Despite the steady shift to electronic channels for transactions between businesses, it’s important to make clear the big difference between the evolution of B2B ecommerce compared with online shopping by consumers, according to data and analysis contained in the recently published 2019 U.S. B2B Ecommerce Market Report.
A $1 million purchase of medical equipment by a major healthcare organization is quite different than an $80 purchase of a sweater by a consumer.
To be sure, there are a growing number of B2B ecommerce websites where buyers select products and put them into a shopping cart for purchase, as they do on a consumer ecommerce site. And there are also B2B online marketplaces, where many sellers offer their goods. By bringing many of the convenience features it mastered in selling to consumers, Amazon.com Inc. has made its Amazon Business marketplace a major B2B purchasing portal in just a few years.
But ecommerce sites and marketplaces accounted for only 7.2% of the estimated $7.36 trillion in U.S. B2B electronic transactions in 2018, while such shopping portals accounted for virtually all of the roughly $520 billion in U.S. consumer online purchasing in 2018.
A variety of electronic channels
The higher value of B2B transactions is just one of the differences between the two forms of electronic purchasing. The business buyer often seeks raw materials or goods that meet rigid specifications. A piece of equipment may have to be configured in a unique way. Purchases may require a series of approvals by layer of management within the buying organization. And there often are legal and regulatory requirements in B2B transactions that rarely crop up in the B2C world.
All these requirements and the many other complexities of B2B transactions have led to the development of specialized e-procurement software, networks and exchanges.
Significantly larger, and growing rapidly, are sales through e-procurement software. These systems let business make purchases from catalogs of products provided by approved suppliers. In some cases, procurement agents can “punch out” from such software to the ecommerce sites of suppliers and make their purchases there; the transaction is then transferred back to the buyer’s procurement system to enable buyer’s employer to manage spending.
Besides such one-to-many systems, there are also many-to-many networks that connect large numbers of buyers and sellers. Some of these networks are industry-specific, while others serve buyers and sellers in many industries.
And, despite the growth in e-procurement systems and ecommerce websites, electronic data interchange, or EDI, remains by far the largest electronic channel.
Nearly two-thirds of U.S. B2B ecommerce still takes place through EDI, a system that allows businesses to exchange a variety of documents and instructions in standardized formats. Before the internet, EDI transactions traveled over dedicated telecommunications networks, and those conduits—often called value-added networks, or VANs—remain an important part of B2B ecommerce, especially for larger companies.
But even VANs for large companies today use the internet in a big way, such as by letting companies generate and manage their EDI documents via a web browser and transmit their EDI documents over the internet via the widely used AS2 format. The arrival of internet-based EDI providers also has made it easier for smaller manufacturers, wholesalers and distributors to transact via EDI, helping to account for its continued growth.
In many cases, B2B transactions go through more than one channel. A buyer may start a purchase in her e-procurement software but punch out to a supplier’s website and place the order through a site’s shopping cart. Or a purchase initiated on an ecommerce website may be completed with an invoice transmitted via EDI.
Thus, it’s tricky to make estimates by channel. In the 2019 U.S. B2B Ecommerce Market Report, B2BecNews provides its estimates of electronic B2B sales broken down into three categories: ecommerce websites, e-procurement systems and networks, and EDI. And this report goes beyond the numbers to also provide examples of how manufacturers, wholesalers and distributors are using web-based systems to offer their customers improved services and increase sales.
For more information on “The 2019 U.S. B2B Ecommerce Market Report,” including how to purchase it, click here.
Sign up for a complimentary subscription to B2BecNews, published 4x/week, covering technology and business trends in the growing B2B ecommerce industry. B2BecNews is owned by Vertical Web Media LLC, which also publishes DigitalCommerce360.com, Internet Retailer and Internet Health Management.
Follow us on LinkedIn and be the first to know when new B2BecNews content is published.Favorite