B2B e-commerce: A trillion-dollar reality check

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Recent estimates by Forrester put the United States B2B e-commerce market at $559 billion by the end of 2013, which is actually double that of the U.S. B2C e-commerce market. There are few other estimates that actually project an even higher number. This may give the impression that this market has really come of age. However, the reality is different.

B2B Market has Significantly Underperformed Compared to Predictions from Early 2000s

During the days of the dot.com boom, many analysts predicted B2B e-commerce would become a trillion dollar industry within five years. In fact, Gartner predicted $7.3 trillion by 2004 and Goldman Sachs $4.3 trillion by 2005.

Like with many predictions made during those days, B2B e-commerce predictions also proved to be hugely exaggerated. Not only were the figures proven wrong, but many of the B2B e-commerce players fell during the dot.com bust.

In many ways the predictions were just too optimistic about the timeframe, rather than being completely off target about the potential of B2B e-commerce. The predictions did not consider the overall ecosystem that is needed for organizations to move their transactions online and do away with traditional channels and systems.

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B2B E-commerce Market Now Growing Steadily, Poised for Significant Growth

Today, this integrated ecosystem is more or less in place, and while some barriers do remain, the positive market drivers for growth of B2B e-commerce far outweigh these barriers. Many B2B companies project e-commerce will soon comprise more than 50 percent of total sales.

Factors driving this growth include:

  • An “ecosystem” is ready for B2B e-commerce to flourish and grow: Internet connections are pretty much there with every organization today, and this is true even in developing economies. B2B e-commerce infrastructure and solution costs are falling, and modular and less capex heavy cloud-based models are readily available. In fact, there is a significant increase in vendor activity with existing IT vendors as well as new vendors coming with a range of solutions for the B2B e-commerce space. B2B market places such as Alibaba continue to evolve and grow.
  • B2C experiences are driving demand for B2B e-commerce: With B2B e-commerce becoming all prevalent, the business buyer is increasingly demanding a similar kind of buying experience.
  • B2C giants have big plans for B2B e-commerce: A big driver for explosive growth of B2B e-commerce will be the ambitious moves that are being made by Amazon (Amazon Supply), and to some extent Google. Each has entered the B2B space, and while they have not made a huge noise about it, the early signs point to possible disruptive changes and rapid growth of B2B e-commerce.
  • Omni-channel is a reality, and is happening already: Multiple studies indicate omni-channel is the direction the B2B market is evolving. Organizations are seeing that converting single channel customers to omni-channel customers with e-commerce as a key channel results in significantly higher sales from these customers.
  • Mobility is a key enabler: Mobile phone and smart devices have opened up new opportunities for B2B e-commerce practitioners. Mobile enables faster real-time order placements and provides more options for field sales teams. Mobile devices are also enabling customer services to be more effective.
  • Cloud computing provides significant value: Cloud-based systems reduce the entry cost for adopting B2B e-commerce and provide a more adaptable and scalable B2B e-commerce architecture.

While the successful implementation of B2B e-commerce platforms relies on the integration of systems and accounting of the often complex rules of engagement, even these accomplishments alone are no longer enough.

Challenges to growth include:

  • Lack of organizational commitment: Often, studies on B2B e-commerce adoption cite “lack of budgets” and “lack of management buy-in” among the top barriers. In many ways these are very much interrelated. With top management buy-in, budgets that are needed for adopting B2B e-commerce should never be a major challenge if organizations are willing to take a longer term vision on business transformation.
  • Concerns around channel conflict: B2B firms have a system of channels and channel relationships that have been built over the years. They are naturally wary of the negative reactions from these channels if they move towards B2B e-commerce as it implies a direct-to-business buyer channel.
  • Concerns on arriving at a balance with internal sales teams: Aligning and often revamping existing internal sales functions, such as field sales teams and inside sales teams, is often challenging. In the move towards B2B e-commerce some of these traditional internal systems will need to change, scale down and reorganize, and this can lead to significant internal organizational resistance.
  • Adapting existing CRM and supply chain systems: Many B2B firms have invested heavily in and built robust CRM and supply chain systems. It can be difficult to change these systems to adapt to the e-commerce world.
  • Global regulatory systems: The regulator environment, especially those related to international payments, can present bottlenecks to B2B e-commerce.
  • Need for personalized selling: Many B2B customers are accustomed to personalized selling and come to expect this even in the e-commerce-enabled engagements.
  • No “standard” prices or offerings: In the B2B space, pricing is never “standard” and depends on a complex set of factors. Often, there are specialized offerings to price combinations that are unique to a customer, implying that B2B e-commerce systems need to be amenable for multiple product/pricing dynamics.

B2B e-commerce will continue to grow, and the pace of growth is bound to pick up, driven by the rapid growth of cloud, digitization and mobility coupled with the ever-increasing demands of B2B consumers. Omni-channel/multi-channel will become all prevalent and B2B e-commerce and other direct channels would coexist, and in fact, synergize with indirect channels and traditional channels.

The future of B2B e-commerce is happening now, and you need a playbook. Game Plan B2B Commerce Forum for Brands, Manufacturers and Distributors is scheduled for Nov. 4-5 in Chicago. At Game Plan, you will hear how B2B e-commerce is changing and what to do about it. Register TODAY by clicking here>>

Ajith Sankaran
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August 13, 2014
Ajith Sankaran

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