Electronic commerce, both in the plastics industry and elsewhere, has come down to a carnival shell game.
Just 12 months ago, with the subtlety of blaring trumpets, many Internet trading companies announced they had arrived to extract cost from materials, parts or equipment transactions.
Resin and equipment suppliers were expected to jump immediately on the bandwagon. Processors were asked to join the parade, both to buy products and sell their wares through reverse auctions offered by FreeMarkets Inc. and others.
And distributors were told to pack their bags and move their businesses online or face virtual extinction.
Now, we´ve reached the end of another year — and, my, how the world has changed.
Instead of distributors fighting for survival, many dot-coms are gasping for air. Some have shunned online trading for other models; others have dropped off the map entirely.
The business case is downright scary; hardly any of them have turned a profit or even had measured sales. The only possible exception is GE Polymerland. That company — albeit offered from a single-source resin trader — is the only dominant plastics Web site in transaction volume. (And even Polymerland can´t — or won´t — tell us how much of its online sales represent expanded business and which simply represent orders placed via this new online channel.)
Still, a Plastics News roundup of plastics-relevant online traders shows that about 50 companies are left standing, even if some are reeling. Many analysts predict a heavy falloff that will leave only a few companies left in every industrial sector, including plastics.
What has happened? A plunge in the stock market, leading to waning interest from both Wall Street and venture capitalists, has left some companies high and dry. Attention has shifted away.
Check out the stock prices for FreeMarkets and others, and you´ll see them tumbling faster than Humpty Dumpty. Several others had their initial-public-offering dreams snatched away this year by the same cruel fates.
But the fissures in some companies have different roots than just funding. Many dot-coms have discovered that processors still must warm up to the click-and-mortar Internet world. It could take several more years before the rush comes.
And who knows what will be the winning model. Already, new companies in the mix include Omnexus, a molders´ central portal financed by resin companies, and many suppliers themselves, who want customers buying directly at their budding Web sites.
That´s where the shell game enters in. E-commerce is certainly not going away and, if anything, could still explode in growth next year the way it was predicted to do in 2000.
Yet, some processors could switch the ball to different shells from earlier, public trading sites. They might prefer working directly with a supplier or passing through a large portal that provides a better market look.
The remaining Web spinners could benefit processors. Emerging companies want to link supply chains to collaborate on design or automate the transaction process from plant to plant.
Meanwhile, the wait continues for that online future.
And so, unfortunately, does the deathwatch for some dot-coms that won´t survive the current upheaval.
