Plenty of websites offer small companies the opportunity to cut costs dramatically by accessing new suppliers in real time. The take-up of these innovative services is being held back, though, by lack of information and widespread fears about trading on the internet.
"There is still quite a steep learning curve for small and medium-sized enterprises and there is still a certain amount of trepidation about using the internet," admits Helga St Blaize, co-founder of Ace Quote, the business-to-business (B2B) technology marketplace. Nevertheless, she is encouraged by the amount of repeat business the marketplace is attracting.
"The method of posting up a request online is so much easier than having to make hundreds of phone calls or trawl through the Yellow Pages," she says.
Ace Quote's service is free to buyers and there are offline consultants to assist small companies that want to publish tenders or take up supplier offers. Some small companies say they are reluctant to approach suppliers that are untested. But Ace Quote insists all their suppliers are strictly vetted. This process normally takes a day and with any online quote, a supplier has to attach a micro-site explaining their services with references and examples of relevant work. St Blaize adds that once a quote is successfully accepted, there tends to be a series of face-to-face negotiations particularly if it is a complicated tender.
Given that suppliers have to go to the trouble of subscribing to Ace Quote, the company believes they have every incentive to satisfy the customers. "Suppliers want this to work because we are giving them genuine leads," St Blaize explains.
Independent B2B trading organisations such as Netmarkets Europe have been set up to raise awareness of e-procurement services. "Small businesses need to be more efficient than large companies if they are going to survive," argues Simon Torrance, Netmarkets' chief executive. "But it does take a lot of time to find out what is going to be useful to you."
He believes the current crop of e-procurement sites offer small businesses the potential to enjoy the resources of a larger company. He points to Group Trade, which promises companies savings of 10%-25% on services such as car leasing, office equipment and computer products through a group buying service works by which combines the purchasing power of small companies online.
Lloyds TSB recently launched an e-procurement service for small companies and hopes its brand values will reassure sceptical business directors. "People still want to deal with a brand they can trust," says Louise Scull, the bank's e-markets director. "Lloyds TSB is one of the most respected brands in the UK in terms of having a reputation for providing a secure and confidential environment." She argues that e-procurement services which can be accessed by small companies through a standard internet browser mean there is no longer any need to invest in expensive purchasing systems.
Some directors of independent B2B sites believe small companies have been deterred from adopting these online services because they are hard to use. "B2B marketplaces have to be as easy to use as accessing a single supplier," says Rouzbeh Pirouz, chief executive of Mondus, which offers online purchasing services. "B2B marketplaces have not given people ease of use and no one is going to bend over backwards to use something new."
But what if a small company is already satisfied with its existing suppliers and sees no reason to change? Pirouz argues that you should not automatically believe your supplier is always offering you the most cost-effective price. "You don't just need to take your suppliers' word for it - you can compare prices online and go for the best one."
Mondus offers no guarantee you will get the service you asked for through its marketplace, but it has set up a self-policing system on its site where buyers can give feedback on the performance of suppliers. "There is a built-in incentive for suppliers to provide a high quality of service," Pirouz explains.
Despite the promises of cost- and time-savings as well as business process efficiencies, small companies are not rushing to use these purchasing services. Against the backdrop of high-profile dotcom failures, concerns still linger in directors' minds over whether or not these services will even be around in the long term. Some leading suppliers are also often reluctant to join e-procurement sites. They feel they are only being judged on price and complain they have no opportunities to properly differentiate themselves online.
Small companies that do not take advantage of these new e-procurement sites are possibly putting their business at risk in the long run. If competitors start to use them, they could get cheaper prices and gain a significant competitive advantage. Furthermore, if you join an e-procurement site early, there is always a good chance you can have some say over how it develops in the future.
