The Case for Business to Business E-Commerce

By
Brandon Gracey
September 9, 2015

Business to business e-Commerce is one of the biggest challenges facing today’s wholesalers. Rapidly changing customer expectations are forcing companies in this once stable industry to adapt in order to keep up with customers who are bringing their B2C expectations to work in the B2B world. Once satisfied with paper catalogs and placing paper orders over the phone or in person with sales reps, today’s B2B customers have grown accustomed to “one-click” buying and browsing the items they want online. They want more control and insight over their experience as a customer. This is one reason why developing and implementing a business to business e-Commerce strategy is so important for wholesale brands. In this post, we’ll talk about some of the evidence supporting the growth of B2B e-Commerce, e-Commerce strategies to consider and an approach for choosing and implementing the strategy that will be most effective for your business.

What is Business to Business e-Commerce?

Business to business e-Commerce relates to the technology and business practices that allow businesses to buy and sell from each other online. In most cases, this involves either an e-Commerce “marketplace” where many buyers and sellers come together to do business, or it may involve a “portal” – a website where a single brand or company sells its products to its own customers.

B2B e-Commerce Growing Rapidly

According to Forrester Research Analysts Peter Sheldon and Andy Hoar, speaking at June’s Internet Retailer conference, manufacturers and wholesalers are expected to account for 30% of e-commerce technology spending, while retailers are expected to fall to just 28% of e-Commerce spending, down from 41% in 2013. Forrester also reports that U.S. manufacturers, wholesalers and distributors are projected to sell as much as $780 billion via e-Commerce in 2015 – nearly double the 2014 figure – and that growth is accelerating. What’s behind this rapid growth? There are two reasons: buyer preferences and cost. Many business buyers prefer to shop online, and sellers can cut costs by serving them via the web. This allows B2B wholesalers to reach out more effectively to new customers with whom they don’t have existing relationships and for whom buying online is now second nature. It also allows those retailers to more easily expand their reach into new geographical areas. They can also better serve existing customers: Forrester Research notes “channel shifting” as a major trend in business to business e-Commerce. B2B buyers are switching away from phone and other offline channels and now increasingly want to do their business online. An additional factor supporting the move to e-Commerce is that studies show buyers tend to buy more online than they did using offline channels. The last factor contributing to the growth of business to business e-Commerce is cost. B2B e-Commerce allows manufacturers, wholesalers and distributors to cut operating costs and process more sales to customers through self-service e-commerce sites and electronic order processing.

Choosing a Business to Business e-Commerce Strategy

The advantages to implementing a business to business e-Commerce strategy are clear. To take advantage of the opportunities B2B e-Commerce offers, most wholesalers will have to first decide which approach best suits their business model, whether it’s participating in an e-Commerce marketplace, targeting buyers directly via the company’s own direct portal, or using a combination “hybrid” approach. We explored this topic further in our recent article, “e-Commerce Business Models for Wholesale: Choosing the Right One.” Direct portals offer wholesalers an online outlet where only your company’s products are available. This offers more control over the look, feel, and user experience your buyers will have, and keeps those buyers concentrated only on your brand. A marketplace, on the other hand, puts your products in front of a wide variety of buyers and handles most aspects of the user experience, but your company will still be responsible for handling payments and logistics related to order fulfillment. This means integrating your back-end ERP systems with the marketplace’s front end. The payoff may be more eyes on your product, but what is the value of those marketplace customers? With a marketplace, your company is one of many options that a customer might choose, so typically you will see a mix of customer types, some high value, some low. You may also see customers bypassing your products in favor of your competitors. A few questions to ask as you make your decision include:

  • How important is it to control your users’ experience and brand perception online?
  • Is your organization already a leader in its space with a reliable customer base?
  • How are you going to implement your B2B e-Commerce platform?

There’s also a middle way. A hybrid strategy, combining a direct portal with marketplace participation, may allow wholesalers to take advantage of both models. Companies that choose the marketplace option can develop their own direct portal, allowing them to control the brand experience for their most valued existing customers, while also participating in a marketplace option.

Implementing Your e-Commerce Strategy: Considerations

Once you’ve figured out whether the marketplace, direct or hybrid strategy best suits your company’s needs, it’s time to get into the details around how to put your strategy to work. If you go with the marketplace option, you will have a wide variety of marketplaces to choose from. Large marketplaces such as Amazon Supply or Alibaba can put you in front of plenty of customers, but you’ll need to decide if they are the right customers for your business. You also need to consider how easy or difficult it will be to integrate your back end payment processing and logistics systems. With the direct option, there are a variety of third party software as a service (SaaS) companies that offer applications that can make implementing your business to business e-Commerce portal a relatively easy task. Implementation is typically a matter of setting up your account, and integrating the portal with your ERP. Most of these integrations can be handled via API interfaces. Relatively little technical knowledge is required to get your portal up and running, which is a boon for companies with relatively small IT budgets or without previous e-Commerce experience. Many of these SaaS portal options also provide access to a marketplace, which allows you to implement the hybrid option and take advantage of new customer acquisition opportunities with minimal additional cost. Many ERP and other software providers also provide access to these marketplaces. A major advantage of these options is simple integration with your existing systems, but you’ll need to take a close look at the customer base to determine whether the right mix of customers and volume exists for your strategy to be successful. Choosing your business to business e-Commerce strategy is a big decision; one with far-reaching long-term consequences for the future of your wholesale company. What is your company doing about business to business e-Commerce? Tell us in the comments.