(September 2012) Our annual financial ranking shows some remarkable shifts among the industry’s shareholder value leaders. Despite flat demand and low commodity prices, investor-owned...
e-Commerce Collusion? The Trustbusters Take Aim
"How can front running of customers trades be stopped? How do you protect information flows?" Shridharani asked. "Some of these exchanges clearly have an incentive to control the price that they will sell at."
Web hubs still pose more questions than answers, but the answers are coming at Internet speed.
New business-to-business (B2B) exchanges across diverse industries are being announced at a rate almost too fast to track. But many of these exchanges haven't yet moved from the announcement stage to actually conducting their first transaction, suggesting that more than a few companies simply are eager to be "on the e-commerce bandwagon."
Although the electric utility industry historically has been slow to react to business trends, including e-business, a group of utilities is creating its own B2B exchange. And while this initiative comes a bit later than efforts in other industries, in the evolving B2B space, the utility industry may not really be that far behind.
Pantellos in Process. The Pantellos Corp. was announced in June as an independent Internet market for the purchase and sale of goods and services between the utility industry and its suppliers. This electronic marketplace was formed by 21 member utilities that also are investors, including PG&E, Duke Energy, and Reliant Energy. While no public plan exists for future liquidity events, it is likely that the lure of IPO riches is what motivated these most cautious of investors, the utility companies themselves.
The utility members of Pantellos haven't disclosed whether they will commit a set percentage of their annual procurement spending to the exchange. The likely rationale in enlisting 21 partners was to capture enough business to provide instant liquidity to the exchange, liquidity being the most critical success factor for any business exchange. In line with that goal, the exchange also will need to attract non-member utilities. That will hinge on the exchange providing cost savings and efficiency. The exchange also should incorporate content, community features, and a positive user experience.
Pantellos is not alone in the B2B utility e-marketplace. In the coming months, other energy companies likely will band together to create utility industry exchanges. Independent electronic exchanges that serve cross-industry needs, such as FreeMarkets.Com, VerticalNets, and MRO.Com, are transacting business and possess the bandwidth to reach utilities. Independent exchanges will continue to outpace their industry rivals, as within-industry exchanges force competitors to collaborate.
Profits for Suppliers? An important goal for a B2B exchange is to provide the real-time pricing and product availability that will introduce the efficiency needed to reduce prices. However, cost savings from exchanges that follow an aggregator model (i.e., many buyers and sellers) cannot come at the expense of the sellers. Ideally, small as well as large suppliers will have ample opportunity to gain market share. In reality, however, smaller vendors in the exchange may be forced to consolidate, because they may not be able to lower their prices enough to compete directly with larger vendors. Furthermore, sellers participate in an exchange at the expense of traditional distribution channels that may offer substantial benefits.
In some of the press regarding