any way you slice it, the power to navigate the world at the click of a mouse is a force that will transform our lives and our businesses like none before it. Although there have been many technological trends in the last century that have transformed business and our lives, none will have quite the impact of the Internet.

Benefits of the Internet

The benefits of the Internet are dramatic in B2B. It has been suggested that e-commerce transactions can be conducted for less than 10% of the cost of a typical transaction done by phone, fax, etc. In addition, the ability to customize information and services for industrial market segments is a very appealing feature and offers tremendous potential. You can incorporate animation, real-time simulations and other techniques that help convey technical information like no other media.

Targeted market research can also be conducted very inexpensively via the Net, enabling even faster response to customer needs and trends.

Trends and Business Strategies

Increasingly, the Net is forging direct links between customers and factories. Buyers — now mainly corporate customers — can tailor products the way they want them. Online customers can flex just as much muscle as corporate customers. Already, Dell Computer Corp. and others encourage shoppers to customize products to their liking on their Web sites.

Experts believe that 90% of manufacturing will move to the Net. In addition, OEMs will continue to outsource some manufacturing. In 1998, companies farmed out 15% of all manufacturing. In 2000, they will have outsourced more than 40%. The Net is also bringing a pivotal change in manufacturing economics. Cisco Systems, for example, outsources most of its production to contract manufacturers that operate 37 factories, all linked via the Net. Suppliers not only make all of the components and perform 90% of the sub-assembly work, but even do 55% of the final assembly.

Some experts view that many enterprises will become virtual partnerships. One member will handle the product development and engineering, another will take care of marketing and the third will handle manufacturing. This trend offers tremendous opportunities to the Internet-savvy small- to medium-sized manufacturing company.

In addition to speed and efficiency, studies also have shown that shifting from mass production to direct factory sales could slash prices for things such as cars and appliances up to 30%.

Soundbytes: The Distributor‘s Role in B2B Marketing

One of the concerns regarding B2B Web marketing has been the impact this business strategy has on the plastics distributor.

Joe Wolf, PlasticLink.com, said he doesn’t see E-commerce necessarily changing the role of the distributor. “Our business plan supports the distributor, giving him a higher technological tool to conduct his business....Instead of a company trying to tie into individual vendors, it can tie into the marketplace.

“The everyday processes will be streamlined, but the day-to-day business will still be there. The manufacturers that have a strong distribution network will continue to have one, and the distributors will also benefit from the lower cost transactions. (E-commerce) is not going to cut the distributor out of the supply chain, but instead it gives them another tool to reach customers,” Wolf said

Kress Schwartz, DSM Engineering Plastic Products, agreed that distributors will maintain their role in the marketplace. Although many of the aggregate B-2-B sites are just “a third-party electronic distributor, people are still going to want to buy from people,” he said.

“As I see it,” he added, “the real power in the Internet is that it is providing appropriate information to the appropriate person in the channel — directly. For a distributor that’s price and delivery, for a fabricator that’s fabricating information, and the OEM gets engineering information and the criteria for selecting the material.” — Karen Koenig

E-Commerce Business Models

In the last few years, several vertical (industry-focused) e-commerce sites have emerged in the area of plastics, metals, chemicals and lab chemicals. These are infomediaries or third party e-commerce sites. ChemConnect, Chemdex and Metalsite represent different e-commerce models.

Metalsite and Chemdex are seller–centric (Aggregation), ChemConnect is supply and demand based (Agora). Other models will be developed over the next couple of years.

It is thought that the most successful electronic marketplaces will be those that focus on specific niches, vertical markets, or industries. In seller-controlled sites such as Metalsite, success depends on offering the right products or services. Buyers look for products in general categories and will browse catalogs before choosing. Supply and demand marketplaces attract buyers who know what they want, how much they want to pay, or both. Priceline.com is an example of a supply and demand site. In this model, prices for goods and services are determined by supply and demand. This is also the model used by ChemConnect, whose strategy is to become the Web’s largest global chemical exchange. Some sites will support auctions or contract based pricing.

Determining Your Model

Before you can determine what role the Internet and e-commerce should play in your business plans, you need to select the business model that is best for you. In order to do this, you need to take an audit of your products, services and customers as well your suppliers, competitors and potential business partners. Remember your customers’ and suppliers’ businesses are changing too; the Internet is having an impact on them as well.

As a supplier, do you want to go through a buyer-controlled marketplace in which customers make demands that you have to meet? Does a seller-controlled marketplace make more sense for helping your business move excess inventory? Do you want to operate in a supply and demand driven site in which the market determines pricing? Downtime will mean lost business and customers might not come back. You need to anticipate this in your plans. Table I summarizes the characteristics of the different models used in e-commerce today.

One of the greatest problems for some of the world’s leading cyber merchants such as ChemConnect and PlasticsNet is figuring out brick and mortar components like distribution and inventory. And the Internet is just one channel. Customers will place orders any time, from any place — via 800 numbers, the Web, e-mail, etc. FedEx, UPS and other logistics concerns represent a necessary component and business model.

My belief is that the infomediaries like PlasticsNet serve a purpose but will not replace face to face or telephone interaction as a means of customer service. I believe more companies will follow the lead of Eastman, AlliedSignal and GE Polymerland go to the direct or value chain model.

But each business needs to determine for itself which e-commerce capabilities and features it wants to offer based on customer needs and market segmentation. It is all about getting the customer what they want when they want it. Just as in the PC world, some companies will get it. They’ll embrace this new opportunity. Others will cling to the old model and gradually go away.

Editor’s note: The above information was excerpted from a presentation given by Maggie Baumann at ANTEC. A complete copy of the article is available from the SPE (203) 775-0471 or contact Maggie Baumann, GH Associates, at (908) 832-2207.

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