New medicine for dotcom fever

By John J. Keough -- Industrial Distribution, 1/1/2001

Just a few short years ago the dot-com phenomenon was at a feverish peak. Everyone, it seemed, was jumping on the dot-com bandwagon. Experts said that if you weren't on the Web you wouldn't be in business. Valuations of companies that hadn't earned a dime were now in the hundreds of millions of dollars. A whole business environment-"the new economy"-was created. Now it seems the bubble has burst on many of these startups.

As of last month more than 140 dotcom companies reportedly were out of business. Thousands of workers were laid off and venture capitalists were ready to pull the plug on many others. Investors were looking for profit, not promises.

Those companies in the B2B sectors serving the distribution/manufacturing sector are not immune. Eventory, an early Internet start-up that built and hosted online storefronts for small distributors so they could conduct e-commerce with its customers, is gone. The company is out of business and filed for bankruptcy. At the time it ceased operations it only had 30 customers. One of its co-founders said, "this is a signal that the industry is not ready for e-commerce."

PurchasingCenter.com, which changed its name to Excara last year, was to have been an online exchange for buyers and sellers. It has announced that it is closing down. The remainder of the company is now focusing on e-commerce for manufacturers.

SupplyFORCE has laid off 20 percent of its employees, and has changed its business strategy. They are now focusing on larger national accounts rather than on the smaller end users it had originally targeted.

There are reports that another dot-com player in our industry may soon be going out of business because of lack of funding.

It appears that distributors have not been flocking to some of these exchanges. ID's 54th Annual Survey of Distributor Operations shows that only 13 percent of distributors signed on to an exchange.

Does this mean the end of business-to-business transactions on the Web? Absolutely not. On the recent CBS television show 60 Minutes a venture capitalist said that people will still buy products over the Web. The question is, who will they buy from? It may be that only strong and financially capable companies with a clear-cut strategy will be around in the near future.