Global B2B E-commerce market will reach 6.7 trillion USD by 2020
Date: Fri, 04/17/2015 - 12:21 Source: Frost & Sullivan press department
Frost & Sullivan Visionary Innovation Group Team Lead Archana Vidyasekar
Image credited to Frost & Sullivan
Business-to-business (B2B) online retailing has been witnessing strong growth due to the rapid migration of manufacturers and wholesalers from legacy systems to open, online platforms. As legacy systems involve the use of electronic data interchange, which is expensive and cumbersome to handle, B2B models will continue to move towards ubiquitous online platforms that allow buyers and sellers from anywhere in the world to transact goods and services with ease. In fact, the B2B online retail market is expected to reach double the size of the business-to-consumer (B2C) online market, generating revenues of 6.7 trillion USD by 2020.
New analysis from Frost & Sullivan, Future of B2B Online Retailing, reveals that B2B online sales will account for close to 27 percent of total manufacturing trade, which is likely to hit 25 trillion USD by 2020. Geographically, China and the United States will lead the B2B online retailing market. The latter is anticipated to double its revenue contribution to 1.2 billion USD by 2020.
As marketplaces and cross-industry public platforms such as Alibaba and Amazon become popular, B2B online relationships are likely to move from a one-to-many to many-to-many business model. Instead of a model where one company invests and builds an e-platform for its suppliers, the preference will be for a solution in which anybody integrates an e-procurement process and facilitates the purchase of goods online.
“As such, private industrial networks, where specific companies come together to exchange products, and public market places that are employed for on-the-spot purchasing, have gained prominence over the last decade,” explained Frost & Sullivan Visionary Innovation Group Team Lead Archana Vidyasekar. “With businesses buying more than selling online, these seller-driven B2C-type open public networks will help provide more visibility and storefront capabilities to sellers.”
Retailers will, however, face certain challenges while implementing B2B e-commerce strategies. Unlike the B2C setting, in the B2B e-commerce setup, prices are variable and order volumes are high and of a wide range, necessitating a flexible shipping and logistics solution. Tax and regulatory concerns also impact sales highly, and providers typically employ large staff whose only responsibility is delivering products and services within these restrictions.
Moreover, executing marketing or educational initiatives in the B2B setting is complex, as clients need to understand the way products work and interact with other systems that they already have or are considering for purchase. The black box effect, wherein a customer buys a device without a real interest in learning how it works, barely exists in the B2B context.
“Nonetheless, with technological advancements facilitating the procurement of goods on the move through smartphones and tablets, business use of online platforms will rapidly grow,” noted Frost & Sullivan Visionary Innovation Group Consultant Pramod Dibble. “The emergence of cloud platforms that offer more scalability, both as a software and infrastructure service, too is pushing businesses towards B2B online retailing.”
To allow customers to experience the online channel with low risk, Internet retailers should offer a menu of services rather than one bundled option. Even clients hesitant to disrupt their current ecosystem of sales and distribution will then begin using online channels, which automate many of the time-consuming and costly aspects of procurement.