According to Frost and Sullivan, the global B2B ecommerce market will reach $6.7 trillion by 2020. This will more than double the size of the B2C ecommerce market ($3.2 trillion) in that timeframe.
The B2B Ecommerce Landscape
By 2020, China is expected to become the largest player in that market, taking up $2.1 trillion. Given the fact that China’s overall ecommerce market grew 21.3% between 2013 and 2014, according to iResearch. They also claimed that B2B ecommerce in China composed 70% of the entire market in 2014, while online shopping composed 22.9%, and the remainder fell to online travel and online-to-offline business.
Despite the common news and noise that Amazon makes in the West, Alibaba is bigger than both eBay and Amazon combined. Alibaba is one of the biggest leaders in the B2B ecommerce world, with gross merchandise value of $27.28 billion, around 11% of their total.
How B2B Differs from B2C
In the B2C landscape, prices are fixed and quantities are low. Shipping is straightforward and products are easy to showcase and market.
In contrast, in the B2B world, prices can vary widely and order quantities can be much greater. This, however, makes shipping much more complex. Taxes and regulations are also necessarily more complex, since much of these orders involve a complicated supply chain. And since the B2B customer needs to know how products and services work, marketing often involves in-depth education.
These differences make the B2B ecommerce world much more difficult to navigate, but there is also a much greater revenue potential.
As online ecommerce platforms such as Amazon and Alibaba begin to become standard, go-to hubs for both B2C and B2B businesses, we will likely see a shift in the B2B business model.
From One-to-Many to Many-to-Many
Traditionally, many B2B companies used legacy electronic data interchanges (EDIs). These inefficient and costly systems forced one company to work with a number of suppliers through its own purchase order system.
One-to-many systems have two main models:
- The Independent Direct Model – Companies establish their own online stores using ecommerce software, then use that software to reach out to customers. Again, this model necessitates a certain burden in terms of internal staffing, software operations, education, marketing to customers, and so on.
- The Private Consortium – In this instance, a company uses a digital network to manage all aspects of suppliers, distributors, retailers, procurement, delivery, and so on.
The affordability and ease-of-use of many-to-many platforms, however, allows buyers and sellers to come together in one online marketplace.
These many-to-many platforms allow buyers, suppliers, freight forwarders, and financial institutions to connect via one central hub. These online marketplaces can be either public or private.
- Public marketplaces can be either industry-specific, such as eBay Motors, or cross-industry, such as Alibaba.
- Private marketplaces can be either buyer-driven, such as Exostar, or supplier-driven, such as Global Healthcare Exchange.
Future Trends and B2B Ecommerce Platforms
As companies realize the advantages and benefits offered by these B2B ecommerce platforms, we will see more businesses making use of them.
Traditionally, such direct B2B commerce required cumbersome investments in sales forces, logistics and supply chain management, and so on. The job was often relegated to other channel partners.
With B2B ecommerce platforms, however, companies can automate much of this process. These platforms allow for simple relationships that even SMBs can use to create their own service models. In the future, expect to see much creative development of offline and online channels as these tools become more prevalent.
As these platforms become more powerful, as businesses acclimate to the new B2B ecommerce landscape, and as technology continues to improve, expect to see a massive explosion in this industry.
Challenges for B2B Ecommerce Industry Growth
As mentioned, the complexities of the B2B industries make for some unique challenges that the B2C marketplace does not face. The price variations, high order volumes, regulatory issues, and other factors increase the burden for ecommerce platforms, which is perhaps one reason B2C ecommerce platforms have been so popular.
According to Frost and Sullivan, internet retailers should offer a menu of services rather than bundled services, in order to decrease risk. Doing so can ease the minds of hesitant clients, who can then begin using online channels to automate the time-consuming, costly tasks of procurement.
In the immediate future, B2B ecommerce still has a ways to go before it reaches maturity.
According to Forrester Research, most companies are still in the early stages of building their own B2B ecommerce operations. Specifically, companies will need to focus on:
- Effectively targeting B2B buyers online
- Developing industrial-strength B2B ecommerce infrastructure
- Achieving “acceptable B2C-like customer experience standard”
The key trends that defined the growth of the B2C landscape will be mirrored in the B2B landscape, once the complexities and challenges of the B2B ecosystem have been overcome. Many-to-many B2B ecommerce platforms will become more dominant, and we’ll begin to see more businesses learn and take advantage of these new tools. While old-fashioned methods of procurement may not disappear entirely over the next few years, expect to see drastic changes that will redefine the entire B2B ecommerce landscape.