B2B E-Commerce Transforms Chemical Industry

Chemical auctions, exchanges and a variety of e-commerce sites have altered the way that chemicals are bought and sold worldwide, according to Forrester Research.

Forrester’s data shows that online business-to-business (B2B) e-commerce in the U.S. chemical market will reach $128 billion (US$) by the year 2003, making the chemical industry the third largest Internet market, just behind electronics/high tech and the automotive industry.

An example is yesterday’s announcement by B2B e-commerce company Chemdex Corporation and chemical giant DuPont that they have formed a new company, Industria Solutions, to create a vertical online marketplace to streamline purchasing in the $75 billion (US$) fluid processing market.

Emerging Chemical Trade Centers

The study reports that two types of chemical industry e-commerce sites are developing: single vendor sites and multi-vendor, third-party sites. Larger companies are setting up their own sites to increase the efficiency of selling to their distribution channels, while third-party companies are setting up online auction or exchange sites that are used by multiple vendors.

Third-party sites, in particular, are developing rapidly, the study reports. Sites run by CheMatch.com in Houston, Texas, ChemConnect.com in San Francisco, California, and e-Chemicals in Ann Arbor, Michigan match buyers with sellers in a real-time auction environment.

These exchanges claim to lower prices for buyers by creating a highly-competitive environment for sellers, while also streamlining the procurement process.

Online Strategies

According to another report, “E-Commerce in the Chemical Industry,” by chemical industry research firm Principia Partners, every chemical company will have to develop an e-strategy in order to succeed in the rapidly changing chemical industry. Many companies, the study says, have aligned with third-party exchanges in order to reach broader worldwide markets.

Chemical companies are also finding that their clients expect service delivered at Internet speed, the study says. Chemical companies are now using their online efforts to offer around-the-clock service to their customers. The report also cites an increase in “spot” buys, which are purchases for immediate needs.

Technology is moving traditional business activities to the Internet. From simple needs such as accessing product literature to comparison shopping and bidding on chemicals worldwide, the study reports that the Internet is becoming central to the sales process of industrial chemicals.

E-Commerce Changing Chemical Industry Sales

In addition to lowering prices and making chemical companies more competitive, Internet sales are changing the sales environment in the industry, according to the report.

Previously, people in the industry were accustomed to complex deal-making and tight, long-term contracts. E-commerce, according to the report, will replace complex negotiations with auction-like, open bidding, while the length of contracts will decline.