Brazilian e-procurement company Mercado Eletronico (ME) (www.me.com.br), one of Brazil's oldest e-procurement ventures, plans to break even in 2Q01. BNamericas recently spoke with Eduardo Nader, the CEO of ME, about acquisition opportunities and how last year's succession of bad news including the Argentine crisis, energy rationing in Brasil, and terrorist attacks in the US affected the e-procurement market.
BNamericas: What is the difference between a private marketplace and the new energy marketplace you have set up for [electricity company] Eletropaulo?
Nader: We have about 60 private marketplaces, which are used by large corporate clients. In the case of Eletropaulo, we are their e-commerce service provider. Currently we have seven such projects where we have created an independent marketplace for each company. In the case of private marketplaces, we [host them] on our home portal.
In the case of e-commerce service provider projects [full-service, independent marketplaces], we do everything for them: CRM, transaction control, registrations, catalog maintenance, etc. Besides providing these services and creating the necessary infrastructure, we actually connect them with all their suppliers.
BNamericas: When do you expect to hit breakeven? ME forecast in January that breakeven would occur in February or March.
Nader: We will break even next quarter, May at the latest.
BNamericas: What is happening with your partnership with Senegocia? Is there a termination date for the contract?
Nader: No there is not. We are still working with them, and will continue to do so for the next few years at least. We do RFQ-sharing with them, and they also sell our e-distribution software, which connects suppliers with buyers and helps keep track of finances and logistics.
Right now there are companies here in Brazil that want to operate in Chile and Argentina, so we will use Senegocia for this.
BNamericas: How would you characterize the current adoption rate of e-procurement solutions in Brazil, and compared to the rest of Latin America?
Nader: Last year in the first semester we experienced a lot of growth - [it was] exponential. Then during the second half of the year the energy crisis, Argentina crisis and terrorist attacks in the US created insecurity here. Big companies stopped e-commerce initiatives.
But nevertheless, we grew by 500% last year as compared to 2000 with revenues of 6mn reais [US$2.54mn], and transaction volume of 26bn reais. This year we will double our volume and revenues.
Chile is growing well, but because of their gross domestic product, which is lower than ours, I don't know how much they can grow. Mexico has no liquidity, or no e-marketplace that has the liquidity we have.
BNamericas: What was the initial investment in ME?
Nader: 10mn reais.
BNamericas: How would you categorize your core services?
Nader: Sourcing, which is the maintenance of catalogs; registrations; reverse auctions; transaction monitoring, which includes call centers and CRM; outsourced e-procurement where we buy the goods for the companies, which is really hot right now; private marketplaces; e-commerce service provider projects; and technical ERP integration.
BNamericas: And what is your revenue stream breakdown currently?
Nader: 30% from e-commerce service provider projects, 30% from services like sourcing and reverse auctions, then 40% from private marketplaces.
The services category will grow a lot. More and more companies want not just technical help with platforms already purchased but strategic help as well. In the past companies have seen e-procurement as too simple - as just buying the platform then making it work.
BNamericas: Do you have a goal for increasing your commerce service provider projects?
Nader: We want to increase our current total of seven [projects] to 12 by year-end.
BNamericas: What about your acquisition last year of Clicon? How is that going?
Nader: That is a very interesting project because although it is a vertical construction portal, it has a catalog of products that can work for other sectors like the chemical and electric [industries]. We incorporated their catalog, client and supplier base. They have already been absorbed by ME.
BNamericas: Do you foresee any more acquisitions this year?
Nader: We are in negotiations now with some possibilities, but I cannot tell you who. Acquisitions are good because they give you more liquidity in less time.
About the company
ME was founded in 1994 and today it has a supplier community of 25,000 small, medium and large companies, with 300 medium and large companies as buyers, mainly in the telecoms, chemical and construction sectors. ME hosts 14,000 RFQs a day. According to the company, buyers save on average 11.4% on the end-cost of products over ME.