Local B2B segment gains momentum

Despite the floundering of a number of local dot-com companies and the lack of Internet penetration, the regions business-to-business (B2B) e-commerce sector is hotting up. In the past few weeks alone a number of deals and partnerships have been signed, sealed and delivered.

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By  Matthew Southwell Published  July 4, 2001

The region's B2B is hotting up|~||~||~|Despite the floundering of a number of local dot-com companies and the lack of Internet penetration, the regions business-to-business (B2B) e-commerce sector is hotting up. In the past few weeks alone a number of deals and partnerships have been signed, sealed and delivered.

PlanetArabia has partnered with Alibaba.com to deliver a B2B portal for the small-to-medium sized market and Tejari.com marks its first birthday with the unveiling of several alliances designed to extend its sphere influence across the region. Each and every company is trying to get a slice of an industry that is expected to deliver $46.2 billion in revenue by 2006.

But the big question remains: is the Middle East ready for B2B e-commerce? Porter Erisman, vice president marketing, Alibaba.com thinks so, and it is this belief that has led the B2B to partner with local company PlanetArabia. “The Middle East is ready for online B2B and is in fact already using the Internet to conduct trade today,” says Erisman.

Speaking at Tejari’s first anniversary event, Sultan Bin Sulayem said the progress of the B2B portal over the last 12-months illustrated that B2B e-commerce was viable and sustainable in the Middle East. “The rapid adoption of Tejari by both public and private sectors has illustrated that the Middle East is extending its status as a physical trading hub to an online meeting place for buyers and sellers from around the world,” said Bin Sulayem, one of the founder’s of the Dubai-based portal, and its current chairman.

Erisman also cites a demand from existing customers but doesn’t name which ones, while Saad Faruqui, director of business development at Planet-Arabia, points to the region’s desire to add an ‘e’ to every process and the industry hype filtering through from abroad.

Lubna Al Qasimi, managing director of Tejari.com, offers a more compelling argument. “It’s been our experience that organisations themselves are leading by example,” she said.

Al Qasimi uses the example of Dubai Duty Free. After joining Tejari.com a number of its prominent sellers, such as A&E, MMI and Lindt & Sprungli, joined as well.

“Similarly, the joining of the Dubai Ruler’s Court and the additional government departments has motivated a large number of private sector organisations to come on board,” adds Al Qasimi.

||**||Will B2B work in the Middle East?|~||~||~|Exactly what type of companies will be taking the B2B route varies on which portal you talk to. PlanetArabia is primarily attacking the SMB market, so it is “looking at a lot of small manufacturers, exporters and importers,” says Faruqui.

Tejari.com, on the other hand, is chasing enterprise level companies. “From the larger trading houses such as Juma Al Majid and Easa Salah Al Gurg to IT suppliers, automotive manufacturers, energy sector organisations, and retail operations,” says Al Qasimi.

Companies are signing onto B2B for the same sort of reasons. The Al Gurg Group anticipates it will be able to streamline its tendering and procurement cycles, as well as using Tejari.com to source materials and services.

“[By] pursuing an e-commerce strategy through Tejari.com the Al Gurg Group [will] receive the benefits of online procurement as well as creating an Internet sales channel,” says the group’s chairman, His Excellency Easa Salah Al Gurg.

Despite the eagerness with which Tejari.com, PlanetArabia, and their customers are pursuing B2B, a note of caution is necessary. In the more advanced US and European markets, 2001 has been far from successful. High cash burn rates and low usage has led to closure, restructuring and lost funding at high-profile marketplaces such as Ventro, Dell Marketplace and Just2Clicks.

Philippe Rixhon, partner at Accenture in the Middle East, echoes these beliefs; “the reality for organisations in the Middle East is that the B2B experience will be a disappointment unless those setting up B2Bs here understand the painful lessons learned in the US and Europe,” comments Rixhon.

“B2B is about satisfying a definite and clearly defined business need, it’s not about trying to be a ‘new age middleman’ that can perhaps shave a few bucks off the cost of a traditional business transaction,” he adds.

The proponents of B2B in the region admit that things will develop a lot slower than the hype suggests. Erisman explains that, “we always tell people not to expect too much too fast, and never to conduct a transaction without doing a background check on your partner.”

Faruqui believes that it is a question of where companies are in terms of technology adoption. “Large firms are not as ‘wired’ as in other parts of the world and their suppliers are not so tech savvy. These problems are compounded in the SME market.”

If the local market is to mature and become profitable then it must learn from the mistakes made elsewhere. If it does, then B2B e-commerce should be here to stay.||**||

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