Smaller Players Drive E-Channel Strategies

SAN MATEO (07/17/2000) - The old line that nobody knows you're a dog on the Internet has made its way to business-to-business e-commerce. Exchanges and auctions are fast opening up opportunities for companies of all sizes to compete on an equal footing. And, as is often the case with e-business, companies with forward-looking dynamic pricing strategies have the advantage.

The notion that a lumbering corporate giant, such as a steel manufacturer or a transportation company, can use the Internet to form an ad hoc relationship with a new supplier and procure goods instantly seems fanciful today. But there are signs that the rush to get smaller companies hooked into trading exchanges is not just expanding the pool of potential business partners. Start-ups with flexible business models are driving the first wave of auctions and dynamic pricing in e-business.

Large companies that don't want to be left behind need to get on board, at least in a limited way initially, and drive the intercompany integration needed to make dynamic pricing worhwhile for them.

The first thought most people have of auctions is eBay Inc., which many consider an online consumer bazaar. Our story by Ephraim Schwartz, Dan Neel, and Eugene Grygo details how the auction buying model is making real headway in the business world and redefining the buyer-seller relationship.

These early business auction experiments, either through a single vendor's e-commerce site or an online trading exchange, are the proving grounds for the soundest business models. The new approaches also put added pressure on established brick-and-mortar outfits to develop an electronic sales channel strategy that incorporates dynamic pricing.

The problem is that the discussion of auctions and exchanges has been limited largely to squeezing the lowest prices out of suppliers. Other factors, such as product quality and delivery time as well as services such as financing, need to be addressed before things will really take off.

Does dynamic pricing belong in your strategy?

Write to me at martin_lamonica@infoworld.com.

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