In the age of Internet economy, corporations are not about to build their own online exchange to palm off surplus goods. Instead, many are discovering what an online exchange, especially one willing to get rid of excess goods, can do for them.

For San Francisco-based B2B portal vLinx, it is time to strike the metal while it is hot. Despite analysts' predictions that two-third of Asian B2B e-marketplaces could fold by 2005 and the slowing US economy will dent the region's economy, vLinx is determined to change traditional distribution and trading habits in the region.

"Buyers have to cut cost and trim margins. Instead of coming to Asia to buy goods, they can do it online - a method which is more efficient and cost effective," said Shannon Boase, president for Asian operations at vLinx.

While she noted that the dotcom fallout has made it tough for players like vLinx which have a viable business or solution, Boase is confident that its buyer-centric B2B model will survive the slowdown.

To date, the online marketplace for excess consumer goods made in Asia, has signed on 1600 suppliers in the region which serve over 8000 wholesalers, distributors and discount retailers in North America.

Backed by Hutchison Whampoa, Cheung Kong, CIBC World Markets and Madrona Venture Group who invested US$12.5 million (in the company), vLinx set up its Asian headquarters in Kuala Lumpur barely six months after setting up shop in Canada and US in March 2000.

The company also inked a deal with the Federation of Malaysian Manufacturers to market surplus supplies from its members via the vLinx channel. The federation represents over 2000 manufacturing and services companies in Malaysia.

"We project moving goods of up to US$1 billion through our portal by 2003 - that is our goal. We hope to have positive cash flow in our third year of operation."

Operating with a lean team of 84 staff worldwide, the vLinx field force spends hours educating suppliers. Field directors, equipped with laptops and digital cameras, go out and establish relationships with suppliers.

"Handholding is necessary, from counting inventory to tracking products available. Some suppliers do not have inventory management for their excess products. The field team plays a big part in keeping suppliers informed of [the inventory] status of their products.

"Our field directors do not sell technology; they do not sell e-commerce. They sell a solution to a business problem. The approach is more like: 'You have excess goods and we can help you sell it. Oh, by the way, we use the Internet to do it'," said Boase.

Among the goods moved through the exchange are jewelry, hardware and tools, baby products, gifts, footwear, sporting goods, stationery, luggage, health, beauty and general merchandise.

"We charge suppliers a fee which is 5% of the invoice value of a successful transaction," she said, adding that members pay a subscription fee of US$500 per year. Freight and insurance charges are billed separately.

She added that vLinx provides a complete transaction fulfilment process that includes selecting the pre-qualified buyer, proposed goods, product sampling, as well as furnishing letter of credit, payment, insurance, inspection and right down to shipping.

Fraud is kept in check as both buyers and suppliers have to qualify for the service. Suppliers undergo industry certification and the buyers' financial worthiness is verified by banks through a simple credit check.

"This increases the probability of successful transactions. The programme partners are also fully integrated on the back-end so that information is available in real time."

Among vLinx's programme partners are American escrow account provider TradeSafe.com, inspection and certification specialist SGSonSITE, FedEx, LloydÕs and freighters NNR and OEC.

In addition, vLinx provides the landed unit cost. "Basically, we take the information entered by the supplier, like how many units [of products], how they are packed, and how much [it costs] per unit. We then figure out for them how much it would cost for the goods to be landed on, for instance, the east-west coast of US and Canada. This enables the buyer to make a quicker decision," she added. The buyer/supplier only needs to register relevant information in a template once. Data is then extracted throughout the process as it is needed. "You do not have to keep keying in the information. It is a one-stop shop," she explained.

Once buyers confirm the goods are available at the set price and quantity, they can choose to get it inspected and insured.

"Once that is done, they sit back and the system takes over. There is no need to phone the freight forwarder or insurance company to make sure they are doing their job, or even confirm the delivery date."

Boase added that the partner programme will be improved in the future. "Our programme partners have spent a lot of time, money and energy in helping us perfect the software [behind our operation]. So we have to give them some benefit."

She added that the relationship with its three partner banks - HSBC, Royal Bank of Canada and Wells Fargo - is non-exclusive. "We have chosen those banks for their geographic strength."

vLinx was quick to offer new services when its auction method failed to garner support. In the past, auction goods buyers had to wait a long time for their bids to be collated before receiving their orders.

Boase said that the Instant Buy feature is the simplest form of trading where suppliers register one-off product offers and buyers come online to search for what fits their needs. "They can negotiate and it is an instant sale. The relationships and networking that happen when doing business the traditional way very much apply when doing business online as well," she added.

Among vLinx's key buyers is retailer AS Watson Group that buys US$1 million worth of goods annually. "We source specific products for them and the system allows them to view, sample and issue their own purchase order for the product. They get priority access."

vLinx hopes to raise the number of suppliers to 3000 by next February, with VIP Room buyers projected to exceed 25 this year. Total revenue is forecasted to reach US$27 million next year.

"We have created a vehicle for small and medium businesses in Asia to tap a global market at a very low cost and this is a working model."


Anita Devasahayam can be reached at anitadm@ pc.jaring.my