Online exchanges and trading hubs
The different types of online exchanges and hubs and the main considerations before entering one.
Online exchanges, also known as trading hubs, are websites where buyers and sellers trade goods and services online.
These trading hubs vary according to the size and number of companies using them and the type of commodity traded. There are already successful hubs in markets as diverse as energy, textiles and logistics.
Like online auctions, online exchanges allow participants to trade straightforwardly with a wide variety of buyers and sellers. There are two main reasons why such exchanges are popular, including:
- large businesses can use them to reduce stock holdings
- small businesses can bid collectively to earn volume discounts or to jointly deliver a large contract
Types of online exchange
There are different types of online exchange, each catering for a specific aspect of trading:
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request for quotation - an invitation to suppliers to provide a quote for a specific product or service
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request for bid - an invitation to buyers to bid for a specific product or service that you can provide
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commodity exchange - an ongoing process where the price of a standardised commodity such as energy or telecoms bandwidth continuously changes because of changes in supply and demand
Online exchange considerations
Before entering an online exchange, check:
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Choice - are all your major suppliers involved? Does the exchange have a comprehensive list of products and services so you can compare like with like?
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Business relationships - could using an exchange undermine your status as a favoured customer?
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Administration - do you have adequate systems in place for order fulfilment? Are your internal business processes suitable for active online trading?
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Disclosure - are you comfortable with publicising information on prices and stock levels where your competitors, as well as potential customers, can view it?
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Fees - how do these compare to any savings in sales and marketing costs?