Value-Chain Report -- Bringing A Face-To-Face Feel To E-Marketplaces

For big-ticket, online purchases, the value of the Internet is not simply that transactions can be executed faster, smarter, and more directly. Online B2B services can provide tremendous advantages -- including greater control over all aspects of the purchase and greater access to choices and potential customers. But what about more complex transactions such as purchasing used capital equipment? Up until now, sites that have attempted to facilitate these more complicated transactions may have caused more problems than they solved -- mostly because they do not emulate business practices buyers and sellers embrace. Auction sites provide a good example. Auctions have their place and are ideally suited to efficient liquidation, but the vast majority of transactions require direct contact between the buyer and seller, and this gets lost in the auction process. Perhaps the buyer needs more detailed information regarding the condition of the equipment or the warranty. Or maybe the buyer needs the equipment sooner than the bidding period allows. Auctions also do not adequately address the needs to establish terms of appraisal, shipping, finance, and other services. The vast majority of Web sites have not been maximized as a tool to establish and retain business relationships. Many B2B Web sites require a buyer to purchase from an unidentified seller. Even if the buyer is thrilled with the outcome, there is no guarantee he or she will connect with the same seller the next time around. Given these problems inherent in establishing sales relationships over the Web, the formula for online success becomes clear: The more complex the transaction, the more it needs to reflect current business practices. In other words, don't ask people to change the way they are used to doing business; simply improve it using the unique advantages of the Internet. Using the example of used capital equipment transactions, online B2B needs to focus on four principles:

Make equipment easy to find: Buyers don't want to waste precious time looking for the equipment they need to keep their operation up and running. Buyers want access to the largest possible inventory for the products they seek. A buyer should be able to post a request in the form of an inquiry that will be viewed by hundreds of potential sellers who can respond with a listing that matches their needs. The result is a better, faster procurement process that replaces the old phone-and-fax routine.

Engender trust: Buyers and sellers need to know who they are buying and selling from. This not only facilitates more deals, but it ensures that established business relationships can continue to thrive. Reliable exchanges will build strong partnerships with major industry associations, those that adhere to a strict code of ethics, creating a resource buyers can trust. It adds to the credibility of the exchange if the identity of the buyer and the seller are revealed at the outset of the transaction, so that both parties can establish a business relationship.

Facilitate direct negotiation: The best way to ensure buyers and sellers will transact online is to give them the same tools they have always used. That is, let the buyer and seller speak directly to one another and negotiate all elements of a mutually satisfactory deal. This is particularly critical for complex transactions that evolve over a long period of time.

Offer value-added services: Price is only one aspect of a used industrial equipment transaction. Other considerations include inspection, appraisal, engineering and shipping. These services can often make or break a deal. Successful B2B exchanges must include soup-to-nuts solutions for buyers and sellers. The success of B2B e-commerce has yet to be guaranteed. In many ways, this is still the first leg of the race. However, more industry experts and venture capitalists are putting their money in companies trying to facilitate existing business practices rather than inventing ones. Relationships have always been key to the sales process, and that will not change because of the Internet. Now, though, success will depend on mirroring the real-world dynamic of a B2B sale through improved tools over the Internet.

Ben Coes is the president and CEO of eSprocket, a Boston-based online marketplace for capital equipment. This column was distributed by BridgeNews but does not necessarily reflect the opinions of BridgeNews.