Business connections Featured

9:52am EDT July 22, 2002

Consumer sales via the Internet are projected to reach $108 billion by 2003 — an impressive amount until you consider business-to-business Internet sales in that same period are expected to hit $1.3 trillion, according to Forrester Research.

Where’s this boom coming from?

“Everyone in the computer and electronics industry is doing it,” says Bruce Temkin, research director at Forrester. “Chip makers are selling a billion dollars a month over the Net.”

Fortune 500 companies are also taking the initiative to buy and sell over the Internet because of increased efficiencies.

“They are starting to put in online procurement applications so employees can purchase anything from PCs to pens and paper from their desktop,” says Temkin.

Companies have emerged to facilitate this growth, bringing diverse suppliers to one site to make it easier for buyers to purchase products. (F or an example, go to www.metalsite.com).

“These are new companies that were built based on the Internet,” says Temkin. “They play the role between buyers and sellers, and are the new breed of middlemen. They have an understanding of the marketplace and facilitate relationships across multiple manufacturers.”

Smaller companies haven’t been swept up in the storm that Forrester projects will affect everything from office products to petrochemicals and industrial equipment. The main reason is cost, but that barrier is quickly eroding.

“To really build a commerce site takes a significant investment,” says Temkin. “As we’ve seen over time, the cost to get into it is being lowered dramatically.”

Smaller companies are finding ways to buy, even if they can’t sell. Even giant companies such as Ford have provided means for smaller operations to participate in their electronic buying programs.

“If they’re willing to keep a spreadsheet up to date and send it in, Ford is willing to buy from them,” says Temkin. “Small- and medium-sized companies have to find ways to use hosted service applications so they can take part in this. The Internet is a good place to buy a lot of products.”

Consider the following facts from Forrester:

  • Business-to-business Internet commerce will account for 9.4 percent of total business sales.

  • By 2003, the percentage of business trade moving to the Internet will vary greatly by industry, from a high of 20.3 percent for computing to 1.2 percent for industrial equipment.

  • Internet commerce will drive structural change in supply chains; computing and raw materials commodities will be the hardest hit.

How to reach: Forrester Research, www. forrester.com

Todd Shryock (tshryock@sbnnet.com) is SBN’s special reports editor.