Covestro and alibaba employees hit the “On” button
The chemical industry looks like it is finally moving into the 21st Century with the news that majors BASF and Covestro have signed up to China’s 1688.com B2B shopping platform, part of Alibaba.
The industry has struggled to move beyond traditional sales channels involving paper, telephone and even fax. Many readers may remember that during the dotcom boom of the early 2000s there were attempts by industry innovators to set up online trading platforms such as ChemConnect and CheMatch.
They showed early signs of success with ChemConnect claiming it, together with ChemMatch, handled $4bn of transactions in 2001. But ultimately they faded away. Big dotcom investments did not pay off because the broader industry simply wasn’t ready to adopt these new ways of doing business. The dotcom bubble burst and new sources of funding also dried up.
However, as the dinosaurs of the pre-digital age shuffle off towards retirement, a new generation of tech-savvy millennials are rising through the chemical industry ranks and into positions of influence. Younger people have overcome hesitation and any fears about buying and selling online. Platforms such as Amazon and Alibaba now dominate retailing in the B2C segment and it looks like B2B is next.
DISTRIBUTORS UNDER THREAT
If online buying and selling take off in a big way it could threaten the current business model where many producers handle large customers themselves, passing smaller volume business to distribution partners.
Many distributors offer value-added services such as help with blending and formulations and act as an extended marketing arm of their suppliers. But simple buying, repackaging and selling of products could be threatened by this new business model.
Covestro’s venture into Alibaba is definitely aimed at smaller customers as it has a limit on order size. But it also hopes to gain a greater understanding of customer needs by interacting directly with them.
From 23 April the company started offering a portfolio of 50 products - polycarbonates (PC) as well as ingredients for polyurethane foams, coatings and adhesives. It uses Alibaba’s B2B portal . A second wave of products is planned and the company announced that new forms of online commerce will contribute up to €1bn in accumulated sales by the end of 2019.
It chose the Chinese market for this venture because it is already highly digitised. Covestro says the main goal is to offer customers a reliable, official channel with a simple and efficient purchasing experience. “Particularly in a market like China, which is at the forefront of digitalization, we need to be where the customers are and will be,” said Xiaobin Zhong, head of commercial operations for the Coatings, Adhesives and Specialties business of Covestro in Asia Pacific.
BASF opened an Alibaba sales channel in 2015 but on 20 April said it was expanding this into a “flagship online store”. It is also aimed squarely at small-to-medium sized customers. A first batch of 11 popular products from BASF’s performance chemicals, dispersions and resins, intermediates and care chemicals divisions are on sale with more in the pipeline.
The company aims to provide convenience to its existing customers and allow it to identify and effectively serve more SMEs. It aims to provide “swift order confirmation, certified storage and transportation of chemical products, and timely delivery.” Earlier adopters of Alibaba include Evonik, which opened a store in November 2017, and Solvay which went live in January 2018.
OTHER TYPES OF PLATFORM
Chemical companies are also experimenting with other types of online buying and selling platforms. Some of these are bespoke, in-house sites which aim for a “no frills” approach to selling standard products.
Dow Corning, for example, created its Xiameter brand and trading platform back in 2000 and it now allows customers of all sizes to buy standard silicone products with a minimal level of service.
Covestro is also planning to launch (see page 24/25) this year its own trading platform which will be opened up for competitors to use too.
In Europe there are GoBuyChem plus PolymerMarketPlace. And in China the Dalian Commodity Exchange provides futures trading for linear low density polyethylene (LLDPE), polyvinyl chloride (PVC) and polypropylene (PP).