ATLANTA (Aug. 10, 2:50 p.m. EDT) — After buying a resin distributor in February, NetVendor.com Inc. now plans to move away from online transactions and toward the software side of its business.
Atlanta-based NetVendor becomes the second independent trading exchange in the past three months to say it will shy away from Web-based plastics transactions.
In June, Chicago-based Commerx PlasticsNet said it would shift its emphasis from Web trading to providing technology to processors for online procurement. Timothy Stojka, chairman and chief executive officer of parent company Commerx Inc., cited the lack of volume — and profitability — for Web-based exchanges.
NetVendor executives did not share the same financial concerns but said that managing transactions is not where its future lies. The company launched PlasticsBin.com, a trading source for surplus plastic inventory and scrap, earlier this year.
"We learned firsthand what it takes to make an exchange work," said Michael Lackey, NetVendor director of product management. "And PlasticsBin was one of the few exchanges making money, with transactions actually going through it. But we're taking what we've learned and carving out our place in the supplier-enablement area."
NetVendor does not plan to scrap PlasticsBin and two other trading sites, for automotive and electronic parts, said spokesman Stuart Smith. However, the possibility exists that the bins could be sold, he said.
The company instead will focus on developing and marketing its E.mbrace software, which helps to automate business processes for resin and parts sellers and connecting them to potential buyers.
In May the company raised $52 million in a third round of private funding, primarily to support E.mbrace. The company's largest investor is Internet Capital Group.
Previous financing rounds — for $4 million and $12 million — went to develop trading exchanges and E.mbrace, Smith said. But the market has changed, he added.
"Between our first and second round of financing, the world got caught up in trading exchanges," Smith said. "The problem is that to get buyers, you have to have sellers. And there are 800-pound gorillas out there who can get buyers quickly. It can be both the beginning and the end of dot-coms as we know it."
One looming "gorilla" is Omnexus, a neutral trading exchange targeted at injection molders. That exchange, scheduled to start in October, is funded by seven large resin companies, including Dow Chemical Co., DuPont, BASF Corp. and Bayer AG.
NetVendor purchased resin broker Able Plastics of Marietta, Ga., in February. Able sold thermoplastic regrind for 13 years but had difficulty keeping up with capacity through traditional selling methods, said Able Plastics founder Barry Shemaria.
Shemaria, now plastics industry director at NetVendor, did not return a telephone call seeking comment.
NetVendor's E.mbrace software, first released in 1996, is being remarketed for resin manufacturers and distributors, Lackey said. Its capabilities allow customers to browse through online catalog offerings, place orders and track shipments.
An updated feature offers the ability to transmit, view and order directly from computer-aided-design drawings.
"On the sell side of things, we hope to be that 800-pound gorilla," Smith said. "We're shifting from fighting the war (with resin suppliers) with a trading exchange to selling guns (to suppliers) for that war."
The change in direction fits forecasts by e-commerce analysts, many of whom see a coming collapse in the number of online exchanges. They site an inability to serve customers effectively and the stock-market decline.
"Independent trading exchanges, in general, do not meet supply-side needs very well," said David Caruso, general manager for manufacturing e-business strategies with Boston-based AMR Research Inc. "Their sustainable competitive advantage is a mirage."
Yet, alliances are being formed. While NetVendor is downplaying its transaction model, the company said in June that it had signed a co-marketing agreement with Burlington, Mass.-based getPlastic.com.
GetPlastic, an online provider of virgin resin, will send customers to PlasticsBin.com to dispose of excess, obsolete and slow-moving inventory, getPlastics President Chris Poirier said in a written release.
NetVendor said it will do the same for its customers who want virgin material.