America’s largest corporations will spend $50 billion this year with minority-owned companies. Should matchmakers linking big buyers and small suppliers expect sure-fire profits? Only if they have the right business model.
July brought the shutdown of a promising four-month-old start-up, M-xchange.com Inc. the online trade exchange company facilitating minority supplier relationships for Fortune 500 companies. Because retired General Motors vice president, Roy Roberts, 61, was cofounder, M-xchange made news. (See “Roberts Shifts From GM to Dotcom,” June 2000).
The closure notice on M-xchange’s Website gave this explanation, later deleted: “The ability to charge transaction fees for Web-based commercial exchanges has declined, rendering it difficult for M-xchange to achieve profitability in an adequate time frame using its business model. Additionally, the willingness of the capital markets to finance business-to-business [firms] has also declined dramatically.”
As a middleman, M-xchange collected a 1% to 2.5% finders fee from buyers who used the site to close a deal.
Given e-commerce, the real snag for suppliers is the ability to perform contracts. “As corporate America decreases its supplier base, minority businesses need to make sure they can indeed, service those larger corporations,” says Adele Johnson, president, Virginia Regional Minority Supplier Development Council. “How to build capacity? Strategic Partnerships,” says Johnson.