As soon as the world went online, everyone went shopping.
The success of Alibaba, Amazon, and E-Bay has shown a clear market for e-commerce. The ease of search, click, purchase, and delivery, all from the comfort of your couch has threatened traditional stores everywhere and turned shopping malls into historic business models.
But whereas specialist shopping websites exist to buy used cars, pet health insurance, farming supplies, catering services, and even property, no one has yet been able to find the right recipe for online industrial chemical sales.
A number of smaller B2B platforms are now well established, such as Amazon Business, Global Sources, Europages, and SeeBiz, but while most of these provide generic goods and services for industry, none of them specifically cover wholesale chemicals. Meanwhile, successful platforms such as Fibre2Fashion and Fashion United show what is possible for B2B e-commerce in specific industry sectors. So, why haven’t online industrial chemical sales taken off?
The first hiccups in moving industrial chemical trading online began in the dot-com bust of the early 2000s, when a host of e-commerce platforms for the wholesale buying and selling of chemicals went under.
Some blamed the complicated mix of regulation, quality assurance, pricing, and safety, as the causes for failure. Certainly, the industry’s overwhelming product range and international logistics didn’t help. Others believed that the model would have survived if investors had stayed patient and avoided the mass selloffs that happened during the Nasdaq market collapse.
Perhaps it was the inherent price secrecy in the industrial chemical industry that made online B2B marketplaces unsuccessful. Certainly, chemical industry sales departments have a long history of making connections and building relationships before any deal is done.
It is a practice that makes sense, when the nature of chemical production, with its long-lead times and decades-long investment process.
According to Dave Haase, president of the e-commerce platform ChemDirect, fear over publishing wholesale chemical prices online is the key factor limiting expansion. Chemical company sales teams simply do not want to share this data with everyone and are averse to changing from ‘how it’s always been done’. To get round price-privacy issues, ChemDirect offers users a tool to set high prices for small-volume customers and lower prices for larger sales.
“It’s one of these markets that hasn’t seen a lot of change,” says Ali Amin-Javaheri, CEO at Knowde “The market is very opaque.”
However, Amin-Javaheri sees the disconnect between the chemical industry and online tech more as an opportunity than a problem, noting that most chemical suppliers do not even have digital versions of their product catalogues.
“They haven’t organized it, structured it, harmonized it, put a taxonomy codification system around it,” he says. “Ninety-five percent of suppliers haven’t done that. They don’t know how to do it.”
The BluePallet platform offers some privacy for its users by allowing distributors to control who can see specific price quotes, something they call permission-based selling. This enables different customers to be offered different prices in secret or to allow prices to be set regionally.
The ultimate success or failure of these platforms remains in the balance, but have been shown what is possible by laboratory chemical suppliers. In this niche chemical market, a host of platforms are profitably shipping pocket-sized amounts to students, universities, and individual chemistry researchers everywhere. Is this also achievable for industrial quantities?
Sebastian Brenner, co-founder of online chemical retailer CheMondis believes there has to be a better way. “There are 22,500 chemical companies in Europe alone,” he observes. “And you still have a lot of companies sending text messages to order products.”
Industrial chemical retailers have learnt from those early dot-com mistakes and are slowly building support and users. This means that today, a number of larger chemical company’s such as Dow, Evonik, and the coatings manufacturer PPG Industries are all experimenting with various third-party e-commerce platforms. It’s a low-cost way to try and expand sales or to find spot prices for individual chemical inputs, especially in new foreign markets.
“We are piloting it [Knowde] to understand whether the marketplace channel will be meaningful in our industry,” says Brad Budde, PPG’s chief digital officer.
“We are working with quite a few [platforms] mostly because we are curious to see how they evolve.” explains Dow’s Futter. Seeing them as just another way of getting product to customer. “We don’t mind if customers want to go with EDI [electronic data interchange], make a phone call, use Dow.com or a third-party website. All that matters is they buy our product,” he says. “Our job is to make sure we are in all those places and to try to make the experience as easy and effective as possible.”
For now though, total online industrial chemical sales traffic remains low, with some industry insiders estimating that less than 1% of all industrial chemical sales are conducted online. And while 1% of an almost $5 trillion industry is a lot of money, it is far from the success story that many predicted.
Whether the problem lies in the price secrecy, the immaturity of the platforms, poor search engines, or the ‘reluctant to change’ chemical industry culture, it’s certainly not an easy puzzle to solve. As Knowde’s Amin-Javaheri concludes, “You can’t just jump online and learn what you need to about the industry and start building software for it.”
Photo credit: Tumisu from Pixabay, Gerd Altmann, Marcin Jozwiak, Artem Podrez on Pexels, & Pete Linforth