Business-to-business buying and the internet

To must consumers, excitements about internet buying has focused on website sealing computers, software, clothings, books, flowers or other retail gods. However, consumers-goods sale

s via the web are dwarfed by the internet sales of business goods. In fact, experts predict that business-to business internet trade will reach $134 billion a year by the turn of the century.

General electric is among the pioneers in internet purchasing. Last January, GE’s Information service division (GEIS) launched a Website, which allows buyers in GE’s many division to purchase industrial products electronically. This website lets GE buyers snap out requests for bids to thousands of suppliers, who can then respond over the Internet. Such electronic purchasing save money, time and piles of paperwork. According to account in Forbes, here is how it works:

The machinery at a GE lighting factory in Cleveland broke down GE lighting needed custom replacement parts, fast. In the past GE would have asked for bids from just four domestic suppliers. There was just to much hassle getting the paperwork and pro duction- line blueprints together and sent out to (a long list of) suppliers. But this time they posted the specification and “requests for quotes” on the GE’s website-and drew seven others bidders. The winner was Hungarian (vender) that would not (even) have been contacted in the days of paper purchasing firms. The Hungarian firm’s replacement parts arrived quicker, and GE Lighting paid just $320,000 a 20 percent savings.

So far, GE’s Internet purchasing system has logged more than $350 million worth of purchases by GE division, at a 10 percent to 15 percent saving in costs and five-day reduction in average in order time.

Based on its own success, GE is now opening the website to other companies. However, as a supplier of Internet purchasing services. GE will face formidable competition. As noted in forbs:

GEIS has jumped ahead of such companies as IBM, Microsoft, and Netscape to led the race in to business-to-business internet commerce. The tough part of establishing such a system, says Orville Bailey, who manages GEIS’ internet project, is just getting it started. Buyers do not want to invest in a system unless suppliers are already on board, and vice versa. “It’s the classic chicken-or-the- egg problem,” says Bailey. [Here, GE’s tremendous size gives it] a crucial advantage. GE division spends more then $30 billion a year on other companies’ good and service. So when GE announced last year that it would be soliciting bids over the internet, even the smallest, most technology of its supplies listed. Smiles bailey, “we could build the critical mass” [needed to get the internet commerce network up and running].

With its own network of industrial goods suppliers already hooked into the system, GE is finding it easy to resell the internet purchasing just as GE does. For access to its website,GE information service will charge buyers an initial fee of $70,000 and an undisclosed annual fee based on volume. Suppliers get to sign on to the system free.

The first [outside firm] to sign on is Textron automotive a subsidiary of the $9.3 billion Textron, inc. like GE, Textron automotive buys a lot of row materials and components: resin,asthrays,matel clips, and other parts used in auto dashboards and paneling. By year-end, Textron Automotive hopes to palace all its order-more than$500 million a year –over the GE information service website.

GEIS’s bailey expects various GE units to be buying goods at the time rate of $2 billion a year by a next year and outside firms like Textron auto motive to be doing another $3 billion or so. If a $134 billion market for business-to-business internet commerce by the year 2000does materialize up to $50 billion of that will move over GE’s internet purchasing system. What of the much-ballyhooed retail website?

….Those site will do about$10 billion in 2000.That’s one-fifth the potential volume of GE’s business goods website alone

Thus, the internet promises to change dramatically the face of business marketing. As one expert suggests, “internet presences is becoming as common as business cards and faxes.” To stay in the game, business-to-business marketers will need a well thought out internet marketing strategy to supplement their other business marketing efforts.