Success Factors of Electronic Markets: Impact of

Context and Process on Outcomes

A.O. Nooteboom, P.M.A. Ribbers, A.M. Fairchild

Dept. of Information Management, Tilburg University
PO Box 90153Tilburg, The Netherlands
Contact author e-mail: [email protected]

Abstract : In the past few years, many electronic markets have opened up but
adoption of electronic marketplaces worldwide has been lower than
expected. A considerable number of electronic markets already have
ceased to exist and several collapsed during the recent dot-com
meltdown. Perhaps a better understanding of risk factors, complexity
and market requirements of these electronic markets, prior to
implementation, may have allowed developers to create more effective
information system solutions.
Several consultancy firms, such as Forrester, Merrill Lynch, and
Morgan Stanley, have made statement on several success factors of
electronic markets, such as acquiring domain expertise, and a critical
mass of users. However, none of those has been scientifically argued
(Bartels, 2000).
Because of this high failure rate of electronic markets, this research
tries to more scientifically identify, from a thorough literature review
of previous research, specific success factors that might be crucial for
electronic market success. These success factors are then applied to
several case studies, as to assess possible risk of success or failure.

Key words: Electronic markets, success factors, supply chain

The original version of this chapter was revised: The copyright line was incorrect. This has been
corrected. The Erratum to this chapter is available at DOI: 10.1007/978-0-387-35614-3_21
C. Rolland et al. (eds.), Engineering Information Systems in the Internet Context
© IFIP International Federation for Information Processing 2002
204 A.D. Nooteboom, P.M.A. Ribbers, A.M. Fairchild

1. INTRODUCTION AND RESEARCH

OBJECTIVE

1.1 Introduction

Electronic markets, as defined by Bakos (1997), allow the

participating buyers and sellers to exchange information about prices
and product offerings via an interorganizational information system
Because of the fact that electronic markets might be able to reduce
cost and other inefficiencies, these markets can appear between
several stages of the supply chain.
Supply chain optimization has typically been an introspective
endeavor, with companies attacking inefficiencies within corporate
boundaries. With the development of the Internet and the more tightly
controlled extranets that have been built between business partners,
we have seen the emergence of integrated supply chains.
Creation of electronic markets have a number of different driving
factors - from stakeholder motives, to market forces and regulatory
pressures, to building a market of critical mass for transaction cost
reduction. The success or failure of an electronic market can depend
on several of these factors, although which factors has been based on
more supposition than fact to-date.

1.2 Research Objective and Methodology

The research question posed is: What factors could contribute to the
success of electronic markets ?
To address this, we first focus in this paper on what electronic markets
are and how these electronic markets emerge, with hypotheses from
literature.

1.2.1 Research Methodology

The research that formed the theory base for this paper was conducted
in two phases. We first reviewed relevant literature and interviewed
experts. The outcome of this phase was a framework for explaining
success of electronic markets, and a questionnaire to investigate the
Success Factors of Electronic Markets: Impact of Context 205
and Process on Outcomes

success factors. For the second phase of the research, we interviewed

and studied cases to find support for the proposed framework.
The extensive literature review of approximately 110 papers initially
focused extensively on economic analyses of effects of electronic
markets; we then studied reports published by commercial research
organizations like Forrester and Gartner. The starting point was
formed by Malone's (1987) electronic market hypothesis and Clemons
at aI's (1993) move to the middle hypothesis. The literature review
and expert interviews resulted in a conceptual research model, which
identifies success factors that are proposed to have an impact on
electronic market success. Case studies were used to evaluate these
factors.
The case study approach was chosen to support analytical rather than
statistical generalization (Yin, 1994), and because cases enable "the
capturing of reality in considerable greater detail and the analysis of
considerable greater number of variables" (Galliers, 1990). The
empirical material gathered has to be seen in the light of offering
support for the proposed success factors.
For this paper, four different electronic markets were analyzed on the
context in which they operate, what (success) factors are present and
what (economic) effects buyers, sellers and the electronic market itself
are experiencing. An attempt is made to explain how and why each of
these (success) factors acts upon each of the aforementioned
(economic) effects.
Case studies in electronic markets are sampled from three different
industries in order to discover similarities and differences in the type
of stakeholders, economic effects and success factors. The electronic
markets were selected on a requirement of having a significant
transaction-volume, to be able measure some of the economic effects
as experienced by the stakeholders.
The structure of this paper is as follows. The literature base for the
research is discussed in the second section covering theoretical
contribution. We address the findings of this literature review in the
third section of the paper in a research model developed to categorize
possible success factors. These success factors are tested with case
examples from case study research in the fourth section of the paper.
Conclusions and lessons learned are summarized in the final section.
206 A.D. Nooteboom, P.M.A. Ribbers, A.M. Fairchild

2. THEORETICAL CONTRIBUTION

We start with a discussion of the emergence of electronic markets and

hierarchies, followed by a consideration of several economic effects
that electronic markets could cause for its stakeholders. In order to
understand which factors are causing the aforementioned economic
effects, we then focus on a number of success factors that have been
found in the literature.

2.1 Emergence of Electronic Markets and

Hierarchies

According to Malone, Yates and Benjamin, economies have two basic

mechanisms for coordinating the flow of materials and services
through adjacent steps in the value-added chain, markets and
hierarchies (Malone et aI., 1987). Markets coordinate the flow of
materials or services through supply and demand forces and internal
transactions between different individuals and firms, presumably
minimizing production costs for the desired product. The coordination
costs associated are however relatively high, because the buyer must
gather information and risk on a variety of possible suppliers. (Malone
et al., 1987).
Hierarchies coordinate the flow of materials or services through
adjacent steps by controlling and directing it at a higher level in the
managerial hierarchy, restricting the choice of suppliers for buyers to
one predetermined supplier. The coordination costs can however be
reduced over those incurred in a market by eliminating the buyer's
need to gather and analyze different information about several
potential suppliers (Malone et aI., 1987).
Drawing on the theories of Malone (Malone et aI., 1987) and Clemons
(Clemons et al., 1993), a distinction can be made between markets and
hierarchies to coordinate the flow of products and services. According
to Malone, the choice of a company for either a market or a hierarchy
is based on the attributes of the product or service being traded,
namely asset specificity and complexity of product description.
There are varying hypotheses on why companies make the choice
between hierarchies and markets, specifically looking at the use of
technology in the supply chain. The Electronic Market Hypothesis
(EMH) looks at why companies are using markets to coordinate the
Success Factors of Electronic Markets: Impact of Context 207
and Process on Outcomes

flow of product or services. Malone, Yates and Benjamin state "that

the overall effect of information technology will be to increase the
proportion of economic activity coordinated by markets" (Malone et
aI., 1987). In other words, lower transaction costs make markets more
interesting.
There is also the argument given as to why companies are likely to
utilize hierarchical structures to coordinate the flow of products or
services, also known as 'The Move To The Middle' hypothesis
(Clemons et aI, 1993). Clemons, Reddi and Row state "that industrial
restructuring will increasingly be characterized by a 'move to the
middle"'. This specifically refers to firms moving away from the
market to intermediate governance structures when outsourcing, as IT
will lead to a greater degree of outsourcing (a move to the market)
(Clemons et al., 1993).
There is a combining theory on the aforementioned hypotheses, which
has further been investigated by Kaplan and Sawhney (2000), who
differentiate electronic markets on how businesses buy and what they
buy. Businesses develop a long-term, close relationship with qualified
suppliers, which is called systematic sourcing, or acquire goods when
they have to fulfill an immediate need at the lowest cost, which is
called spot sourcing (Kaplan and Sawhney, 2000).
Several dimensions of electronic markets, such as the type of product
and contract the market facilitates, the type of market making
mechanism that is used, and the level of bias on an electronic market
as investigated by Kaplan and Sawhney, can be seen in Figure 1.
Level of bias can be defined as a range from markets favoring certain
buyers or suppliers to unbiased markets open to all buyers and
suppliers and favoring none (Malone et aI, 1987).

Type of Product Manufacturing Operating inputs

inputs
'l)'pe of Contract Systematic Spot sourcing
sourcing
Market'Makln'g ,"'c Matching Aggregation
Me«ibanlsm. ,
Bias I,' Buyer centric Seller centric Neutral I
Figure 1 " Dimensions of electronic markets
208 A. O. Nooteboom, P.M.A. Ribbers, A.M. Fairchild

2.2 Electronic Market Effects

2.2.1 Stakeholders: Buyers, Suppliers, Market Makers

In electronic markets, stakeholders can be defined as participants who

can affect or are affected by the market development and
implementation, including market makers, buyers, sellers, investors,
and service providers.
Stakeholders can be defined as participants in both the task
environment and the general environment (Douma, 1996). The task
environment encompasses all organizations or persons with whom the
company interacts on a regular basis. These are buyers, suppliers of
primary goods, components, machinery and know-how, capital
providers, and unions. The general environment participants are those
required for functional operation, but are not active participants.

3. RESEARCH MODEL OF SUCCESS

FACTORS OF ELECTRONIC MARKETS

Based on a extensive literature search, 17 success factors for

electronic markets were identified and developed into a research
model, as shown in Figure 2. We distinguish between success factors
related to the context of an electronic market, and success factors
related to the processes of the electronic market.
Success factors related to the context refer to those conditions under
which the electronic market operates, basically beyond the control of
the market maker, which have an affect on the possible success of that
market.
Success factors related to the processes are factors which characterize
the trading processes on the market, and which are basically under the
control of the market maker.
Success Factors of Electronic Markets: Impact of Context 209
and Process on Outcomes

COnlr!!l Success Factors : Procm Succus Fa(!Ors: Oulcome for

-MOIives of Stakeholders -Learning com
-Critical Mass -Functionalily and Support -Sellers
-Complexity of Product Description -Trust: -Market
-Asset Specificity -Partnerships make'"
-Frequency of Purchase -Quality of Information Investors
-Value of Products -Securily of Information
-Market Variability -Neutrality
-Governmenl Regulations -Geographic !.ocalion
-Entry Barriers

Figure 2 : Research Model of Success Factors of Electronic Markets, segmented

into Context, Process and Outcome

3.1 Context related Success Factors

3.1.1 Motives of Stakeholders

Stakeholders will often pursue different, and sometimes conflicting

goals_ In his research on an electronic market in Hong Kong's air
cargo industry (Traxon), Damsgaard found that it was essential that all
parties would see the benefits from the arrangement and decide to
participate (Damsgaard, 1998).

3.1.2 Critical Mass

Critical Mass can be defined as "the minimal number of users of an

interactive innovation for the further rate of adoption to be self-
sustaining" (Schoder, 2000). The importance of the establishment of a
critical mass for electronic markets has also been illustrated by Lee
and Clark (1996), in that the benefits realized by individual
participants in an electronic market system increase as more
organizations join the system

3.1.3 Complexity of Product Description

As Malone proposes highly complex product descriptions require

more information exchange and thus increase the coordination cost
advantage of hierarchies over markets_ Consequently items with
210 A.D. Nooteboom, P.M.A. Ribbers, A.M. Fairchild

simple product descriptions are expected to be more suitable for

(electronic) markets (Malone et al., 1987).

3.1.4 Asset Specificity

Transactions involving asset-specific products often involve a long

process of development and adjustments for the supplier to meet the
needs of the (individual) buyer, a process that favors the continuity of
relationships found in a hierarchy. Therefore (electronic) markets are
proposed to be more suitable to source goods with a low asset-
specificity (Malone et al., 1987).

3.1.5 Frequency of Purchase

Frequency of purchase affects the benefits to be obtained through

routinization. The lower the frequency the greater the incentive to try
to get the best price each time through a (spot) market transaction
(Choudhury, et aI., 1998)

3.1.6 Value of Products

In case of high value products even small savings in prices for each
purchase, due to comparison among suppliers, can offset the
opportunity costs of long term relationship. Choudhury et al (1998)
propose electronic markets will likely be chosen by buyers in case of
high value products.

3.1.7 Market Variability

Electronic markets have the potential to significantly reduce search

costs. This is especially true in those markets where buyers and sellers
have to conduct an extensive search to find a trading partner an
electronic market might be able to reduce these costs (Choudhury, et
aI., 1998).

3.1.8 Regulations

Fong et al (1998) found that statutory government support is important

for the success of an electronic market, because of the high initial
Success Factors of Electronic Markets: Impact of Context 211
and Process on Outcomes

costs and the problem of free-riders, where outsiders can use the
system without making any contribution.

3.2 Process Related Success Factors

3.2.1 Learning Costs

As Lee and Clark (1996) argue, the reluctance of traders to adopt new
technologies and embark on a new round of organizational learning
may serve as a barrier to successful implementation of electronic
markets.

3.2.2 Functionality and Support

Malone proposed that a final stage in the evolution of electronic

markets would be the development of electronic markets that provide
personalized decision aids to help individual buyers to make a
selection from various alternatives (Malone et al., 1987).

3.2.3 Trust

Trust especially applies to electronic markets where the only contact

between buyers and sellers may be the contact through databases and
the telecommunication network. As Fung and Lee (1999) propose, the
development of trust in e-commerce is a continuous process involving
initial trust formation and continuous trust development based on
repeated trials, until a firm loyalty is formed or participants drop out
due to distrust.

3.2.4 Partnerships

According to Damsgaard, partnerships with industry leaders and

domain experts can contribute to the success of the electronic market.
In his study on Traxon, an electronic market for the air cargo industry
created by Cathay Pacific, Air France, Lufthansa and Japan Airlines
Damsgaard found that "each local Traxon system had the other
shareholder airlines as initial customers, which constituted a
significant share of the air cargo market" (Darnsgaard, 1998).
212 A.a. Nooteboom, P.M.A. Ribbers, A.M. Fairchild

3.2.5 Quality of Information

Information about products, trading partners and contacts is

considered a condition for success of an electronic market.
Authenticity (identity of buyers and sellers), integrity (verifiability
and completeness of product and price information) and non-
repudiation (the ability to hold a buyer or seller to the terms of the
transaction they are committed to) are three key features that will fuel
or impede the growth of e-commerce (Alba et al., 1997).

3.2.6 Security of Information

Integrity and confidentiality of especially personal and financial

information must be assured. This requires not only instituting robust
and secure encryption algorithms, but also ensuring that the service
providers observe the highest level of internal control and ethical
standards in the handling and storage of such information (Asuncion,
1997).

3.2.7 Neutrality

Beach at al suggest in their study on electronic markets in logistics:

"Electronic market will only succeed as a high value system for the
entire industry provided it is run by an IS firm, fully independent from
logistics, sellers and buyers." (Beach et aI., 1999). Similarly Fong et al
conclude "If ownership and control of the computerized market is not
shared among market participants from various sectors within the
industry, buyers and sellers are likely to ignore the system" (Fong et
aI., 1998).

3.2.8 Geographic Location

Several studies suggest that the physical geographic location of the

marketplace, headquarters and offices of the market maker contribute
to the confidence of (potential) participants. Daniel and Klimis
investigated an electronic market in the financial industry and found
that "due to the need for any financial service to be based on
confidence between the buyer and the supplier, more localized
personalized markets will evolve. " (Daniel and Klimis, 1999).
Success Factors of Electronic Markets: Impact of Context 213
and Process on Outcomes

3.2.9 Entry Barriers

Special procedures and regulations, serving as entry barriers

for potential participants provide safeguards against entrants who are
not trustworthy and are expected to contribute to the overall
confidence in the electronic markets" (Ribbers and Van Heck 1998).

4. DISCUSSION OF CASE EXAMPLES

4.1 MetalSite

Context: MetalSite has been created for companies that produce, sell
and use metal, in order to reduce supply chain inefficiencies
associated with the metal industry. Stakeholders of MetalSite are
suppliers, service-centers, and buyers of metal products.
Process: MetalSite had focused on the provision of extra functionality
to a relatively under-serviced market, namely the manufacturers and
producers of metal. It was expected that the increased use of sellers
would pull buyers into the system. This research showed that sellers
are only willing to pay for a system that provides functionality for
them. It turns out that they do not adopt, and are not willing to pay for
a system that only provides value for the buyer. Neither the buyers
paid for this technology because it did not provide sufficient
additional value to them.
Outcome: There are several discrepancies in the motives of buyers and
sellers, which led to the initial failure of MetalSite. First, Ryerson Coil
only used MetalSite to sell their short term, excess inventories. This
company probably did not want to jeopardize their existing long-term
relationships with their buyers. Since buyers did not receive enough
additional value and functionality from trading on MetalSite, they
used MetalSite for the purchase of short-term spot materials,
impacting the critical mass of MetalSite.
MetalSite temporarily suspended operations in June 2001 and its
assets were purchased in August 2001 by Management Science
Associates, Inc. (MSA). MSA has used its initial interim period to
thoroughly review more than 300 suggestions for improvements made
by customers and to make numerous operating changes designed to
214 A.a. Nooteboom, P.M.A. Ribbers, A.M. Fairchild

speed service and simplify operations for buyers and sellers alike. For
the re-launching, MSA MetalSite has attempted to both improve
functionality and increase user-friendliness.

4.2 ChemConnect and CheMatch

Context: ChemConnect hosts an electronic market for worldwide

buyers and sellers of chemicals, plastics and industrial gas. Since the
chemical industry consists of a very fragmented buyer and seller side,
ChemConnect was created in 1995 for companies that want to buy or
sell chemicals in a more efficient manner. The stakeholders of
ChemConnect consist of buyers, sellers and charter members,
including a total of 33 companies from the chemical industry that
invested in ChemConnect as a means to obtain industry credibility and
to attract more buyers and sellers.
CheMatch was an electronic market for the buying and selling of bulk
commodity chemicals, polymers, feedstocks and fuel products.
CheMatch has attracted a total of 750 companies from the US, Europe
and Asia to do business on their electronic market.
Process: CheMatch focused on the global market for trade of spot
commodity chemicals, whereas ChemConnect focuses more on
facilitating auctions for specialty type chemicals.
Specialty chemicals, borderline specialty commodities and commodity
products are general chemical products, with a low physical asset
specificity and are movable at low cost, therefore having a low site
specificity.
For CheMatch, a crucial remark was made by DuPont: "Critical mass
is not important, because we only use the RFQ for the procurement of
raw materials and because of the fact that this reversed auction is pre-
arranged in the sense that DuPont brings in its own suppliers, critical
mass is not an important issue. " This view on critical mass shows that
DuPont considers CheMatch as a provider of a technology tools,
which they could have purchased themselves.
Outcome: The reason for discussing both markets in the same section
is that ChemConnect acquired CheMatch in January 2002.
ChemConnect also purchased the Envera Network, one of the
industry's two transaction hubs, in a similar deal in June 2001. By
combining, the goal is to create increased liquidity that is going to be
of tremendous benefit to the industry in the current economy.
Success Factors of Electronic Markets: Impact of Context 215
and Process on Outcomes

4.3 Eumedix

Context: Eumedix focused on the international sector for the

procurement of medical products, and had been created in a very
inefficient market, with a low frequency of switching occurring from
hospitals to other suppliers. Given hospitals often maintained their
relationships with existing suppliers, it was also very hard for other,
new suppliers to enter the stage. The reason for hospitals to use a
limited number of suppliers, with whom they keep long-term
relationships, was a result of the high complexity of medical products.
Process: Eumedix attracted the Amsterdam Medical Center,
Leyenburg Hospital, and Gelre Hospital as buyers. The total number
of transactions facilitated on Eumedix was less than twenty. Eumedix
reports Procter & Gamble was one of the few suppliers who were
moderately enthusiastic in offering on Eumedix.
Eumedix did not develop any strategies to attract suppliers to their
electronic market, because of the fact that these suppliers were only
approached if a hospital had selected a particular supplier with whom
they wanted to trade.
Outcome: Procter & Gamble did not trust the way in which their
product information was presented in the reversed auction and this
clearly had a negative impact on the success of the electronic market.
In this respect, reference is made to the theory of Lee and Clark on the
resistance of buyers if an electronic market does not reflect product
information properly (Lee and Clark, 1996).
216 A.a. Nooteboom, P.M.A. Ribbers, A.M. Fairchild

5. OVERALL DISCUSSION ON RESEARCH

FINDINGS
MetalSIte ChemConnect CheMatch Eumedlx
Convergent
Motives
Critical Mass
Low Learning
Costs
Value Added
Fu[lCtlonalUy
Partnerships +/- + +
with Domain
Experts
Trust n.m. n.m. n.m. n.m.
High Quality of +/. +/. +/. +/.
Information
High Security +
of Information
Neutrality +
Localization + + + +
High Entry +/- +/. +/- +/.
Barriers
Low + +
Complexity of
Product
Description
Low Asset + + + +
Specificity
+ present - not present
+/- more or less present n.m. not measured
Fig. 3.Summary of Case Research Findings

Based on the theory and research on the success factors of electronic

markets, several comments can be made:
• With respect to the convergence in the motives of stakeholders, it
turned out that in cases where the motives of all stakeholders were
not met, this electronic market was likely to fail.
• With respect to the establishment of a critical mass on an
electronic market, it became clear that not the number of
participants, but its usage and therefore the number and volume of
Success Factors of Electronic Markets: Impact of Context 217
and Process on Outcomes

transactions compared to (non-) electronic markets is important

for its success.
• As to learning costs, the necessary learning in order to be able to
use electronic markets, clearly influences the adoption of
electronic markets, and therefore its success.
• As to the provision of value added functionality, electronic
markets offer multiple transaction mechanisms as well as credit
and logistic services. Apparently, none of these were sufficient to
contribute significantly to the establishment of a critical mass.
• As to the formation of partnerships with domain experts, it turned
out that these have a positive effect on the achievement of a
critical mass and therefore the success of an electronic market.
• As to a high quality of product- and trading partner information it
became apparent that these contribute to the level of trust among
traders and therefore to the success of an electronic market.
• As to the security of information, all of the investigated electronic
markets developed privacy statements as a means to guarantee the
security of the information provided by traders, such as company
specific information and trading histories, which might have
contributed to the level of trust among traders and thus to the
success of an electronic market.
• As to neutrality, the absence of shared ownership clearly
contributed to the failure of two investigated electronic markets.
• As to localization, the local focus of an electronic market might
contribute to the trust among traders. As to global electronic
markets, a globalized character of the industry combined with
local support might have a positive impact on the level of trust
among traders and thus on the success of an electronic market.
• As to entry barriers, the absence of these probably did not yield in
distrust on the electronic market and thus had no impact on its
success. This was a result of the fact that traders were mostly
familiar with one another.
• As to product complexity, it became clear that highly complex
products are not suitable to be traded on an electronic market, and
therefore have a significant impact on its success.
• With respect to asset specificity, products that are designed for
one single purpose only are not traded very often, which has an
impact on the success of an electronic market.
218 A.D. Nooteboom, P.M.A. Ribbers, A.M. Fairchild

6. ROLE OF INFORMATION TECHNOLOGY

AND CONCLUSIONS

The reason for the emergence of electronic markets can be explained

as result of the increased use of information technology (IT). From
theory, it is clear that IT has the ability to reduce the complexity in the
description of products, as well as the specificity of certain products.
This allows for more types of products to be traded on markets and
thus for the emergence of more markets to facilitate this. Furthermore,
due to the use of IT, transaction costs can be reduced. Combined with
the product cost advantage of markets, this makes markets becoming
more desirable as opposed to the sourcing of goods through a
predefined number of suppliers. It is clear that successful
implementation of IT in electronic markets is a component of success
factors such as creating critical mass, providing trust, and learning
costs, among others. The relationship between these success factors
and IT implementation is an area for future research.
Our findings suggest a few new contributions to the area of electronic
markets. With respect to the attributes on which Kaplan and Sawhney
(Kaplan and Sawhney, 2000) distinguish electronic markets, such as
type of product, type of contract, market making mechanism, and bias
level, two additional dimensions might be distinguishable. First,
electronic markets can offer public- and private market making
mechanisms. An example of this was found with ChemConnect,
which offers the Exchange Floor, open to all traders, as well as the
Corporate Trading Rooms, where traders have to approve one another.
Second, electronic markets can offer a certain degree as to the
integration of the trading process with the business process of a
company. Examples of electronic markets that do provide integration
are Elemica and Transora, which allow for ERP-to-ERP connectivity
and integrated supply chain services.
With respect to the divergent motives of buyers, these were most of
the time not willing to invite suppliers to the electronic market with
whom they already had developed long term relationships. To be more
specific, this damage could entail the disappearance of the incentive
for suppliers to commit to non-contractible investments, and to charge
a fair price (Clemons et ai., 1993; Treleven and Schweikhart, 1988).
And with respect to the establishment of a critical mass on an
electronic market, it became clear that not the number of participants,
Success Factors of Electronic Markets: Impact of Context 219
and Process on Outcomes

but its usage and therefore the number and volume of transactions
compared to (non) electronic markets is important for its success.
As to the provision of value added functionality, electronic markets
offer multiple transaction mechanisms as well as credit and logistic
services. Apparently, none of these were sufficient to contribute
significantly to the establishment of a critical mass. It would therefore
be better to provide 'real value' to traders.
It also was clear during the analysis of MetalSite, ChemConnect, and
CheMatch, that buyers mostly used these electronic markets to fulfil
small, temporal demands whereas sellers used these as an outlet for
their excess inventories. This was caused by the fact that these traders
did not want to jeopardize their long-term, already existing
relationships with each other. Differently formulated, it is highly
questionable whether electronic markets change long-term existing
close relationships between buyers and suppliers.

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