After consuming more than $100 million worth of investors' money since its inception just three years ago, Omnexus is hitting the delete button on the idea of a dot-com marketplace for resin.
On Nov. 13, Omnexus and its 14 stakeholders - all leading materials and equipment suppliers - announced they will take down the site by the end of this month.
``We were in a fully evolving situation, but we didn't achieve the e-commerce adoption to support our marketplace,'' Michael Walsh, Omnexus chief operating officer, said in a Nov. 17 telephone interview from the company's U.S. headquarters in Atlanta. ``That's [one of] the realities of business.''
Another reality: The loss of Omnexus is a major setback to e-business adoption in the plastics industry, said David Jukes, a former Omnexus vice president who now is chief executive officer of resin distributor Distrupol LLC of Chertsey, England.
It could take years for the industry to recover, he said.
A major loss is Omnexus' UltraLite technology, a trailblazing piece of software that eliminates the double keying of orders, Jukes said. But in the end, the company could not continue to meet its finances - UltraLite alone cost close to $30 million to develop, Jukes said.
Some of the fault in Omnexus' failure might come from the inability of the market, and the investors, to understand the concept, Jukes said.
``At the end of the day, not enough people got it.''
The company will lay off its 45 employees, spread between Atlanta and at its European headquarters in Zurich, Switzerland, by the end of the month, Walsh said. While its trading arena will stop Nov. 30, the company is seeking buyers for its e-marketing and advertising services.
Walsh said two companies are negotiating with Omnexus for those functions, which include Omnexus' news service, electronic marketing support, Web seminars and lead-generation.
Some resin producers touted Omnexus as the future of materials buying when the concept was unveiled at NPE 2000. At the time, a group of five formidable suppliers who sometimes competed with each other - Dow Chemical Co., DuPont Co., BASF AG, Bayer AG and Ticona/Celanese AG - contributed more than $50 million to start Omnexus.
The setup was a bit tricky. While Omnexus would run independently, those resin companies were working concurrently to build long-lasting Web trading sites of their own.
More funding soon followed, with Omnexus receiving well over $100 million, according to several sources close to the companies. Other sell-side investors included PolyOne Corp., DSM Engineering Plastics Inc. and Solvay SA. Omnexus added machinery sales to its bulked-up roster, gaining Engel Vertriebsgesellschaft MbH as another investor.
The resin companies had kept an eagle eye on distributor GE Polymerland, which had a fast-growing Web trading site. They hedged their bets that they could do the same with Omnexus, creating an insurance policy in case their own sites failed, said Jean Sirois, director of North American marketing for material supplier and Omnexus investor Clariant Masterbatches.
That setup, while not doomed to fail, certainly had its questionable aspects, Sirois said.
``The bottom line is that when you have five founders who all compete with each other and are investing in a company with a common goal, there is going to be conflict,'' said Sirois, based in Holden, Mass.
Some earlier dot-com models serving the entire industry also did not work.
One pioneer, PlasticsNet.com, sold off its site in 2001. Former CEO Timothy Stojka said the concept still works, but takes more time than first envisioned.
``The execution of it is very difficult, very time-intense,'' said Stojka, now chairman of hot-runner systems supplier Fast Heat Inc. in Elmhurst, Ill. ``And I don't see how competitors can build a system that can manage proprietary information and have common interests. It's not surprising what happened at Omnexus.''
Still, the site had its elevating moments that moved Web-based buying forward for processors and suppliers.
More than 20 suppliers used Omnexus as a neutral site to trade resin and machinery, allowing buyers to compare materials and interact with diverse companies.
But the company never gained the acceptance it wanted. Difficult economic times, starting soon after Omnexus launched in October 2000, contributed to those hardships, Walsh said.
The company attempted to evolve into other areas, such as a marketing service and a sophisticated search engine to compare resin grades.
For the past two years, Omnexus championed UltraLite, which it also marketed for use by outside Web sites. That technology will disappear with the Omnexus name, Walsh said. The company is recommending that customers use an automated purchase-order technology called Buyer Direct from Web networking supplier Elemica Inc. of Wayne, Pa. Omnexus has an alliance with Elemica.
The Omnexus model was essentially flawed but well executed internally, said David Honeycutt, PolyOne director of e-business and marketing communications. Yet, Honeycutt said he hopes the company's end does not put a damper on processors' Web use.
``My fear is that a lot of people will lose faith altogether, instead of understanding that e-commerce is a 10- or 20-year journey,'' said Honeycutt, based in Avon Lake, Ohio. ``It's possible that the lesson of Omnexus will be a kind of early-warning message to others wanting to venture into the space. That would be a shame.''
The loss of Omnexus leaves little in the way of independent Web sites for plastics sales. One of the few remaining larger sites is Houston-based ChemConnect Inc., but that company serves buyers of chemicals and feedstocks more than resin.