As manufacturers and wholesalers migrate from legacy systems to open, online platforms, business-to-business (B2B) online retailing is experiencing strong growth. The B2B online market could easily reach double the size of the business-to-consumer (B2C) online market, generating revenues of $6.7 trillion by 2020, according to Frost & Sullivan, a growth strategy firm.
In part, because B2B models are moving toward “ubiquitous online platforms that allow buyers and sellers from anywhere in the world to transact goods and services with ease,” adding legacy systems involving the use of electronic data interchange that can be expensive and cumbersome to handle is necessary.
The analysis from Frost & Sullivan, Future of B2B Online Retailing, reveals that B2B online sales will account for nearly 27% of total manufacturing trade, which is expected to hit $25 trillion by 2020. “Geographically, China and the United States will lead the B2B online retailing market. The latter is anticipated to double its revenue contribution to $1.2 billion by 2020.
“As marketplaces and cross-industry public platforms such as Alibaba and Amazon become popular, B2B online relationships are likely to move from a one-to-many to many-to-many business model. Instead of a model where one company invests and builds an e-platform for its suppliers, the preference will be for a solution in which anyone can integrate an e-procurement process and facilitate the purchase of goods online.”
Private industrial networks, where specific companies exchange products, and public market places for on-the-spot purchasing have gained prominence over the last decade, said Archana Vidyasekar, Frost & Sullivan’s Visionary Innovation Group team leader. “With businesses buying more than selling online, these seller-driven B2C-type open public networks will help provide more visibility and storefront capabilities to sellers.”
Unlike the B2C setting, however, B2B prices are variable and order volumes are high and wide ranging, necessitating a flexible shipping and logistics solution, Frost & Sullivan said. “Tax and regulatory concerns also impact sales highly, and providers typically employ large staff whose only responsibility is delivering products and services within these restrictions.”
Additionally, executing marketing or educational initiatives in the B2B setting are complex; clients must understand how products work and interact with systems they already have or are considering. “The black box effect, wherein a customer buys a device without a real interest in learning how it works, barely exists in the B2B context.”
“Nonetheless, with technological advancements facilitating the procurement of goods on the move through smartphones and tablets, business use of online platforms will rapidly grow,” said Pramod Dibble, the firm’s Visionary Innovation Group consultant. “The emergence of cloud platforms that offer more scalability, both as a software and infrastructure service too, is pushing businesses toward B2B online retailing.”
The firm suggests that Internet retailers offer a menu of services rather than one bundled option to allow customers to experience the online channel with low risk. “Even clients hesitant to disrupt their current ecosystem of sales and distribution will then begin using online channels, which automate many of the time-consuming and costly aspects of procurement.”
- Diana Mota, NACM associate editor
To read more about the future of B2B e-Commerce, click here for an eNews item about Forrester’s inaugural five-year B2B e-Commerce forecast.