What is Business to Business (B2B)?
Business-to-business e-commerce may be defined as the buying and selling of goods and services between companies online. Therefore, B2B electronic commerce implies that both sellers (suppliers) and buyers are business corporations.
B2B e-commerce is a slightly more evolved version of commerce. This type of e-commerce is the electronic exchange of business documents among businesses for the purpose of conducting commerce.
B2B e-commerce currently makes up about 94 per cent of all e-commerce transactions. Business to Business electronic commerce has been in use for quite a few years and is more commonly known as Electronic Data Interchange (EDI).
Functions of Business to Business (B2B)
These are the following functions of the business to business (B2B) e-commerce are discussed below:
Materials acquisition is the process that facilitates (or supports) the purchase of raw materials or goods for resale. Within this activity, materials are ordered from various suppliers, and tracked and purchased using Electronic Data Interchange (EDI).
EDI is a fundamental component of the procurement process in many organizations. Procurement activities include items such as vendor selection qualification, price negotiation, shipment certification and acceptance, all of which are enabled through the activities of EDI within e-commerce.
Conversion of raw materials and labour into finished goods occurs in the manufacturing process. Within B2B e-commerce, suppliers and vendors share information about raw materials and products as they transform them through the assembly, finishing, testing and packing process.
The utilization of secured and expanded networks (extranets) enables each business partner in the supply chain system to share detailed information about product identification, progression and status at any given time.
Transportation and Logistics
Activities that categorize, store, distribute and ship the final product are recognized as logistics management. Both EDI and Electronic Fund Transfer (EFT) assist companies in performing the activities that facilitate warehousing, shipping and monitoring the delivery of products to businesses within the value chain.
Internet technologies also assist members of the supply chain system in reducing costs by evaluating various routing options for materials, comparing costs between shipping vendors, and enabling efficiency and accuracy in inventory control with concepts like Kanban (inventory replenishment triggers) or just-in-time inventory management.
Marketing activities that support revenue models are achieved by sharing information with customers about products and services available for purchase. These marketing processes involve the creation of product catalogues, description of features, information regarding purchasing discounts and promotions, and details regarding loyalty programs.
Electronic storefronts (or marketing websites) create inducements to attract consumers, inform them of current promotions and help promote selling activities.
Importance of Business to Business (B2B) E-Commerce
The importance of business to business (B2B) e-commerce given below:
E-commerce Sales are Growing
Net e-commerce sales in the US have gone from $127 billion in 2007 to $165.4 billion in 2010. That is a 30 percent increase, indicating major growth, and it shows no signs of slowing anytime soon.
Growth of e-commerce sales means growth of your B2B business – but that will happen if and only if you’re engaged in B2B e-commerce.
Clients Want E-commerce
Using online portals to do business cuts costs and makes transactions much more efficient for your clients. They are demanding e-commerce for their business needs, and if your business can’t meet them, you will be left in the dust.
Other B2b Companies are Rushing to Meet This Growing Need
They say if you can’t beat ’em, join ’em – but that’s not how it works in the business world. If you can’t beat them, you’re beat, plain and simple. Ignoring e-commerce means letting the competition pass your business by.
Increased Online Presence
Even if you’re not doing a ton of sales online at first, the more you engage in e- commerce efforts, the more your business will be visible on the internet, returning in search results on Google, Bing, and the like.
Higher visibility means more future business for your company. Your business’s search engine rankings can be further helped by starting a business blog, and adding new content to your blog 3-5 times a week.
Investment in Business Future
You will find that updating your systems and getting everything online might take a lot of effort at first, but it will pay off in the long run and save you money. Add this point to the 4 before it, and you’ll realize that your B2B business can’t afford NOT to make the jump to e- commerce.
So what are you waiting for? Start integrating e-commerce into your B2B business immediately, and soon you’ll be enjoying increased rate of growth of your business.
Models of Business to Business (B2B) E-Commerce
The three models of B2B Electronic Commerce are classified depending on who controls the marketplace: the buyer, the supplier or the intermediary.
Supplier-oriented Marketplace (Sell-side-solution)
Supplier-Oriented Marketplaces offer a group of customers with a wide spectrum of products and services and also support them in their own business. In addition, there are large potentials through customer communities, individualized products and direct customer relationships.
By using Supplier-Oriented Marketplaces, suppliers are offered new types of market channels in marketing and distribution of products. Products can be sold directly to the customer without using intermediaries. According to Turban, Lee, King and Chung, the cultivation of customer relationships is also possible.
Buyer-oriented Marketplace (Buy-side-solution)
By using Supplier-Oriented Marketplaces, buyers would have to search electronic stores and electronic malls to find and compare suppliers and products. This would be very costly and time consuming for big buyers, who purchase thousands of items on the Internet.
As a result, such big buyers prefer to open their own marketplace, which is called a Buyer-Oriented Marketplace. By supporting transactions and procurement processes, these marketplaces offer great potentials in cost savings. Buyer-Oriented Marketplaces are found in industrial sectors with few and dominant buyers.
Essential elements of the marketplace are:
- Guidelines for transactions
- Internet-based product and supplier catalogue
- Availability check – Informational support of negotiations
- Invitation to bid in auctions and submissions
- Catalogue ordering
- Support of transactions
- Delivery inspection
- Quality management
This business model is established by an intermediary company which runs a marketplace where business buyers and sellers can meet. There are two types of Intermediary-Oriented Marketplaces: horizontal and vertical marketplaces.
Vertical marketplaces concentrate on one industrial sector whereas horizontal marketplaces offer services to all industrial sectors. The Intermediary-Oriented Marketplace is a neutral business platform and offers the classical economic functions of a usual market.
Business to Business (B2B) E-Commerce Requirements
Multiple Logins for Single Customer’s Business
B2B customers businesses will typically have multiple user persons (order creators, finance procurement etc.) with varying levels of authority to interact with the B2B platform. The B2B ecommerce platform should facilitate login management and permissions (add, delete, update) for all these users under a single business account.
One Customer Account for Multiple Businesses
One customer account may purchase for many different businesses. For example a customer may own a chain of retail outlets dispersed in several locations and they will want to place orders for all of them using a single account and login instance.
It is not uncommon for B2B customer businesses to only want to view the relevant products which they buy frequently. For instance the customer only wants to buy from a particular product range or brand in the catalogue.
If this is required the company needs to ensure B2B ecommerce website allows to configure catalogue per business, customer to ensure those frequently bought products are more visible or available as part of a re-order or favorites list.
Typically each customer will have a specific, and sometimes complex set of pricing rules applied to the product catalogue, including negotiated prices, volume discounts and payment / delivery terms which affect the final order price. There are some questions to consider;
- Is there a need to display catalogue pricing after login only. If this is the case, then it is very likely the business will need to personalize the prices for each customer.
- Each product may have more than one price type (trade price, retail price, sale price). What price type does the business want to display to the customer?
- Is the price type configurable per customer type, or per individual customer?
Personalise or Customised Promotions
This feature ties in closely with the previous one and allows B2B sellers the ability to provide customer specific promotions, landing page banners, sale icons and so on. This feature can also include customised banners and promotions based on rules such as the value of a previous transaction or the customers’ transaction history.
Order Approval Workflow
B2B ecommerce transactions typically involve values that are significantly higher than B2C and therefore can require an order workflow and approval process. In a lot of cases we’ve seen , when an order is placed by any user of the B2B customer, an email is generated to and sent to an approver user (in most cases a finance or business owner) of same business who will then login and validate and then approve the order.
Repeat orders are a very common piece of functionality for almost all B2B e-commerce websites. Repeat orders can be a manual process such that the B2B customer needs to login into their dedicated account area and see a history of previous orders or a favorites list and then place a replenishment order or it can be fully automated using scheduled orders. An option can be provided to your customers to opt for one or the other.
B2B Payment Methods
A lot of B2B ecommerce focuses more on offline payment methods than online methods such as debit and credit card payments. The offline methods include;
- Purchase Orders
- Partial payment of invoices and account receivable ageing
- Invoice Me Credit limits
Personalised Scheduled Deliveries
Whether company is operating a B2C or B2B ecommerce website, delivery options are a key battleground to gain a competitive edge. Delivery is an incredibly important part of B2B ecommerce offering and customers need reassurance that an online shopping experience will deliver on its delivery promises.
External System Integration
B2B ecommerce typically requires complex integrations with existing Enterprise Resource Planning (ERP), Customer Relationship Management (CRM), Warehouse Management, Fulfilment Systems and/or Manufacturing Systems. These external systems may be supporting many parts of the business and will likely be integral to supporting your ecommerce operations.