E-Commerce

Barters, swaps, and other twists on B2B e-commerce models

Buyers and sellers in markets from automotive to printing are embracing online B2B practices such as barters and exchanges. Read more to learn how participants benefit from doing business in this emerging e-marketplace.

Just in the last quarter of 1999, dozens of business-to-business e-commerce sites have popped up, and most are experiencing swift activity on their sites.

Practices like bartering, trading, and exchanging, which are now taking place at these new sites, have been embraced by buyers and sellers in the automotive, construction, advertising and media, printing, and retail markets. Experts say these practices are going over well because they help users to increase sales and marketshare, decrease cash expenditures, reduce surplus inventory, take advantage of underutilized capacity, and increase cash flow.

In this article, we’ll examine online barters and exchanges and how participants benefit from doing business in this emerging e-marketplace.
For the past three weeks, TechRepublic has explored the world of online auctions. Previous installments have presented an overview of online auctions and have examined how businesses can use auctions to reduce their bottom lines.
Part 1: “Online auctions: What a buyer should know "

Part 2: “Online auctions make your old inventory pay

E-currency instead of cash
Though bartering is nearly as old as humankind itself, the practice is gaining more and more backers in today’s business world.

Companies are beginning to see corporate barter—a form of business-to-business trade—as a value-added proposition. If a company is weighed down with excess inventory, barter offers a better payback than alternatives like liquidation. By bartering, a company can get something useful in return for those goods, without necessarily putting up any money.

Corporate barter can also save companies money by:
  • ·        Reducing inventory storage needs
  • ·        Minimizing losses from perishable goods
  • ·        Boosting export business
  • ·        Cutting corporate purchasing costs for such items as airfares, hotel stays, and advertising.

When companies barter online, they typically use a non-cash electronic currency. At Ubarter.com, users haggle over everything from apparel to office equipment to financial services, and money never changes hands. Instead, buyers and sellers secure goods and services using “Ubarter Dollars” as payment.

In one recent exchange on Ubarter.com, a radio station purchased $100,000 worth of real estate, and the seller of the real estate purchased construction services and advertising from other members. In another, a hotel sold rooms to other Ubarter members, and the hotel purchased printing services, bottled water, and janitorial services.

Another barter site, BarterTrust.com, partners companies with trade exchanges and international corporations so they can barter over products and services at values based on a non-cash electronic currency.

Mike Edelhart, BarterTrust.com president and CEO, said barter sites allow companies of all sizes to exchange goods and services at full economic value within a safe, financially backed network.

"Business-to-business barter allows for the cashless exchange of goods and services among multiple, trustworthy corporate trading partners," Edelhart said. "Barter allows companies to secure goods while preserving their cash, enabling member companies within the barter network to better manage inventory without forced or unnecessary discounting."

Swapping down the supply chain
While bartering may work for companies looking to reduce cash flow, exchanges may be the answer for businesses preferring to buy and sell items in return for real dollars.

Exchanges involve a neutral party that sets ground rules for many buyers and sellers, who pay a fee for each transaction conducted. The practice is ideal for purchasing agents because it allows them to place their orders online with the same suppliers with whom they are already approved to work.

Oracle recently launched an online trading marketplace, OracleExchange, where companies can buy, sell, or auction a variety of goods and services. Oracle’s goal is to facilitate the exchange process without buyers or sellers needing to purchase or install any software.

The Ford Motor Company will use Oracle Exchange for its AutoXchange, an online auto supply chain network that the company will launch in January.

Ford claims the site will be the world's first automotive online supply chain network and the largest business-to-business electronic network. Because AutoXchange will be open to the entire automotive industry, Ford executives expect the site to dramatically increase both purchasing and operating efficiencies throughout the entire supplier network and reduce time-to-market.

The automotive industry as a whole is intensifying its efforts to move business to the Web. GM TradeXchange, General Motors’ business-to-business auction site, is expected to be fully operational in the first quarter. And PartsDriver.com, an aftermarket auto parts trading exchange, offers participating traders three buy-sell formats—catalog-style listings, auctions, and “parts-wanted” postings.

Buyers and sellers in widely diverse markets are using exchange sites as well. FreeMarkets , a business-to-business site for buyers and sellers of industrial parts, raw materials, commodities, and services, has introduced Exchange@FreeMarkets, which deals in surplus, used, and secondary goods. Exchanges are generally open to all buyers and sellers, unlike the site’s purchasing auctions, which are open only to the buyer's select list of invited suppliers.

At Industry to Industry Inc., buyers and sellers can trade and auction goods and services related to construction and engineering, automotive and components, and the food and beverage industries. And PrintBid.com, an e-commerce marketplace for the printing industry, aims to make it easier for print buyers to find the best vendor quickly, as well as to help commercial printers and suppliers attract the right customers for their equipment mix.
E-commerce solutions such as bartering and swapping work for business-to-business users in a variety of situations:
  • ·        In place of using catalogs or brokers for procurement
  • ·        When establishing a long-term contract
  • ·        When making spot purchases
  • ·        As an alternative to liquidation of excess inventory
  • ·        As a way of reducing cash flow

So much e-commerce activity across such a wide variety of markets points to time and cost savings for all participants, insiders say. Oracle’s Ron Wohl, senior vice president of applications development, believes the model will expand to include more users over the next several years.

"Traditional business-to-business procurement has been too limited," Wohl said. "The Internet, for the first time, allows the creation of a global business marketplace that leverages all modern trading approaches—catalog buying, long-term contracts, spot purchases, auctions—and applies them to all goods and services.”
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