Online Exchanges as Market Aggregators

As the Internet has proven in its many incarnations, it is a robust, resilient, and reliable platform for information exchange, which has the potential to make great changes in the way goods are traded in the bricks and mortar world.

It could be used, for instance, to be a platform for the exchange on information of the demand and supply of goods and commodities, which could result in greater efficiencies and cost savings both for the client and the supplier.

This business to business (B2B) e-commerce concept, could be used, for instance, to move agricultural products across geographies based on the demand for them by certain sectors. For instance, if I were Nescafe, I could aggregate my global demand for coffee beans (of certain types Arabica or Robusta), and invite suppliers, also from various parts of the world to bid to supply these requirements to my company.

Or if I were Ayala Land, I could go to an online B2B marketplace, post my aggregated demand for steel across my various real estate subsidiaries for the year, and farm it out to suppliers across the globe who could meet my quality, price, and timely fulfillment requirements.

As an online marketplace, I could charge both clients and suppliers a percentage of the transaction value in exchange for sustained verification and certification services. This means that for a certain commission, or perhaps a subscription fee, anyone who logs on to my B2B marketplace could be assured that the transactions entered into by both parties are with legitimate entities who have both the capacity to pay the orders in a timely manner, and deliver on the orders in a timely manner as well.

Imagine the savings that can be culled from such a facility. The marketplace directly engages suppliers, thus minimizing intermediation in trade and cutting out middle man’s fees. On the other hand, clients can bargain for deeper volume discounts since they interact directly with producers and suppliers, thus cutting down a lot of overhead business costs such as sales commissions and mass marketing fees.

However, buyers should not fall into the price trap, meaning that they evaluate bids based solely on price. Many has been the time when the lowest bidder was unable to deliver on orders because they do not have the capacity to fulfill such at certain volumes because their value chain is not yet in a position to scale up.

This is where the online marketplace could come in with procurement expertise, by certifying the capacity of its sellers to fulfill orders at the required quality levels at the time they are needed.

The online B2B market place could pivot corporate planning towards a more long term outlook, which creates increased stability and resilience in the economies and markets in which they operate. With a stable demand outlook, supply prices are less likely to be volatile, since producers have a target they are expected to meet at previously agreed upon prices.

In addition, the costing and pricing of commodities and finished goods will tend to be more reflective of their actual value, because of the synchronicity of demand and supply, as facilitated by onlineB2B exchanges.

It will also be an impetus for a more efficient and rationalized transport and logistics industry, as goods are increasingly moved to and from different geographies. This industry will have no choice but to ride the digital wave as buyers and sellers increasingly find use for their services.