Finance:B2B e-commerce
B2B e-commerce, short for business-to-business electronic commerce, is the sale of goods or services between businesses via an online sales portal. In general, it is used to improve the efficiency and effectiveness of a company's sales efforts. Instead of receiving orders using human assets (sales reps) manually – by telephone or e-mail – orders are received digitally, reducing overhead costs.[1]
Definition
The differences between business-to-consumer (B2C) and business-to-business (B2B)
B2B and B2C e-commerce may look the same, but they are quite different. Business buyers and retail consumers have different purchasing needs.[2] The differences can be:
- Buying Impulsively Vs. Buying Rationally - B2C buyers will buy on impulse and make one-off purchases, while B2B buyers plan for purchases and make recurring purchases.
- Single Decision Maker Vs. Multiple Decision Makers - B2C purchases are decided upon by the buyer, B2B purchases often involve several layers of approval and may involve different departments.
- Short-term Customer Relationship Vs. Long-term Customer Relationship - B2C purchases are often one-off purchases, and B2B purchases are based on long-term and ongoing relationships.
- Set, Fixed Prices Vs. Diverse Prices - B2C prices are generally not negotiable. B2B prices are usually negotiated individually.
- Pre-Delivery Payment Vs. Post-Delivery Payment - B2C e-Commerce is generally paid by credit card, debit card or PayPal before the goods are shipped B2B payment is often on terms and maybe 30 or more days after goods are shipped.
- Deliveries focused on speed Vs. Deliveries focused on punctuality - B2C buyers are looking for speed of delivery and B2B buyers want deliveries on a reliable schedule.
B2B buyer characteristics
Supply chains are more important to B2B transactions. Manufacturing companies obtain components or raw materials from other companies and then sell to a wholesaler, distributor, or retail customer. For example, an automobile manufacturer makes several B2B transactions such as buying tires, glass for windscreens, and rubber hoses for its vehicles. The final transaction, a finished vehicle sold to the consumer, is a single B2C transaction.[3] Wholesalers and distributors still have a supply chain, but their chain consists of finished products.
Generally, B2B and B2C web stores both have search, navigation, detailed product information and personal account history pages. However, in some ways, B2B greatly differs from B2C. Most B2B businesses have complex ordering processes, large collections of attributes and elaborate back-end systems. Moreover, in a B2B scenario, buying is part of the customers’ jobs. He needs to make sure he buys all the necessary products or components for keeping his company up and running. Thirdly, since organizations can be very large, they need a lot of products or components to keep their business going. Therefore, B2B buyers often place large orders. B2B purchases are also characterized by recurring orders instead of single purchases. Because of that, companies make deals based on their monthly or even yearly demand. They closely collaborate, and each B2B customer can have its specific prices for certain products. Lastly, multiple people are involved in B2B purchases. For instance, a company can have multiple buyers or buying centres. They are responsible for finding the right products and making the right deal with resellers. Because multiple people are involved in a single deal, B2B is more fact-based instead of based on emotions. It's not about the nicest packaging, but the best deal for the company. In general, the ratio is leading.
The characteristics mentioned above can be summarized as follows:
| B2C | B2B |
|---|---|
| Single buyer | Multiple Decision Makers |
| Fixed consumer prices | Customer specific prices |
| Direct payments | Payment on credit sales |
| Stocks (for a.s.a.p shipments) | Smart shipments (i.e. truckloads) |
| Low frequency purchases | Reoccurring purchases |
| Single visits | Long-lasting relationship between customer and manufacturer |
| Buying because you like it | Buying as part of the job |
| Consumer | Buyers as part of an organization with a relationship defined by a contract, terms and conditions |
The differences between B2B e-commerce and EDI
B2B transactions can be processed online in various ways, of which Electronic Data Interchange (EDI) and B2B e-commerce is most often used. Although EDI and B2B e-commerce both have their own, distinctive features, they are frequently confused.[4]
EDI is the electronic transfer of purchasing information between the buyer and seller. EDI transmits the information from the buyer's purchase order to the seller's sales or customer service department for conversion to a sales order. EDI is well suited for placing large, recurring orders to supply raw materials to manufacturers.[5] For instance, following the example above, an automobile manufacturer regularly needs to order a specific brand and size of tires for a certain car model. When manufacturing a certain number of that type of car, the buyers can use EDI to place an order for the number of tires needed. So, the seller need not worry about providing product information – like a description, images or pricing –for reordering purposes.[6]
Although, like EDI, sales orders are processed online, with B2B e-commerce it is possible for customers to order occasionally and in irregular order quantities. Also, B2B e-commerce enables the display of many different types of detailed figures and images. It is possible to exhibit a full range of products or parts. Therefore, a web store provides the opportunity to cross- and upsell.[5]
Market development and trends
The B2B e-commerce market is growing rapidly. In 2014, 63% of industrial supplies buyers made their purchases online. The US market was projected to grow from $780 billion in 2015 to $1.1 trillion by 2020, [7] but recent data suggests that it is even larger. In 2022, just over 10% of B2B product sales, totaling $1.676 trillion, were made through e-commerce websites. This growth trend is expected to continue strongly until at least t 2026.[8] The European Union Enterprise policy aims to "enhance trust and confidence" in B2B electronic markets.[9]
In the US, B2B e-commerce is expected to reach $1.8 trillion by 2023.[10] This growth is being driven by a number of factors, including the increasing adoption of cloud computing, the growth of mobile commerce, and the rising demand for end-to-end supply chain solutions.
Mobile
The phrase mobile commerce was originally coined in 1997 by Kevin Duffey at the launch of the Global Mobile Commerce Forum, to mean "the delivery of electronic commerce capabilities directly into the consumer's hand, anywhere, via wireless technology."[11] Mobile e-commerce for B2B is becoming increasingly popular.[citation needed] B2B has features different from mobile e-commerce for B2C.[citation needed] Whereas B2C is mostly classic catalogue browsing, mobile e-commerce for B2B requires specific features, which include:[citation needed]
- Displayed prices that are customer specific;
- Stock indication that is always up-to-date;
- Discounts that are calculated in real-time;
- Orders can be placed quickly, for example with order histories or lists based on filtered product sets;
- Sales agents should be able to represent their customers.
See also
References
- ↑ "How Does eCommerce Reduce Business Transaction Costs for a Typical Retail Store?" (in en). https://smallbusiness.chron.com/ecommerce-reduce-business-transaction-costs-typical-retail-store-71941.html.
- ↑ "Differences Between B2C & B2B in Business Systems". https://smallbusiness.chron.com/differences-between-b2c-b2b-business-systems-39922.html.
- ↑ Kenton, Will. "How Supply Chains Work" (in en). https://www.investopedia.com/terms/s/supplychain.asp.
- ↑ Menezes, Gary De (1998-03-19). "Electronic Commerce and EDI - What's the Difference?" (in en-ZA). https://www.itweb.co.za/content/Gb3Bw7WoKDm72k6V.
- ↑ 5.0 5.1 "The Relationship Between EDI and B2B eCommerce" (in en-US). 2018-12-13. https://public.four51.com/edi-and-b2b-ecommerce/.
- ↑ "EDI or B2B Ecommerce: That is the Question" (in en-US). 2016-06-13. https://multichannelmerchant.com/blog/edi-b2b-ecommerce-question/.
- ↑ Forrester Research (2015-04-03). "US B2B eCommerce To Reach $1.1 Trillion By 2020". Andy Hoar. http://blogs.forrester.com/andy_hoar/15-04-02-us_b2b_ecommerce_to_reach_11_trillion_by_2020. Retrieved 18 January 2016.
- ↑ "US B2B Ecommerce Forecast 2022–2026". https://www.insiderintelligence.com/content/us-b2b-ecommerce-forecast-2022-2026.
- ↑ European Commission, Enhancing Trust and Confidence in Business-to-Business Electronic Markets, Communication from the Commission to the Council, the European Parliament and the European Economic and Social Committee, COM(2004) 479 final, published 14 July 2004
- ↑ "US B2B eCommerce Will Hit $1.8 Trillion By 2023" (in en). https://www.forrester.com/report/US-B2B-eCommerce-Will-Hit-12-Trillion-By-2021/RES136173.
- ↑ Global Mobile Commerce Forum. "Inaugral [sic] Plenary Conference". Christiane Morris. http://cryptome.wikileaks.org/jya/glomob.htm. Retrieved 18 January 2016.
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