By many accounts, the future of e-commerce has less to do with selling CDs and books online to consumers, than it does with selling transformers and rivets via the Internet to other businesses.
Ninety percent of all e-commerce conducted in 1999 involved online business-to-business (B2B) deals, according to the U.S. Department of Commerce. Additionally, a study by Gartner found that B2B e-commerce revenues reached US$433 billion in 2000, a 189 percent increase over the $145 billion in revenues raked in by B2B e-commerce in 1999.
Yet despite the importance of B2B in the e-commerce picture, several myths and misperceptions still exist, according to analysts. In a two-part series, the E-Commerce Times aims to dispel the seven deadly myths of B2B.
Myth No. 1: Follow the Money
B2B is not about how much revenue can be generated online, according to analysts, but rather about making connections with business partners.
“The idea of pure online sales as something onto itself has a very limited potential,” Jupiter Media Metrix analyst Jonathan Gibs told the E-Commerce Times. “Most B2B works toward relationship building.”
Gartner research director Lauren Shu agreed, telling the E-Commerce Times that “B2B is more about the process than a single transaction.” She added that implementing a B2B strategy is a decision that “reaches though the entire organization” and will affect every department.
Gibs said that the B2B process could include buyers and sellers collaborating on designs, supply chain management and work flow management. A study released in June by Forrester Research supports this view, saying that firms must master dynamic collaboration — the sharing of information not only across the enterprise but outside the enterprise — to achieve their next big B2B breakthrough.
Myth No. 2: B2B Follows B2C
Companies hoping to translate business-to-consumer (B2C) e-tail success would do well to realize that, according to Gibs, “B2B and B2C are not even broadly the same.”
Gibs pointed out that B2C e-tailers sell goods on a first-come, first-serve basis, but most B2B is done through negotiated contracts that allow the seller to anticipate and plan for buyer demands.
“The nature of B2B is radically different than B2C,” Shu said. “It is a much deeper and longer term process than B2C.”
One e-tailer preparing to test the B2B waters is Amazon.com (Nasdaq: AMZN). The Internet behemoth recently announced that it will open a new division later this year catering to corporations, libraries and other institutional buyers.
One potential problem Amazon faces is that selling on credit means shipping orders before they are paid for, which could affect the company’s cash flow.
“Depending on the size of the order, it could add to Amazon’s problems,” Gibs said.
Myth No. 3: B2B Is for All
Some companies jump on the B2B bandwagon without analyzing whether buying and selling online is right for their business.
“Thinking we have to do something ‘e’ now, just because everyone else is doing it,” is a mistake, according to Shu, adding that some companies “jump in without thinking it through.”
Although all companies could benefit by using tools that automate business processes, B2B is generally “not for everyone,” Shu said.
Myth No. 4: B2B Is Simple
“Early on, the perception was that integrating supply chains was reasonably quick and easy,” Forrester analyst Lucine King told the E-Commerce Times.
When Covisint was first announced in February 2000, its founding partners — General Motors, Ford and DaimlerChrysler — expected it to be live within 30 days and predicted that it would eventually handle $750 billion in annual purchasing. However, more than a year later, the online auto marketplace is not fully operational.
Please see Part 2.