Companies selling specialized software and offering online exchanges promise to decrease the cost of doing business, thereby increasing profits and making new, more economically sound ventures possible. But in the past month, share prices of some of these companies have slumped, in some ways mirroring the slowdown in the consumer e-commerce market. Some analysts see market caps shrinking further, along with a consolidation of smaller companies in the coming months. The news drove down stocks of many players.
Analysts say overcrowding and a lack of confidence in unproven business models.
I don't think they'll stay out of favor for long, but investors do want to see some traction with the business models. Analysts warn that a consolidation of exchanges is expected as start-ups overcrowd the market. Donald Goodwin, president of market research firm Technomic, said the smaller companies will ultimately be gobbled up by megasites, such as the one recently proposed by Ford Motor, DaimlerChrysler and GM, aimed at streamlining automakers' supply chains. Goodwin said that as pressure mounts for business partners to produce profits and grow quickly, they will likely form megasites comprised of subcategories that focus on specific market segments. To a certain extent, Technomic's conclusion is shared by other industry analysts, but there is disagreement on when a shakeout will occur.