It’s the kind of stuff guaranteed to kill a conversation. Petroleum marketplaces. Vertical exchanges. Streamlining procurement.
Mind-numbing, maybe, but they’re all part of business-to-business e-commerce, which everyone seems to think is going to be big. But why should you care? Because it’s going to change your life.
In the short term, these new on-line markets and software that connect companies to each other and to their suppliers through the Internet will grease the wheels of capitalism. That means products should be cheaper to make and arrive faster. It’ll be easier to manage inventory so a store rarely runs out of the things you want. And it could keep inflation tame.
Getting these systems in place will likely be a messy process that takes lots of time and money. But down the road, this revolution could drive the most fundamental change in society since the country became wired for electricity.
Electricity turned us into mass consumers, brought new standards of living, new methods of communications and entertainment and redefined entire social relationships. Business-to-business e-commerce has the potential to do the same.
It could lead to a day when products aren’t made until you order them. Goods will be produced to suit your tastes, from Barbie dolls to cars to houses. Along the way there’s bound to be enormous disruption for investors who place their bets on these new enterprises and for workers who wonder if the new jobs being created are as good as the old ones being eliminated.
In the end, observers believe, there is likely to be a whole new consumer culture that shifts power to the hands of buyers. It will dramatically accelerate the pace of our lives as we begin to expect products and services to arrive instantaneously. And like electricity, business-to-business e-commerce will likely have effects that today no one can even imagine.
“I think we’re watching the building of a different global civilization,” said Peter Leyden, former managing editor of Wired magazine and co-author of “The Long Boom,” a book that explores the new on-line economy. “The infrastructure we’re building now is mind-blowing. I think everybody really underappreciates that.”
Until the last year or so, most Web sites have focused on an area known in industry jargon as “business-to-consumer.” These are the Amazon.coms that put some type of retail business on the Internet.
Think for a minute: How has this changed our lives? Amazon.com lets you order a book through a Web site and it’s delivered a few days later. But you still can get most books much faster for about the same price by hopping in your car and driving to the nearest bookstore. Some revolution.
But business-to-business commerce is really different. As more commerce is done on-line and more time, money and paperwork is saved, some economists say the resulting productivity increases will continue to keep inflation low.
“We’re looking at a long-term reduction in inflation,” said David Roddy, vice president of Internet Economics for Tradeum, a business-to-business company based in San Francisco. “Every price reduction you see is multiplied by three as it works through the economy.” But there are still plenty of hurdles to overcome before B2B commerce succeeds.
For one thing, it requires unprecedented cooperation between fierce competitors. And some of these companies have old economy cultures that will resist change, though most expect the new economy to win them over.
These marketplaces only work with a critical mass of participants, meaning that ultimately there may be only one dominant marketplace in each industry. When there are 30 marketplaces in one field, and bunches of software and services companies selling essentially the same technology, it becomes even tougher for investors to figure out which one will be the last one standing.
That may be compounded by other fundamental shifts in the labor markets. If all parts of the production process become more flexible, industry will expect labor to do the same. The result can be seen already in Web sites like eLance.com. Projects are posted and freelancers bid on them. This could be a glimpse of a new economy where workers are brought together to do a project and then let go when it’s done.
Many observers liken this upheaval to the last part of the 19th Century when the country was just being wired for electricity. The immediate result was street lights and street cars.
Then came a host of business and social consequences no one could have foreseen. Companies began to invent household appliances that promised to save us time, but required us to buy more stuff, including electricity. With more light in homes, libraries reported a surge in lending. With heat in every room, families no longer had to huddle around the wood or coal stove. And eventually there was the radio, television and then the Internet.
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Many of those pushing the business-to-business revolution said they expect that like the networks that carried electricity, the Internet will make our globe even smaller.