It's a more efficient, more streamlined way of doing business. You can deal with thousands of buyers at a time instantly, rather than one phone call at a time. By bringing buyers and sellers together on neutral trading turf, the market determines the price dynamically, with both buyer and seller able to go back and forth on a price. CheMatch, an online spot market for petrochemicals, plastics and fuel additives, counts industry giants like ExxonMobil and Dow Chemical among its participants, all of which are pre-screened. Jorge Werlang, vice president of global commodities trading at Voest-Alpine Intertrading, an international commodities trading company in Houston, says using the exchange saves him the trouble of calling individual traders or brokers.
Brokers know that it's hard to represent the market differently than it is.
Some sell advertising, although for many that is becoming a less important piece of the revenue stream. Sites with a catalog component take a markup on the items they sell, just as distributors do. The typical range for markups in multivendor catalog sites is 5 percent to 15 percent, according to Bear, Stearns. Some marketplaces charge membership fees, although Bear, Stearns notes that those fees can keep people from signing up to a marketplace, and they are frequently waived. We'll see a lot of changes over the next 18 months.