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Online markets face doubtful future

More than half of today's online marketplaces will die as serious business models replace the 'gold rush mentality', according to analyst Gartner. Computing magazine[10 Apr 2001]

Research director Petra Gartzen said that Europe has probably reached the peak in the number of online marketplaces, at around 500. She told Gartner's Spring Symposium in Florence that the real potential for online transactions was far lower than expected, and that only a small proportion of companies were using internet marketplaces as a place for serious buying and selling.

'Only 40% of the e-marketplaces will still exist over the coming few years. The rest will fail due to poorly developed business models,' she said.

'Businesses must ignore the gold rush mentality that typified the business-to-consumer market. The real gold is to be found in the long-term competitive advantage built on successful integration of the internet [with] business models,' she added.

David Oates, European vice president for online marketplace vendor Moai, said that the future for e-marketplaces does not lie with private exchanges set up by entrepreneurs. Instead, large companies must develop their own in-house markets and combine them with existing supply chains to get real returns on investment.

'People are now wary about the future of dotcom marketplaces. There are many, many public marketplaces failing at the moment. I heard of three failing in the UK this week,' he said.

'The real growth will be the corporate marketplace taking those exchanges in-house. They don't want other members of a consortium to know if it is competitive edge purchasing, so they will keep it behind the firewall,' he explained.

Oates added that large manufacturers do not want to get involved in using privately-run markets that charge huge fees.

'The transaction model is dying. Nobody wants to pay X per cent of the transaction value in fees any more,' he said.

Also published in Computing.

-- Carl Jenkins (, April 10, 2001

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