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From aggravation to aggregation Featured

9:39am EDT July 22, 2002
Floyd Ostrowski was looking for a viable e-commerce strategy for his company.

The proliferation of dot-com solution providers always seemed to leave someone unhappy. Either the company was forced to give away too much and watch its profits dwindle or it was the buyers who were squeezed, leaving them uninterested in the approach.

That’s when the vice president of Weatherchem Corp. found eWinWin.

“There truly is a ‘win-win’ here for both sides of sales transactions,” said Ostrowski. “We reviewed a number of e-commerce competitors and chose eWinWin because its ‘demand aggregation’ approach offers real benefits to both buyers and suppliers in an online environment.”

As its name suggests, eWinWin founder and owner Greg Mesaros wanted to develop an e-commerce solution that offered benefits to buyers and sellers. He calls it the Demand Aggregation System.

“For this particular dot-com, we provide turnkey business to business e-commerce solutions for suppliers,” he says. “We’re taking the old business models and totally putting them on their side.”

To understand how the system works, you must understand the word “aggregation.” It’s a word that permeates the literature of eWinWin and the speech of its owners. Aggregation, as they employ the term, is to bring together a company’s clients and use their collective buying power.

A manufacturer like Weatherchem, which produces several types of packaging products, contacts eWinWin and creates an online deal room. In the deal room, Weatherchem offers a product at a certain price for a certain quantity with a predetermined ship date. Weatherchem can then contact any or all of its customers for that product and invite them into the deal room. As the quantity of orders increases, the price decreases.

Companies like Weatherchem use molds to produce products. It can take as long as 12 hours to switch from one to another, and that dead time is potential lost revenue. Predetermining ship dates allows the company to be more economical.

The approach offers other savings as well, including better scheduling, improved operating efficiency, better management of working capital, lower transaction costs, access to hard-to-reach customers and a live database of buyers.

“A lot of suppliers look at e-commerce and they get scared,” says Gerardo Orlando, executive vice president of business affairs for eWinWin. “Really, this is something that’s very pro-supplier. The supplier can become more efficient, and they can use this as a tool to become a better manufacturer.”

The buyer wins, because as more people buy, the price decreases. A buyer might even be willing to purchase more of a product in advance, knowing it comes at a lower price.

“There really is an incentive for all the buyers to come back to the site to see if the price is going down to see if they can get even more of the product,” Orlando says. “So what this system does is it really goes to the cost of the goods themselves. And that is all tied to the efficiencies that the suppliers get through the system, through being able to plan their production better.”

Currently, eWinWin offers four variations on the theme. In addition to those of suppliers, there are deal rooms sponsored by associations and buyers and cooperative deal rooms. Each company works with an eWinWin action manager who helps the company facilitate the process.

The company also hopes to create deal rooms up and down the supply chain. In that way, a company like Weatherchem could purchase its materials at a lower price and its clients can then sell their wares in their own deal room. And at each step in the process, eWinWin takes a cut.

eWinWin makes money three ways: through a fee for setting up the deal room, a monthly hosting fee and a transaction fee based on the amount of merchandise sold.

This is the perfect e-commerce model for Cleveland because it serves manufacturing operations.

We love being the underdog,” Mesaros says. “People are not looking at Cleveland right now for e-commerce solutions. And we’re sitting back going, there’s no better place to be than Cleveland, because that’s where our customers are.”

If the solution works, Mesaros and Orlando think they might be able to meld their approach with other industries, including energy, natural gas and even bandwidth. But for now, their attention is on manufacturers and building their own operation.

“There’s nothing that really prepares you for an Internet start-up,” Mesaros says. “As cliché as that may sound — to show you how old I am — when I went to graduate school they actually taught you how to make money. Turn a profit. That’s not what a dot-com is — scaling your model, creating satisfied customers and managing your cash flow, and then getting to the next level. This is a different form of the economy.”

At eWinWin, however, the plan is to turn a profit.

“We’re going to be first and our goal is to always be better than everyone else,” Orlando says. “By being first, you have a head start both on technology and experience, and as we do this with more and more customers, we’ll learn more and more and continuously improve our product.”

How to reach: eWinWin, (216) 348-9700

Daniel G. Jacobs (djacobs@sbnnet.com) is senior editor of SBN.