August 14, 2000

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B-To-B Exchange Scales Down

Bizbuyer.com cuts number of offerings and raises the bar on requirements for suppliers

By Alorie Gilbert

More on B-to-B marketplace:

Ariba Leads The Way In B-To-B Marketplaces (6/12/00) E-Marketplace Vision Collides With Reality (6/12/00) TechWeb Finance B-to-B Marketplaces Face Crowded Field (6/9/00)

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izBuyer.com Inc., an online marketplace that launched last summer to match small businesses with dozens of product and service suppliers, is scaling back the scope of its marketplace. The company hopes it will be able to offer buyers a better level of service and expertise by cutting the number of offerings on its site from 63 categories to 29 and raising the bar on requirements for suppliers who want to join its business-to-business exchange.

The pall prevailing over cash-burning startups hit BizBuyer.com in June, when it laid off 20% of its staff. The company's beginnings were auspicious: It was financed by the likes of @Ventures, the venture-capital affiliate of CMGI Inc., TMCT Ventures, and eBay CEO Meg Whitman, and had formed an alliance with office-supplies retailer Staples Inc. to provide request-for-quotes service to Staples.com's customers.

But BizBuyer.com took on more than it could handle, says CEO Bernard Louvat. Its "close rate"--the percentage of RFQ that ends in a sale--has hovered somewhere between 6% and 20%, depending on the product category.

The goal, Louvat says, is a 25% to 30% close rate. Getting there is critical, because in addition to charging suppliers $1 to $10 for each response to an RFQ, BizBuyer.com is counting on a percentage of each completed transaction to accelerate its path to profitability.

With plans now to focus on telecommunications and Internet services, insurance, and professional services such as IT consulting and Web-site design, BizBuyer.com this week will begin eliminating options such as small-business loan, cell phone, credit card, accounting, and moving services. To boost customer confidence, it will more rigorously screen RFQs and suppliers, taking into account the brand recognition of providers in its remaining categories. It will offer a $5,000 guarantee on transactions with certified suppliers.

That's all good news to Cellina Fafard, owner of a clothing boutique and art gallery in Redondo Beach, Calif. She says she was surprised at the absence of many of the larger payroll providers on the site; Fafard has used BizBuyer .com to secure business insurance at one-third the cost of the offline rate.

BizBuyer.com will also offer more online advice about each category and walk customers through the RFQ process. But some observers still have reservations about the company. Vernon Keenan, Internet analyst and founder of Keenan Vision, is unconvinced that a business model based on small fees from processing RFQs is viable in the long-term. "They're in a transition phase. It's a precarious moment."

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