Trading hubs drive boom in business ecommerce

The amount of business conducted within electronic trading communities, such as the one formed last month by car giants Ford, General Motors and Chrysler, is poised to explode.

Researcher Durlacher predicts that the European Business-to-business (B2B) ecommerce market - measured by value of goods and services traded - will grow from $76bn (£48bn) in 2000 to $1.27 trillion in 2004.

Trading hubs will increasingly soak up a large volume of this trade - growing from $8bn during 2000 to $408bn or 32 per cent of all B2B trade by 2004.

The figures are published in Durlacher's latest report which looks at the future for the European B2B market.

Sarah Skinner, a European internet analyst at Durlacher and the report's author, estimates that there are 1000 B2B hubs worldwide. Some 75 per cent of these hubs are in the US, but Skinner claims that the balance will shift towards Europe.

"Big and small European companies are going to use trading hubs to trade within the next three to four years as companies see the supply chain benefits," she said.

Benefits include cost savings through streamlining fax, phone and paper-based trade, and dynamic pricing as multiple suppliers negotiate cheaper prices. They also include the use of supply chain management software, which allows decisions to be made in real time as all elements of the supply chain have access to each others progress.

Car giants Ford, General Motors and Chrysler have demonstrated their power to bring suppliers into closed trading communities based around their market dominance, but Skinner believes that long-term neutral trading hubs will be winners.

Some neutral industry hubs exist today including EFDEX (online trading of fresh and processed food) and GF-X (online trading of excess capacity on trains and planes). But Skinner predicts that their importance will grow.

"By the end of the year, closed industry hubs will be spun off to be operated by neutral players when they have built a critical mass to serve the whole industry," she said. "Suppliers will push to make them get together."

While pure internet-based companies stand to lose out to so-called clicks and mortar firms, there will be other winners, including industry associations or trading groups, large distributors, systems integrators and software providers.

"Oracle and SAP are at the forefront of software players in the B2B space, but they are all looking at becoming hubs in this market," said Skinner.