June 2001 Newsletter

Construction eCommerce - A Year Later

**** Quick Clicks:

Paid Placement is Catching on In Web Searches - The New York Times, June 4, 2001. The 4specs' showcase listings are a paid placement at the top of the section pages. (renamed to Overture) is another example of paid placement.
[link now in paid archive area, also Overture was purchased by Yahoo 7/2003]

**** The 4specs Perspective:

A year ago our newsletter focused on Construction eCommerce - Hype and Reality. Today the landscape is very different. Dot-coms have been pushed from a lush landscape with lots of venture capital to the dry desert of reality - they have to make a profit! And, this is more difficult and slower than they ever expected.

Our perspective is that there will be a lot of eCommerce in construction in 2005, but not as the venture capitalists and big websites expect to receive fees.

On May 21, 2001, the Wall Street Journal's special section on eCommerce used the terms private exchange and public exchange. I propose that two-party and three-party eCommerce is a better description.

Two-party eCommerce is between companies with an existing relationship, moving the purchase and delivery process from mail, phone and fax to the Internet. Initially the transaction can be as simple as an emailed form that is manually reviewed and entered, moving towards connecting the transaction into your order processing and manufacturing computer systems.

Three-party eCommerce adds an intermediary that is not typically in the purchase process. Most of the dot-coms had their revenue source in transaction fees for the sales through their website. They expected auctions and RFQ's would be the magic tools.

Many marketing managers have told me they receive phone calls for advertising from Buzzsaw and 100 other websites. A year ago, Buzzsaw expected revenues from transaction fees on material purchases made through their marketplace. In January 2001, Buzzsaw recognized that their materials marketplace was not part of a viable business plan and they refocused on providing project websites. I expect that other construction websites will change their projected source of revenues from eCommerce fees - or fail. (October, 2001 note - Buzzsaw was consolidated back into Autodesk)

There will be no single solutions for two-party eCommerce. Each manufacturer has different problems to work through. For ideas for your company, look to companies already successful in reducing their costs through the Internet and increasing revenues:

FedEx
Internet web tracking reduces their phone center costs and improves customer confidence in where their package is at that moment.

Southwest Airlines
30% of their seats are sold on the Internet. No other airline is close. Southwest has achieved significant cost savings through the Internet. In addition, while flyers like to find the cheap seats, Southwest gets to sell the cheap seats on lightly loaded flights. Increased revenues, lower costs.

GE Polymers
The Wall Street Journal reported that 25% of GE's polymers are purchased from GE through their website, at a reduced cost. Paraphrased from the 5/21/01 WSJ:

"The Website was just a way to make the enterprise more efficient. A phone call with a technical question, might cost GE $80 and a visitor could get the same information on the Internet for 50 cents."

How can the Internet reduce your costs? That is the question for your company for the next five years. From the beginning Specs-Online and now 4specs provides the working construction professional with access to the product websites need to design and build their projects. You can reduce literature costs and phone time answering common questions.

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Colin Gilboy
Publisher - 4specs
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