Marketplace Shakeout Predicted
Just when you came to terms with the fact that a lot of onlineretailers could be in bankruptcy court this time next year comes
the prediction that many--maybe most--marketplaces will join them
there. A study by AMR Research released Monday assessed the future
of today's hot E-commerce niche and predicted big trouble if
fundamental changes are not made.
"Two guys and a dog could receive funding for an online
marketplace right now," AMR senior VP Bruce Richardson says. But,
he says, most marketplaces studied will fail because of errors in
revenue strategy, technology integration, and liquidity. "The fee
per transaction, advertising, seller vs. buyer--all these revenue
models are getting bounced around because they don't work.
Membership models would." According to AMR, exchanges will have to
adopt revenue models similar to those of application service
providers.
In the study, AMR tracked 600 exchanges over 18 months. A similar
study next year might find that bankruptcies, mergers, and
acquisitions have killed off all of them but 50 to 100, according
to the survey. Dean Dorman, VP of business development at Ventro
Corp., an umbrella company for five vertical market exchanges, is
more pessimistic: he predicts only 10 to 20 will survive the year.
"Most of the Net markets--even the big names--haven't completed
their first transactions. When do they plan on getting into
business?"
And the standalone exchange might soon be a thing of the past.
Take Ventro, for example. It's operated Chemdex, one of the front-
runners of the exchange phenomenon, since 1997, but the company
recently created five new exchanges. It's difficult for single
exchanges to operate and have a return on investment. We needed to
spread our assets across several markets, concedes a Chemdex
spokesman.
Richardson further predicted that the neutrality of independent
exchanges would be sacrificed for the bottom line. Exchanges will
need equity investments from major partners to draw all players
in. "I look at it as a mall: You have to have an anchor store to
bring in the transactions."
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