The News – 07/30/01
B2B Pace Car
Covisint landed on the B2B exchange scene last year with a
thud, simultaneously legitimizing and terrorizing the exchange marketplace.
After spending most of last year getting their act together, the automotive
marketplace is now doing $36 billion in transactions via auctions. There’s
no telling how much revenue the independent company is reaping from those
transactions because Covisint (stupid name alert) isn’t saying.
Lately it seems they’ve been having trouble signing up European
automotive suppliers, but partner DaimlerChrysler should be able to bring
them in line. Covisint claims automakers can save $2,000 to $3,000 on
producing a car and take 6 to 8 months out of the product cycle.
Doug VanDagens, Covisint’s senior vice president of strategy
and business development, said “At the end of the day, private and public
exchanges want the same thing: they all want to be profitable and save
money for their customers at the same time. Ownership is the only real
difference.” I beg to differ. The
aims of captive exchanges like Covisint are fundamentally different from
the aims of either public or private exchanges. There’s more detail in the
white paper, Taking
Control of the B2B Exchange: What's Next in the Supply Chain Evolution,
but essentially the goals of the three types of marketplaces are:
Captive Exchange (AKA COBAM – Collaborative Online Bricks
And Mortar) – to ensure lower prices and continued industry dominance for
the sponsors. Price pressure is applied through liquidity, the volume of
transactions over the exchange. Partners commit to a certain transaction
volume, and encourage or require their trading partners to participate. COBAMs
are slowly realizing that true value can be created through collaboration
with suppliers, not through beating them up over price.
Independent Exchange (AKA Public Exchange) – to create
liquidity that drives transaction fees and other revenue streams. A
marketplace that is not liquid does not have a lot of trading activity. Without
critical mass, independent exchanges cannot derive revenue, regardless of
whether they charge transaction fees or depend on providing ancillary
services to make ends meet.
Private Exchange (AKA Extranets on Steroids) – to improve
communications and increase collaboration with supply chain partners.
Private Exchanges are controlled by a single buyer, and are typically not about
liquidity, although a critical mass of transactions is necessary to justify
their existence. The buyer and the suppliers can design new products or
logistical flows, and all can benefit from greater visibility into what’s
happening in the supply chain. The private exchange is more about creating
lower costs through decreasing supply chain friction rather than through
Business owners should be aware of the goals of the various
types of exchanges before agreeing to participate. If those goals are not
aligned with the business’, take a hard look at participation. It seems
that the COBAMs have the momentum and the transaction volume in the
industry today, but private exchanges and the collaborative tools they make
available will be the dominant form of online marketplace by the end of the
- Do Online Ads Work? A famous man once said, “I know that half the
money I spend on advertising is wasted. I just don’t know which half.”
You’d think online advertising, with its ability to track response,
would improve that ratio. Apparently not, but there are some things we’re
learning about online advertising. For example, a DoubleClick study
found that larger banner ads work better. Also more effective were
those incredibly annoying “interstitial” or “pop under” ads. Those are
the irritating windows that pop up when you enter or leave a site. A
great example is the ubiquitous ads for the wireless video camera you’ve
no doubt seen. Those have become so obnoxious, that you can actually
go to the manufacturer’s site and sign
up not to see the ads. It only works for a month, and then they’re
back in your face. Anyway, this eMarketer article pleads with
advertisers to not start an arms race:
Rather than lurching towards
"bigger is better" online advertising, in an understandable
attempt to provide both comfort and confidence to traditional
advertisers, perhaps the industry should seek ways to work with
consumers. After all, this is still a very young medium. Surely we
haven't run out of ideas already.
Amen to that.
Online Grocers: Several grocery dot-coms have blown up recently, yet two European
firms are charging ahead with online grocery. As reported here earlier, multinational
grocery Ahold has made eCommerce and home deliveries a major strategy,
buying the rest
of Peapod and running a very nice online operation in Argentina.
In 2000, it achieved online sales of about 250 million euro and
expects sales to rise to about 1 billion euro by 2002. After shelving GroceryWorks.com
and writing off $30 million, multinational grocer Safeway transferred
35 percent of GroceryWorks equity to Tesco PLC, a British grocer. Tesco
runs a profitable $420 million online operation in the United Kingdom
and intends to allow users to shop via Microsoft Pocket PC devices. In
return for the equity, Tesco is helping to revamp Safeway's online
operations. The operations will reopen under the local Safeway banner
with a new Web site and deliveries fulfilled from the stores. Now that’s
the way you do it.
- Demise of a Newsletter: Jeffrey Harrow, the
author of one of my favorite online newsletters, the Rapidly Changing
Face of Computing, published by Compaq, is leaving the company. RCFoC
has a little larger circulation than SNS, about half a million
readers. There’s no telling what will happen to this tremendous
resource about leading edge tech, but chances are good something will
occur at www.rcfoc.com.
- Web Site Outage: Although it didn’t make the national news, the
StratVantage Web site was inaccessible for many hours last Thursday,
right after the previous
SNS went out. I apologize for the inconvenience and blame the nitwits at my hosting company,
who decided to change all the IP addresses in the middle of the day.
When I pressed them as to why they hadn’t notified me beforehand, they
said, “We have thousands of users. We couldn’t possibly call them all
up.” I asked them if they had ever heard of email. They said they
usually post notices of this sort on their helpdesk Web site, although
they had neglected to do so this time. This reminded me of the bit in Hitchhikers Guide to the Galaxy
where poor Arthur Dent is told the notice of his impending house
demolition had been on display at the local planning office for nine
months. Dent eventually found the notice: “It was on display in the
bottom of a locked filing cabinet stuck in a disused lavatory with a
sign on the door saying ‘Beware
of the Leopard.’”
- Content-Free Websites: Noted Web usability expert Jakob Nielsen recently
wrote about Web site tag lines, the short statements that sum up what
a site offers. He has found that B2B sites have a tough time putting
what they’re about into short, pithy statements. He offers some
guidelines for front page design (among them, lose the Flash
decide quickly whether to stay or leave a site. To assess whether your
homepage communicates effectively to visitors in the crucial first 10
seconds, follow two simple guidelines.
- First, collect the taglines from your own
site and your three strongest competitors. Print them in a bulleted
list without identifying the company names. Ask yourself whether you
can tell which company does what. More important, ask a handful of
people outside your company the same question.
- Second, look at how you present the company
in the main copy on the home page. Rewrite the text to say exactly
the opposite. Would any company ever say that? If not, you're not
saying much with your copy, either.
about your home page as analogous to a tradeshow booth. Why do you stop at
some booths and skip others? And, no: having a live magician is not the
answer for your home page. Clearly saying what you do and why users should
care is the way to go.
Can’t Get Enough of ME?
In the unlikely event
that you want more of my opinions, I’ve started a Weblog. It’s the
fashionable thing for pundits to do, and I’m doing it too. A Weblog is a
datestamped collection of somewhat random thoughts and ideas assembled on a
Web page. If you’d like to subject the world to your thoughts, as I do, you
can create your own Weblog. You need to have a Web site that allows you FTP
access, and the free software from www.blogger.com.
This allows you to right click on a Web page and append your pithy thoughts
to your Weblog.
I’ve dubbed my Weblog
entries “Stratlets”, and they are available at www.stratvantage.com/stratlets/.
Let me know what you think. Also check out the TrendSpot for ranking of
the latest emerging trends.
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