Thursday, November 16, 2000
eMarketplaces Emerge As New Antitrust Battleground
Antitrust problems won't seriously hinder eMarketplaces
for the next three to five years, Forrester Research,
Inc. predicts. But the eventual shakeout of eMarketplaces
and the Internet's restructuring of business over the
long term will create new legal uncertainties for businesses,
policymakers, and regulators.
"As eMarketplaces and online trade become an integral
part of how industries operate, business on the Internet
will resemble a massive round of deregulation," says
Jay Stanley, analyst, Forrester Research. "You will
see an initial burst of competition, but it will give
way to a new set of winners that will gain dominance
and lower the intensity of competition again."
In addition, the competitive landscape in many industries
will be reshaped by the Internet. What will be new about
competition online? The first change will be the transparency
of information, which will expose new details about companies'
prices, costs, and performance. Second will be network
effects, which will drive consolidation. Finally, the
Net's global scope will make it easier for buyers to
do business with worldwide sellers that they would have
never known existed when they had to shop by phone and
fax.
Antitrust regulators, judges, and academics will have
to adapt the law to the new environment. Currently, antitrust
statutes are broad, so their application to the economy
will become less and less clear as competition changes,
leaving businesses hungry for certainty. These changes
will drive antitrust policy through three phases:
1) uneasy consensus;
2) eMarketplace scrutiny; and
3) increased oligopolization.
An uneasy consensus will evolve over the next two years
as eMarketplaces fine-tune their operations and adjust
their business models while the bulk of B2B trade remains
in traditional channels. The top B2B antitrust concerns
being identified today -- price fixing, exclusion, monopsony,
and illicit information sharing -- will not prove to
be major because eMarketplace operators will strive to
prove their neutrality, while antitrust counsels will
spot other problems before they take root.
As the number of surviving eMarketplaces dwindles toward
natural monopoly levels around the middle of the decade,
antitrust scrutiny will focus on the exchanges themselves.
As online trade is channeled through fewer exchanges,
legal uncertainties will emerge about how to handle mergers
between eMarketplaces. Some policymakers will want to
intervene to prevent markets from tipping to a single
eMarketplace, while others will advocate for a more laissez-faire
approach. Meanwhile, as eMarketplaces become more tightly
interconnected, regulators will have to choose whether
to get embroiled in technology issues or let companies
leverage dominance through interconnectivity.
The success of eMarketplaces will act as a catalyst
for greater oligopolization in many industries by 2006.
Antitrust policies will have to be re-evaluated to address
suppliers, buyers, and the exchanges in which they do
business. Regulators also will need to address global
coordination policies as online oligopolies stretch across
the globe.
"The emergence of eMarketplace oligopolies will
lead to renewed debate about whether the government should
intervene in the market or simply regulate it to make
sure that monopolies are not abused," added Stanley. "These
debates will be complicated by legal battles over new
product and market definitions. It will take years to
arrive at a coherent set of standards as authorities
make decisions on a case-by-case basis."
For the "The B2B Antitrust Minefield" Report,
Forrester interviewed professionals from more than a
dozen organizations, including law and consulting firms,
government and academic institutions, and trade and commerce
agencies.
Online Retailing Will Survive Failure of Online Retailers
Shopping online is alive and well, despite a number of
high profile failures in retailing on the Internet,
according to Jupiter Research, a Jupiter MMXI company.
The results of a recent survey into the attitude and
behaviour of Internet users in Europe's seven most mature
Internet markets show that more consumers are becoming
online shoppers and that existing shoppers are spending
more of their income online.
The failure of companies such as Boxman, Boo.com, Dressmart,
Clickmango and the consumer operations of Urbanfetch
have made the industry sceptical about the future of
online shopping. However, troubles in the business to
consumer sector have more to do with inevitable market
consolidation and the difficulty in securing new funding
than with the failure of Internet retailing.
The European Online User Survey conducted by Jupiter
in conjunction with Ipsos, its sole European survey provider,
polled a representative sample of 6,000 regular Internet
users* across the UK, Germany, France, Sweden, Denmark,
Finland, and Norway. The survey identified three categories
of Internet users according to the length of time they
have been online:
Newbies (those who have been using the Internet for
1 year or less)
Intermediate users (1 to 2 years)
Veterans (more than 2 years)
The results show that the longer consumers have been
using the Internet the more likely they are to become
shoppers. It also indicates that the longer users have
been shopping online the more money they spend on the
Internet. 11% of newbies stated that they had purchased
products and services online, versus 41% of veterans.
Meanwhile, 34% of inexperienced shoppers (who had been
shopping for less than a year) stated that they had spent
less than Euros 100 over the last 12 months, compared
to just 13% of experienced shoppers (who had been shopping
for more than two years). In contrast, 25% of experienced
shoppers reported that they had spent more than Euros
1,000 over the same period, compared to just 12% of inexperienced
shoppers.
"These figures show that online consumers are initially
more comfortable buying inexpensive items but graduate
onto higher margin purchases as they become more familiar
and confident with using the Internet as a shopping tool",
said Mark Mulligan, analyst with Jupiter Research. "It
is essential for retailers to recognise this long-term
life span of the online shopper and thus the importance
of customer retention."
Comparing market maturity and average spend reinforces
this trend: For example, in Sweden, where 51% of the
population is online, the reported average spend per
person is Euros 1,043. In France, where Internet penetration
is just 18%, the reported average spend per online shopper
is only Euros 520.
Today's Internet audience still largely consists of
newbies (24%) and intermediate users (49%), with many
people using the Web to window shop and then going out
to purchase on the high street. By 2002, over half (51%)
the online population will have become veterans, and
their likelihood to shop online as well as their spending
will increase accordingly.
--
