7 - 13 June 2001
Issue No.537
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Al-Ahram Weekly Online 7 - 13 June 2001 Issue No.537 |
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B2B means business
For companies that cannot afford to take their business online individually, joining a virtual market-place may be the answer, writes Niveen Wahish
If you happen to accidentally log in to Ciranet.com, you would probably immediately log right back out. It is not exactly a "sticky" site, but, then again, that is not its intention, at least not for the average net surfer. Ciranet, as defined by its managing director Sameh Montasser, operates a virtual business-to-business (B2B) market-place, wherein producers, distributors and retailers come together. Its services cover everything from placement of initial orders to delivery and payment settlement.
Raya Holding and Citibank joined forces to create Ciranet, hoping to capitalise on what they saw as the potentially exponential growth of value-added services available through the Internet. Although Ciranet's launching has come during a worldwide slump in the information technology industry, Montasser is optimistic about the company's business prospects. He insists that estimates of B2B transactions reaching $1.4 trillion by 2003 are unchanged.
In Egypt, e-commerce is a particularly fertile ground. According to Montasser, with the privatisation and liberalisation of the economy, our society is increasingly accommodating international systems. And while companies may not be able to afford setting up a system to take their business on-line individually, going through a market operator is a solution that is both practical and less costly.
Although designed to address various markets, Ciranet began by servicing the pharmaceuticals sector, as it was the most promising. "In general, automation in this sector, compared to other sectors, is high. And being doctors, they could be more open-minded to the introduction of a new system," Montasser explains.
To begin, Ciranet set out to change business relationships. Tradition in the pharmaceuticals sector called for a sales agent to pay regular visits to pharmacies, marketing new products, taking orders and then delivering. With the new system, orders are placed electronically, thereby saving time and enabling the pharmacies to keep better control of inventory. But to make this happen, Montasser says, the company is fighting on two fronts: "to change the business cycle as well as the cultural barrier to technology and the use of the Internet."
Despite the difficulties, the ball has started rolling; trade is already taking place through Ciranet. According to Montasser, the company currently has more than 15 suppliers and over 80 pharmacies in Cairo using its service. "This is very good, since we have just begun, but we have a long way to go," he says, adding that the company plans to extend the service outside Cairo soon.
There are around 19,000 pharmacies in Egypt. Ciranet is targeting the 7,000 pharmacies which account for 80 per cent of the business. There are over 100 distributors, which deliver anything that is sold in a pharmacy, from prescriptions to make-up and baby food.
To attract subscribers, Ciranet offers services such as online catalogues and access to industry-specific news and research. For pharmacies which want to join but lack the technology, the company enables them to acquire computers through Citibank and pay by instalment over three years.
"It takes time to get people to be part of the system, not only to convince companies to become part of the system, but also to train them to use it," Montasser admits.
With such a tough task ahead, Ciranet management know that recovering their LE15 million investment and then making a profit will not happen overnight. They are aware that e-commerce is a long-term investment. "It is a business whereby you must have deep pockets and good financial support... We do not expect to start making money before two years," Montasser says.
Suppliers pay an annual subscription fee to participate, while pharmacies pay nothing. Ciranet makes money by taking a commission on each transaction. According to Montasser, in the long run the commission is enough to justify the investment. "We have to reach a break-even point wherein the number of users on the system grows to a certain level and on more than one vertical market," he says, explaining that the system's infrastructure is very expensive. "If I distribute its cost over more than one market-place then it starts to become justifiable."
He points to the oil and gas and automotive industries as examples of areas where the company can create a market-place. "We are hoping to open two new market-places this year," he says.
At the same time that it opens vertical market-places, Ciranet plans to connect with other virtual market-places in what is called Market-to-Market (M2M). This provides exposure to products of companies using the system and facilitates import and export transactions.
Working in an area that is new for both the company and the market is made difficult by the absence of legislation regulating Internet transactions. To handle the situation, "we develop our own contracts to preserve the rights of the various parties," Montasser says. Fortunately, the law currently in the making "will make our lives much easier."
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