Sellers in all product categories, from raw materials to highly engineered machinery, have approached the Internet reluctantly. Because business-to-business (B2B) e-marketplaces initially focused on attracting buyers, low prices naturally took priority over cost savings and growth opportunities that could benefit all participants in the marketplace. The prevalence of reverse auctions, in which sellers try to underbid one another to win particular orders, shows how strongly this ultracompetitive way of thinking has taken root in today’s economy.

From a seller’s standpoint, B2B marketplaces not only offer advantages but also embody some of the Internet’s least attractive tendencies. By efficiently matching sellers and buyers, these marketplaces take costs out of the supply-and-demand chain and increase the market’s efficiency, particularly in the high-volume trading of commodities such as chemicals, metal, and paper. Since customers of B2B marketplaces tend to focus on getting the best price, sellers face cutthroat competition and pressures to standardize products so that they are more directly comparable to the competition’s—thus diminishing the distinctiveness of the brand. B2B marketplaces also erode the direct relationships that sellers had with their customers.

Many sellers have therefore avoided these marketplaces, preferring instead to establish bilateral e-trade relations by, for example, opening "extranets"...