BRAVE NEW WORLD
IN THE FACE OF A SHAKY NASDAQ AND FASHION-INDUSTRY SKEPTICISM, INTERNET B2BS ARE FORGING AHEAD WITH PLANS TO GROW THEIR BUSINESSES.
Byline: Katherine Bowers
In the ongoing game of “Survivor” that’s become the dot-com industry, B2B marketplaces that target the textile and apparel industries have the additional challenge of streamlining an industry that has complex production requirements — and a healthy skepticism about technology.
These companies are pitching an ability to create a centralized hub for data and collaboration, decreased reliance on middlemen overseas, access to a wider variety of sourcing scenarios — and all of it through a point-and-click process expected to save the fashion business tens of billions of dollars.
These goals are made doubly difficult by the current market conditions. Although these companies are privately held, the Nasdaq’s losing year has sent many venture capital sources scurrying away from technology plays, making it difficult for apparel marketplaces to raise additional capital.
Here’s a look at some common actions the B2Bs are taking to grow their businesses in spite of a less-than-favorable financing climate:
Testing, one, two, three: B2B marketplaces have already begun running millions of dollars of real and simulated orders through their sites.
For example, New York-based ThreadeXchange has run production specifications from companies such as Saks Inc., Federated Department Stores and J.C. Penney through its system in order to test its sourcing engine, according to chief executive officer Scott Corzine. The Thread, another New York-based e-marketplace provider, began a limited pilot of its technology this Jan. 15, with roughly 10 retailers and wholesalers, confirmed vice president of operations Gene Ostrovsky.
Other companies have shifted their business strategies and are reengineering technologies accordingly. Fasturn, a Los Angeles-based provider of services for e-marketplaces, last year shifted its focus from public to private marketplaces. The company has just released a new wireless access protocol that will allow its private marketplace customers to access data from Fasturn by using a cell phone or personal data assistant, such as a Palm Pilot or Blackberry.
“They can log on and get into a particular order to see if there are messages, problems or action items to follow up on,” said Fasturn’s ceo Frank Litvak.
Licensing technologies in order to decrease development cost and time is yet another virtual vein being mined by the nascent B2Bs. Textile e-marketplace provider ClickTex.com, for instance, has inked a licensing deal with Ariba Inc. and will be customizing Ariba’s marketplace technology for the textile industry, said a spokesman for the Los Angeles-based company.
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Multichanneling revenues: Six months ago, most companies believed they could reach profitability on the backs of subscription- or commission-driven public e-marketplaces. But the highly competitive apparel industry has been reluctant to jump on board, citing security concerns and saying they prefer to work within established supplier relationships. “The most logical thing, really, is not to go first to worldwide trading, but to find ways to use the Internet to do your current business,” observed one source in the B2B technology industry.
Some players are experimenting with software sales, licensing deals and providing various application services as revenue models that could yield quick returns. ClickTex.com, for one, has shifted into software sales mode, said a company spokesman, who estimated that 75 percent the firm’s revenue will stem from that source. “We still believe there’s a big opportunity for an open marketplace, but [acceptance] will take time,” the spokesman stated. “We don’t have the luxury of sitting around and waiting.”
Desperately seeking industry funding: “Always, always looking for more funding,” joked one source. ClickTex.com is currently undergoing discussions with two potential inventors, said its spokesman, while The Thread, which has been privately funded, is courting a first-round investor, Ostrovsky said.