B2C versus B2B in E-Commerce Growth
In 2015, one-third of all e-commerce purchases were made through top-10 sites like Amazon or Alibaba. That number grew to 50% in 2018 and is expected to grow to two-thirds by 2023 (Retail TouchPoints). The e-commerce model is here to stay for business-to-consumer (B2C) transactions. So, why haven’t e-commerce platforms seen the same type of explosive growth in business-to-business (B2B) transactions?
The short answer is, B2B e-commerce is laggard to B2C due to the complex nature of the transactions. B2C transactions tend to be more straightforward with fixed pricing, lower-order quantities, and less shipping locations. In contrast, the sale of goods and services between businesses see high order volumes, variable pricing and external factors such as trade regulations.
- Complexity – B2C e-commerce purchases are typically made through a mobile phone or via a PC-accessible electronic storefront/portal. Notifications of shipments or order issues are sent to the consumer via email & text. In B2B, the business systems (ERP, middleware) that support all facets of a transaction (order capture, acknowledgement, fulfillment, and customer service) differ dramatically in terms of complexity and scale.
- Sourcing – With B2C e-commerce, products are sourced from a variety of places typically unknown to the single buyer. With B2B eCommerce, purchasing decisions are made by teams (technical, business, operations, finance), not necessarily individuals. In B2B procurement operations, sourcing is either for direct or indirect materials. Direct material purchases are typically the lifeblood of the company, and many factors above and beyond price play a factor.
- Pricing – In B2B e-commerce, pricing for direct materials may vary from customer to customer, and many times raw materials and services may be contracted competitively via RFQ. Payment terms and methods differ considerably, with regulatory compliance also more of a challenge in the B2B space. In B2C, pricing is typically set, and not variable.
- Catalog vs. Cross-referencing – In B2C, customer typically purchase from the supplier’s online catalog. In B2B, the purchaser is typically working within their ERP to complete purchases. Purchase orders are sent from the buyer to the supplier via email, paper, or portal.
This is not to say that e-commerce is not on the horizon for B2B. In fact, Forrester projects B2B e-commerce will grow to represent about 17 % of B2B US sales by 2023. However, the exact “Amazon-like” experience B2C consumers now expect, might take a little more time to develop in the B2B environment. One reason for this, is the systems and technology requirements are different than we find in the B2C model.
- The connectivity method is irrelevant, the ability to communicate is the key. Corporations have realized that managing a number of point-to-point connections and company-developed or vendor-provided portals is complex and cumbersome. It is much simpler to have all trading partners (suppliers, buyers, transportation providers) on a digital network where transactions can be captured and acted upon, allowing businesses to focus on core capabilities.
- Once we can capture the data (order, forecast, etc.), the supplier needs the right tools to be able to correctly interpret and fulfill the demand. This requires support for a practically limitless amount of data formats and connectivity methods, as well as back-end integration with other systems including logistics and payment.
- Complex cross-referencing scenarios may need to be supported in order to deliver the right product to the right location.
One way B2B e-commerce can get closer to the “Amazon model” is by adopting a network model that routes complex data, tracks orders, and payments, and provides online visibility of supply chain logistics. This is the foundation needed to take the B2B industry successfully into the e-commerce world.
Elemica is the leading digital supply network for process manufacturers. We are the world’s leading network within the Chemicals, Tire & Rubber, and CPG space, and have a high degree of penetration in adjacent industries such as plastics, oil and gas, and agricultural chemicals.
What sets us apart from our competitors:
- Breadth of solutions – customer/supplier/logistics/quality. Elemica’s solutions help fulfill the right product (meeting your stringent quality needs), at the right place, at the right time.
- Our domain experience and industry-specific solutions.
- The network of buyers/sellers/LSPs that you can tap directly into with one single connection.
- On-boarding customers and suppliers to the network is quick, easy, and cost-effective for trading partners to join the Elemica DSN.
In order for B2B e-commerce platforms to gain acceptance and become more like B2C platforms, they need to offer efficiency, scalability, security, and customer experience. These can be found in a digital supply chain network.