More than twenty years after Amazon made online shopping possible for consumers and businesses alike, B2B is still primarily an offline category. According to a recent Forrester Research report, B2B eCommerce sales in the United States hit $855 billion in 2016. That’s just under 10% of all B2B sales. In comparison, eCommerce accounts for close to 12% of overall retail sales.
But while eCommerce plays more or less an equal role in both retail and B2B today, this is about to change. ECommerce is expected to touch $1.1 trillion, or 27% of all B2B sales, by 2020. During this period, eCommerce as part of retail sales is expected to remain under 15%.
One reason why B2B is taking off a lot quicker than retail commerce is because it is a lot more streamlined. B2B consumers do not go through the same kind of buyers’ anxiety that afflicts B2C consumers. Also, unlike retail consumers, the B2B purchases are formalized through contracts and sellers are therefore less likely to renege on their delivery promises.
The immense growth in the B2B eCommerce segment is likely to create new challenges and opportunities for businesses in this space. It is important for marketers to devise a strategy that can aid in this transformation.
Upgrade your PO systems
There is a reason why many businesses in B2B have resisted the migration to online channels. Traditional channels provide enterprise buyers the advantage of buying products on credit. The credit period in the case of large enterprises can be anywhere between three to six months. These businesses transact millions of dollars each month and upgrading to an online system would mean an instant shift to prepaid purchases. Besides the fact that many businesses prefer the luxury of credit, moving to a prepaid model also necessitates a higher working capital. If you are a small or medium sized business that is at the mercy of your large enterprise clients for timely payments, it is time to upgrade your PO system. A switch to online commerce could free up capital that is held up by your enterprise customers.
However, making this switch will not be easy since this instantly puts your business at a disadvantage. A large chunk of your small business competitors are likely to continue offering credit to their customers. A good way to nudge your clients to migrate to a prepaid online PO system is by offering attractive discounts for prepayment. The ‘time value of money’ theory states that money is worth more if it is made available today than if it were to be made available in future. In essence, a discounted prepayment for your product or service is likely to be equal or higher in value compared to non-discounted invoice offered as credit.
Invest in eCommerce businesses
There is a bit of a chicken and egg scenario when it comes to migrating to an online platform. Many businesses in the B2B space still do not have an extensive online commerce network. B2B buyers like to work with a provider who is reputable in the online channel. One way to work around this is by investing in existing eCommerce businesses that deals in your industry. Shopify’s marketplace called Exchange has an extensive list of eCommerce businesses from multiple industries and this provides you with a potential list of businesses to invest in.
This is a great strategy for several reasons. Buying into an existing online retail store could help your business build credibility among your buyers. Your business could gain an early mover advantage over your competitors who do not yet have an online presence. If you would not prefer an outright purchase of an eCommerce store, an alternative is to invest into multiple eCommerce stores in your industry. Besides establishing credibility, such investments enable your business to serve as the supplier to buyers over these eCommerce channels. This helps your business overcome the chicken-and-egg problem with B2B eCommerce. The experiences you gain from such investments can then be used to bring your other regular business customers on board.
Improve analytics and automation
Switching to an eCommerce setup provides your business an opportunity to build a more efficient backend system. A staggering number of B2B enterprises still deal with manual and labor-intensive fulfillment processes. Also, it is customary for your clients to place orders through call centers. ECommerce makes this manual order processing redundant. A sophisticated analytics system makes demand planning accurate and logistics more predictable. CEOs need to view this as an opportunity to cut down on inefficient processes and focus on building a lean and streamlined supply chain system.
Switching from an offline model to eCommerce is not an easy task. Neither is this something businesses can achieve overnight. The point of this article is for CEOs to wake up to the imminent reality where a majority of B2B commerce is likely to move online. Upgrading your PO and establishing an early mover advantage in this space will go a long way in building credibility among your target clients.