B2B is the selling between companies, wholesale rather than retail. But it means more than that. Efficient use of capital demands small inventories, which entails anticipating demand, and so maintaining detailed information flows between all parties involved in today's complex manufacturing processes. B2B involves widening the circle of suppliers (for safety and competition), and of centralizing control (for records and discounts).
B2B ecommerce is an important part of any online business. Leaving aside the simple transfer of funds — covered here — many businesses need some combination of:
- creditworthiness assessment.
- guarantee of quality and delivery of goods (escrow services).
- safeguards against fraud.
- fast collection of funds, with ability to vary the collection period.
- reporting: approval of sale, invoicing, delivery, payment.
- procedures to handle disputes.
- Information of all types — corporate, technical, identity-building — has to be interchanged across the scattered divisions of large companies, and new ideas fostered, assessed and disseminated. Speed is vital, as are improved communication, collaboration, and customer understanding. All these requirements can be handled by IT, and software has been developed to meet the challenge — customer relationship management, enterprise resource planning, online auction, supply chain management, etc. Little of it is off-the-shelf, but is devised as systems to be extended and built round individual company requirements.
Hence many problems with surveys. B2B has reportedly done better than B2C — steadier growth, higher profits — but is it software sales or savings in companies with B2B-enhanced management that have been measured? Even within the B2B market, there are marked differences between types of software and their successes. Records of some are distinctly spotty, and sales of the more advanced systems have been badly hit by the dotcom bust and US recession. Improved management is not simply a matter of installing new software: extensive company reorganization and retraining are required to obtain even a modest payoff. These points need to be borne in mind when following up the information briefly noted below.
B2B Ecommerce History
An Anderson survey found that America accounted for 67% of worldwide B2B revenues in 2000, and Europe 14%. Towards the end of 2000, a gloomy period for ecommerce in America, executives remained confident about the digital marketplace. Some 45% of suppliers reported an average 31% increase in sales over the previous 6 months, and 66% of customers responding said they had increased purchases over the period. A June 2001 IDG survey came to a similar conclusion, noting that B2B trade in Brazil should near $2 billion in 2003. . Even in the B2C ecommerce slump of August 2001, the larger US retailers were planning to invest in B2B to improve customer service and supply chain management.
2003-4 B2B Prospects
Forrester predicted in 2001 that the US would be exporting $1.4 trillion worth of goods through online marketplaces by 2004, and associated easy payment systems were proving their worth in 2001. According to American CRM, customer relationship management expenditures are expected to grow from $5.4 billion in 2002 to $11.0 - $16.9 billion in 2004. Demand is growing for B2B products in midsize US companies, reported Gartner in January 2002. Fifty percent of European firms expect B2B investment to create a 5% productivity growth. IDC forecast a 49% annual growth in Japanese B2B to $504 billion in 2005, but prospects in Asia and the Pacific Rim need careful research.
Nonetheless, there are differences between B2B submarkets. Supply chain management is increasingly competitive, and software houses will need to address customer requirements better if they are to survive. Nor has B2B implementation been plain sailing. B2B industry should prosper, but individual suppliers may not.
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