Until now, there have been two basic business models in catalog-based e-procurement:
- The Buyer Pay Model: Followed by Coupa, Sciquest, Tradeshift, Basware, and others. This model charges the buyer a fee and is free to the supplier.
- The Buyer and Supplier Pay Model: Evolved to, and followed by, Ariba and a few others.
But a new player in laboratory management (note they do not call themselves lab e-procurement), Quartzy, is offering an interesting twist on the existing models. It’s a variant on a model I’ve dubbed Industry Catalogs.
Quartzy is not meant to be a complete procure-top-pay system (it does not seem to send POs or receive invoices. But it does offer:
- a free cross-supplier catalog search tool
- integration to Sciquest or Ariba for ordering and invoicing
- inventory management
- and equipment scheduling
Quartzy is free to the buyers (and says it always will be). The company intends to make money by being a market-maker, broker, and even supplier of record to these buyers. The company explains its business model clearly as follows (see here as well):
For labs using the Order Requests Module, Quartzy hunts for cheaper prices on the supplies they are about to buy. If we find a better price we send you a quote, and you can choose to accept or ignore it. If you accept our quote, you buy the item from Quartzy. Our suppliers pay us a commission for sourcing products from them, and you get the product for cheaper. Win-win!
Essentially, Quartzy makes a market for each item and then steps in as the supplier. (I’m presuming Quartzy does not hold any inventory, but instead instructs the supplier drop ship the item to the buyer–though this is not clear.) Quartzy is basically a modified form of AmazonBusiness–but deeper in lab supplies and offering lab management functionality.
Lab Supplies 3.0
One of Ariba’s initial “power alleys” was lab supplies and equipment category frepresented by distributors such as VWR and Fisher, who were early leaders in e-commerce. Lab supplies are a great category for e-procurement–highly catalogable, substantial spend, and requiring rich content. After Ariba, came Sciquest which provided a catalog solution on top of Ariba and then eventually, a complete e-procurement solution. Then came Coupa, etc. and the result is a crowded market of e-procurement systems for any lab products supplier, as this public slide from VWR shows.
Now Quartzy is trying to re-invent the category’s business model for a third time. The questions will be:
- Do buyers want these quotes which could be seen as working against strategic sourcing efforts and volume rebates? Will the proposed savings and additional functionality compel buyers to search in Quartzy first?
- Will the flow-through of spend and associated commissions fund the business?
The walled gardens created by strategic sourcing and “punch-out” may be succumbing to more open systems of procurement of catalog items. AmazonBusiness, Quartzy, and Tradeshift Buy appear to be attempting to scale those walls.