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Business-to-Business (B2B) Overview
The global e-commerce revolution is entering a new phase. While the first
stage was fueled by the vision and innovation of business-to-consumer Internet
companies, the next phase will be defined by the leadership and market success
of companies engaged in business-to business or B2B e-commerce. This refers
to electronic transactions between and among companies and their employees
The early consumer-focused, e-commerce winners created the Internet business
model, but it will be their business-to-business (B2B) successors that realize
the full potential of the new electronic economy.
From the perspective of today's enterprise managers, this second Internet
revolution consists of equal parts threat and opportunity. The new B2B wave
will split most industries' competitive field into two camps - the prepared
and the unaware. Many organizations, reluctant or unable to initiate the deep
change that the new business climate requires, have made only minor technical
changes so far. These changes modify their culture or business processes. These
organizations have yet to make the investment in the strategy, people, and
money necessary to survive in the B2B
e-commerce world. Those who fail to address the opportunity at hand risk becoming
displaced by more forward-thinking competitors.
For those who do respond to the new realities of B2B e-commerce, the worldwide
B2B market offers opportunities on a grand scale. Still in its infancy, B2B
e-commerce is already the fastest growth area in the Internet economy and
carries potential almost beyond measure. A Boston Consulting Group report estimates
that Internet-based electronic business relationships will account for $2.8
trillion in sales by 2003. Gartner Group places this figure even higher at
But although helpful in sizing the growth of B2B Internet sales, such projections
of transaction volume give a false impression of the future importance of the
e-commerce market. More important than volume, from a business-to-business
perspective, is value. Today's volume projections only hint at the value that
the Internet will provide in the years to come as an enabling technology for
Businesses have three choices in how they prepare for the coming B2B storm:
(1) they may ignore the trends and leave their organizations unchanged; (2)
they may take half-hearted steps to adapt for Internet business, superficially
altering their organizations but leaving their core processes unchanged; Or
(3), they may recognize the tremendous opportunity offered by this paradigm
shift, transform the way they serve their customers, and ensure their future
in the digital age.
Developing a B2B Presence
The rise of Internet-based electronic commerce has changed the global business
landscape forever. After a few years of explosive growth in the worldwide adoption
of web technology, business leaders have completely changed the way they perceive
online technology. Once seen as an unfamiliar and threatening medium, the Internet
has proven itself as a superb environment for commerce. In today's fast-paced
competitive atmosphere, no B2B supplier that lacks a strategy to conduct sales
and operations over the Internet may be considered a leader.
Organizations that move decisively and intelligently into web business can
register significant competitive gains. These gains include increased revenue,
lowered costs, new customer relationships, innovative branding opportunities,
and the creation of new lines of customer service. Sellers who fail to gear
up for the coming B2B
e-commerce explosion will not only pass up those opportunities, but in many
industries will find their very survival threatened. As their customers and
competitors outpace them, they will slide further into irrelevancy.
How can suppliers ensure their place in the B2B Internet revolution? Participation
in the new economy means very different things to different selling organizations.
Generally speaking, the most important requirements for sellers seeking to
push their business onto the Internet are a total commitment to success, recognition
of the infrastructure challenges involved, and an intelligent plan of action.
Whether your organization sells office supplies to multinational companies
or provides specialized consulting services to a handful of clients, strong
commitment is a prerequisite for engaging in Internet business. If the web
is to be central to the way any company operates, the effort to gear up for
e-commerce and an Internet-enabled value chain must be understood and accepted
by key functional areas within your organization, as well as by executive management.
This is true for sellers large and small, highly centralized or distributed
along several continents.
This commitment is necessary because each incremental advance down the path
of web-enabled commerce carries deep implications for business processes and
organizational culture. Company leadership must be willing to commit the resources
in the people, money, and focus necessary to carry the e-commerce deployment
through to fulfillment. Line managers and employees must embrace new tools
for internal communications, sales processing, and customer fulfillment.
At every level of e-business adoption, organizations must evolve and adapt
to new ways of working and delivering customer value. The new processes and
responsibilities required by world-class, B2B e-commerce are demanding; management
cannot easily force their creation and execution. Establishing leadership in
the new economy requires company-wide commitment. The commitment to adapt and
transform must be built into all levels of the organization.
Understanding Digital Infrastructure
Suppliers seeking to make the web a significant platform for sales and order
fulfillment must gain an understanding of e-commerce infrastructure requirements.
These infrastructure challenges are frequently misunderstood, and often exaggerated,
by new deployers of Internet business solutions.
Sellers are already familiar with the physical infrastructure that allows
them to deliver their goods or services to their customers. Elements of this
physical infrastructure include storefronts, processing centers, and transportation
fleets. What is less familiar to new entrants to the electronic economy is
the digital infrastructure of business - the combination of internal applications,
network connectivity, online presence and web-based customer fulfillment that
allows companies to track and satisfy a customer's total experience.
The Internet is creating a paradigm shift in B2B commerce, a transformation
that enables new business processes and improves upon existing ones. The key
to online success is the creation of a digital infrastructure that is tightly
integrated with the company's physical infrastructure. Establishing the right
flow of information links the organization's digital and physical infrastructures,
providing target elements of the company with data about all aspects of the
acquisition decision, including order fulfillment, payment, and customer support.
Plan for Action
Under pressure to perform in a new, unfamiliar arena, many companies sacrifice
strategy to urgency. These initiatives fail because of a lack of forethought.
By not taking the time to carefully assess the market, companies sometimes
fail to realize where the real areas of opportunity lie in this new economy.
Many sellers are already well down the path of transforming their business
processes and implementing the necessary infrastructure for their e-commerce
operations. These companies may already have found their entry point in the
new digital economy and are concentrating on expanding their operations or
improving their business results.
Other B2B players have not yet begun to address the challenge, and face the
need for a much more concerted and far-reaching deployment to integrate the
web into their customer communication and transaction processes. Regardless
of their deployment stage, however, e-commerce ventures’ success or demise
depend on the quality of their conception and execution.
Each supplier's specific strategy, objectives and technical infrastructure
for e-commerce will be shaped by variables that include the supplier’s
size and scope, market pressures, industry focus, and available resources.
Management must develop a coherent course of action that is both feasible and
appropriate to the company's overall situation.
It is also critical to ensure that the organization's e-commerce strategy
contains both a short-term and long-term perspective. For companies lacking
a quality presence online, rapid time to market is essential; these organizations
should seek the execution path that allows them access to business results
But the velocity of change online demands that companies also plan for the
future, whether that be six months or three years down the road. The action
e-commerce deployment is never completed. It is best thought of as a living
strategy, one that will evolve to fit the organization as its requirements
and capabilities grow over time.
Suppliers should develop an e-commerce action plan that is appropriate for
their size, competitive situation, industry focus, and available resources.
Online markets, also known as B2B marketplaces, are commerce sites on the
public Internet. These e-marketplaces allow large communities of buyers and
suppliers to "meet" and trade with each other. They present ideal
structures for commercial exchange, achieving new levels of market efficiency
by tightening and automating the relationship between supplier and buyer.
They allow participants to access various mechanisms to buy and sell almost
anything, from services to direct materials. The extreme flexibility of these
marketplaces, which may be customized to serve the full supply chain of virtually
any industry, will establish themselves as pillars of the new B2B e-commerce
Ultimately, all businesses will buy on a marketplace, sell on a marketplace,
host a marketplace, or be marginalized by a marketplace. For organizations
committed to participating in the coming wave of online business, B2B marketplaces
offer a compelling entry point into the new economy. As e-commerce becomes
more central to the operations of mainline companies, a diversity of marketplaces
will arise in every sector.
So far, most of the early movers have been small, aggressive third-party,
dot-coms seeking first-mover advantage, which they hope to leverage into market
dominance. But they will not have the playing field to themselves for long.
Already the established brick-and-mortar players are moving to leverage their
existing trade relationships and access to buyer liquidity into established
B2B marketplaces are redefining how businesses interact with each other. Inevitably,
all businesses will be affected by this revolution. The important question
that all companies must answer is: "How?"
B2B E-Marketplaces and Supply Chains
Marketplaces and exchanges are emerging to serve each point of every industry's
supply chain. Whether it's a spot market to clear excess raw materials in the
metals industry or a new "virtual" distributor in the life science
chemicals industry, these electronic markets bring buyers and suppliers together
through new methods of dynamic collaboration and trade. They remove costly
inefficiencies and deliver bottom-line savings to all participants.
Although still in their infancy, B2B marketplaces have the potential to drive
the B2B e-commerce revolution. By virtue of their structure, which unites member
companies in seamless trading communities of common business interest, B2B
marketplaces maximize speed and efficiency. They offer buyers and sellers uniquely
powerful forums to reduce transaction costs, enhance sales and distribution
processes, deliver and consume value-added services, and streamline customer
Evolution of E-Commerce Mechanisms
To understand the step forward that B2B marketplaces represent, it is useful
to examine the progression of electronic business. A brief review of the rapid
evolution of B2B e-commerce helps set the context for B2B marketplaces:
- EDI (Electronic Data Interchange) and ERP ( Enterprise Resource Planning)
- Businesses with well-defined trading relationships use EDI and ERP to create
point-to-point interfaces with each other
- Expensive to implement, outside the reach of all but the largest companies
- Useful for transactions involving replenishment orders for direct production
goods tied to a previously negotiated contract.
- Primary model used in current business-to-consumer scenarios
- Single seller, typically a distributor, constructs a web storefront to
sell to many consumers (i.e. Amazon.com)
- Unless a single distributor can aggregate all the suppliers in a given
industry, the buyer remains responsible for comparison shopping between stores
- Expensive for buyer and does not meet the needs of corporate procurement
- Buy-side applications generally consist of a browser-based self-service
front end to ERP and legacy purchasing systems
- Corporate procurement aggregates many supplier catalogs into a single "universal" catalog
and allows end-user requisitioning from the desktop, facilitating standard
procurement for the organization and cutting down on "maverick" purchasing
- Purchases made through this system are linked to the back-office ERP or
accounting system, cutting time and expense from the transaction and avoiding
potential bookkeeping errors
- Model yields reduced transaction costs but not lower purchase costs; no
impact on size of supplier base, no enablement of dynamic trade; buying organizations
must set-up and maintain catalogs for each of their suppliers; too costly
and technically demanding for most small and medium-sized businesses.
- Latest evolution of B2B e-commerce, enabling a many-to-many (M:M) relationship
between buyers and suppliers
- Buyers and suppliers leverage economies of scale in their trading relationships
and access a more "liquid" marketplace
- Sellers find buyers for their goods, buyers find suppliers with goods to
- Many-to-many liquidity allows the use of dynamic pricing models such as
auctions and exchanges, further improving the economic efficiency of the
As the new B2B trading hubs, marketplaces must enable certain processes and
enterprise trading requirements. They should accommodate existing procurement
processes and buyer-supplier interactions, and offer full interoperability
with other markets.
Procurement Processes - Procurement professionals configure
a "virtual procurement system" within B2B marketplaces. This replicates
the buyers' unique procurement process down to individual permissions, rules
and workflow, allowing the procurement organization to control the overall
buying process while distributing the buying task to end users.
Buyer-Supplier Relationships - Before moving to a marketplace,
most buyers and suppliers will have existing relationships that must be reflected
in the marketplace. Suppliers can configure the system to reflect pre-negotiated
discounts for certain buyers, which will automatically be applied when those
buyers access the marketplace. This many-to-many marketplace combines the advantages
sell-side and buy-side models, but since it is hosted, avoids setup and maintenance
costs for the participants. Significantly, this can allow access to smaller
organizations that would not otherwise have had the resources for B2B trade
online. Both buyers and suppliers gain the advantage of a much broader trading
community. Both sides can also enjoy the benefits of a streamlined trading
Interoperable Marketplaces - One of the key factors in building
a successful B2B marketplace is to focus on meeting all of the buying needs
of the target user.
These needs may go beyond the specialist capabilities of any single marketplace.
To cater to broader buying requirements, therefore, marketplaces may link to
each other, effectively extending the product range without giving up "control" of
The ability of marketplaces to interoperate extends the idea of liquidity
and network effect by joining more buyers with more suppliers, but does not
sacrifice the ability of each marketplace to be highly specific to the supply-chain
node or target buyer group it serves.
Benefits of B2B E-Marketplaces
- Sellers, buyers, and market makers each stand to benefit from the B2B marketplace.
- Sellers use B2B e-commerce to lower costs and access new customers.
- Marketplaces extend that reach still further by creating and leveraging
close collaboration between trading partners, tightening the relationship
between supplier and buyer, promoting price discovery and spend aggregation
and slashing supply chain costs.
- Buyers can use B2B marketplaces to reduce direct and indirect supply chain
costs by leveraging their global scale, focusing their spending on preferred
suppliers, and taking advantage of dynamic models such as auctions and bid-quote
for efficient sourcing and spot buying. Beyond leveraging spend, new tools
for logistics, payment and tax create new opportunities to build transparency
in the supply chain, decrease logistics costs, increase inventory turns,
and improve the overall performance of the manufacturing and procurement
- Market makers are the fulcrum of these new B2B e-commerce relationships,
catalyzing the growth of the B2B economy by leveraging their domain expertise,
customer relationships and supply chain strength to fuel the growth of B2B
marketplaces. In return for delivering incredible value, market makers stand
poised to reap substantial rewards by sharing in the returns achieved by
buyers and suppliers.
It is important to understand the principles that underlie B2B marketplaces
and determine the shapes that they assume under the pressure of time and competition.
Every market, whether online or not, represents a complex assembly of buyers
and suppliers united by intricate lines of power and dependency. Although forces
of supply and demand control the flow of business, each market carries a built-in
measure of inefficiency. The B2B marketplace minimizes that inefficiency by
tightening the relationship between supplier and buyer, promoting price discovery
and spend aggregation, slashing supply chain costs, and increasing the reach
of suppliers. If enough liquidity is built into the system, B2B marketplaces
are the ultimate trading structures - the closest thing to a perfectly efficient
trading system ever developed in the long history of commerce.
Buyer liquidity - the critical mass of transaction volume that is the lifeblood
of every market - is essential to electronic exchanges. With so much speed
and capacity, the B2B marketplace is the ideal technological platform for commercial
exchange. Without enough buyers and suppliers on the network, or enough total
purchase volume, the marketplace cannot capitalize on its potential for efficiency;
it would be bound by the same inefficiencies as old-world exchanges.
Marketplace Expansion Strategies
Electronic marketplaces create value for participants by playing three roles:
connector, value-added service provider, and spend aggregator. The initial
value proposition of every marketplace lies in the connector role, serving
as the common platform over which trading companies route information and transactions.
To become a value-added service provider, B2B marketplaces must provide access
to services ranging from baseline interoperability and directory services to
specialty services, such as online payment, logistics, and dynamic trade. Many
marketplaces also take on the role of spend aggregator, negotiating lower prices
for buyers by leveraging collective volume.
The early stage of marketplace development focuses on establishing enough
basic capability and buyer liquidity to make the market competitive.
In nearly all cases, markets start out with a narrow range of products and
services and target either a product category or a buyer group. As they grow,
they must expand from this sharp focus to support a broader base of buyers
B2B E-Marketplaces and Exchanges
A product-focused B2B marketplace may develop when a product or family of
products is purchased across multiple industries (e.g., steel, PCs). Product-focused
marketplaces typically serve industries in which extensive buy- and sell-side
fragmentation makes it difficult for the players to achieve price and product
discovery independently. That fragmentation, and the resulting natural friction
in the market, makes these industries ideal candidates for B2B marketplaces,
which let them drastically cut down on volatile and uneven pricing, improve
information access, speed up transaction cycles, and slash transaction costs.
A buyer-focused, vertical B2B marketplace emerges to serve the product needs
of a particular group of buyers (i.e. Chemdex, which focused initially on serving
scientists in the life sciences industry). Buyer-focused marketplaces deliver
the same benefits and are structured along the same lines as product-focused
markets, and typically adapt over time to serve more categories of buyers.
The division between product- and buyer-focused marketplaces is sharpest for
early entrants. As markets grow, they must become more inclusive and functional
The newest example of the electronic B2B marketplace is the procurement portal,
in which the market maker leverages deep relationships with small and medium-sized
buyers to create an exchange. In this model, the market maker offers value
to the exchange members — including lower pricing driven by its own spend
consolidation and access to new customers and suppliers — while enjoying
a range of special benefits.
The procurement portal becomes a powerful platform through which the host
can extend brand, offer value-added services, and strengthen relationships
Companies with the strong competitive positioning and customer relationships
to create and populate a procurement portal gain access to a unique range of
opportunities. If leveraged intelligently, portals open the door to significant
growth in the company's sales, service, and supply operations. It unites companies
in a trading community of common interest driven by the market maker, who realizes
substantial secondary business benefits from the endeavour, including branding
opportunities and increased exposure to potential customers.
Keys to B2B Success
Every enterprise's value chain may be enhanced through business-to-business
e-commerce. While the details of a company's e-commerce action plan must reflect
its broader competitive situation, almost all companies will share several
high-level objectives. How an organization goes about targeting these goals
will determine the success or failure of its Internet initiative.
Increase Revenue and Lower Costs
The ultimate goal of every e-commerce expansion is to achieve bottom-line,
measurable results — to increase revenue and reduce expenses. If well
executed, a web strategy allows businesses to accomplish this at several levels.
Aggressive web-enabled businesses gain new revenue from multiple sources,
including acquiring new customers and increasing business from existing customers.
By expanding into the online medium, a supplier grows its universe of potential
trading partners tremendously. And by developing a complete online business
solution, the seller can gain increased revenue from existing technology-enabled
customers that prefer to do business through e-commerce.
Suppliers lower their operating expenses by taking advantage of the web's
unique abilities to communicate and process transactions. By implementing new
processes that automate functions long performed by salespeople or support
staff - for instance, notifying customers of their order status - they register
Find Partnerships of Opportunity
The right partnership strategy can allow a seller just entering the online
space to accelerate towards a world-class business presence, or help an established
e-commerce player expand into new markets and services. It is neither necessary
nor advisable for companies hoping to tap the flow of B2B e-commerce to go
at it alone. The alliance concept is alive and well on the Internet, where
the special capabilities of the online medium can make such relationships especially
advantageous. Simply by selecting the right technology and marketplace partners — many
of whom offer access and services at low cost — suppliers can take a
giant step towards true e-commerce enablement.
Sellers seeking to fast-track their web plans should seek partnerships of
opportunity — alliances with other companies that allow them to quickly
develop. Partnerships help sellers rapidly deploy e-commerce solutions and
gain access to buyer infrastructure, services, and access to new customers.
Pursuit of this strategy may mean joining a B2B marketplace, an electronic
market on the public Internet that brings together buyers and sellers into
a seamless trading community. These online marketplaces allow sellers to gain
broad access to buyers and develop new, highly efficient lines of trade. Or
it may mean selecting an ASP (Application Service Provider) that will provide
hosted access to the applications the organization requires to conduct its
e-commerce solution. For suppliers of small size and limited resources, web
communities exist that offer basic e-commerce infrastructure, including hosting
and transaction management.
Seize First Mover Advantage
Suppliers who move quickly to establish effective electronic business presence
put themselves in a position of strength. Those who adopt a wait-and-see approach,
hesitate too long over infrastructure decisions, or who are too tentative in
execution, run the risk of being passed by. Internet business is characterized
by its rapid pace and intense competition. Once a competitor has fallen far
behind, it can be too late to catch up. Time-to-benefit is directly correlated
to the speed at which a supplier establishes its B2B e-commerce presence. Rapid
time-to-market is an essential component to every e-commerce rollout.
Create the Right Digital Infrastructure
Even small or medium sized B2B suppliers should not consider infrastructure
an obstacle to the development of an electronic market presence. In many ways,
it is easier than ever before for such organizations to gain early-stage access
to the benefits of e-commerce and to an Internet-enabled supply chain. The
last few years have seen remarkable evolution in web hosting, dynamic electronic
marketplaces, and applications that process and route sales information. These
are the essential building blocks of e-commerce infrastructure, assuring the
organization's ability to establish connectivity, put product or service information
online, access a broad range of customers, process transactions and fulfill
Successful e-commerce demands the right alignment of human assets and technology
elements, working together to support all phases of the customer experience:
selection, purchase, delivery, and support.
Selection - Customer review of key product and service
information prior to the purchase decision. This function is best served by
a well designed web site that contains a complete range of information to guide
the customer through the decision-making process.
Purchase - Sales transaction and processing. This requires
a tracking solution that routes information to all functional groups needed
to complete customer orders.
Delivery Fulfillment - This should also include a customer
response capability to keep end recipients apprised of order status.
Support Customer Service - Often the forgotten element of
e-commerce, support can be a make-or-break proposition in B2B, which is far
more sensitive to service issues than B2C. From an infra-structure standpoint,
this need is served through a web presence that places technical information
and access to customer service information company representatives.
Create a Single Point of Access to All Markets of Opportunities
Sellers want to get their products and services in front of as many customers
as possible, while minimizing their online investment of time and resources.
To achieve this goal they should try to join a system of interconnected B2B
marketplaces. By using common data standards, these electronic marketplaces
allow suppliers to maintain their product and service information at a single
online location while participating in several markets.
Maintaining multiple points of online product information forces a seller
to do expensive work in several places — updating prices and information,
eliminating dated content and managing customer data. This extra commitment
leads to costly errors, drains money and time resources, and potentially makes
the organization less responsive and customer-focused. Participation in a global
network of integrated B2B marketplaces helps sellers gain tactical advantage
and access to a virtually unlimited stream of buyer liquidity, maximizing the
return on their investment in effort and money.
Exploit Branding and Customer Personalization
Online business offers a special range of opportunities for branding and customer
personalization. Both encourage customer loyalty. B2B marketplaces let sellers
access many customers, while maintaining one point of product and service information.
The high cost of customer acquisition demands that organizations focus on
retaining existing customers through innovative branding and personalization
initiatives. Maintaining brand identity on the web can be a challenge for B2B
Buyers have easy access to so many competing suppliers that product and service
offerings can be reduced to a commodity presence, if aggregated. Building a
high-quality, distinctive web site, particularly one that is enabled for integration
via standards such as Commerce XML (cXML) to interact with network-based
e-commerce purchasing solutions, can differentiate suppliers online by maintaining
their brand identity and competitive differentiation.
Build Buyer Power
Building buyer power is the single most important element to establishing
market control. Buyer power refers to the flow of transaction volume that market
makers can drive through their B2B marketplace. For single companies with enough
present purchase volume to qualify as the dominant player in the market, or
for a consortium of major buyers able to aggregate their spend, buyer power
represents a potentially unbeatable weapon in the struggle to edge out rival
market makers. Companies that achieve market-leading buyer power are able to
bind a community of suppliers and smaller buyers firmly to their B2B marketplace.
Cater to Buyer Behavior
Understanding how the market operates presently is critical. What preferences
do buyers have around issues like business standards, supplier terms, and vendor
assurances? What value-added services are in demand in the market, and which
can be realistically supported over the exchange platform? Buyer behavior offers
another leverage point in the struggle to establish B2B marketplace ownership.
The B2B marketplace model relies on light, client-side technology — buyers
and suppliers must be able to do business over the site through a standard
browser that facilitates buyer/supplier transaction - but imposes special demands
on the market maker, who must be able to manage the commerce process from requisition
to order fulfillment and payment. This end-to-end support must take place over
a network application architecture capable of supporting thousands of users
in a highly distributed, fully scalable Internet environment. The B2B marketplace
platform should also enable complex business rules, workflow, and relationships,
and allow for integration with custom and third-party commerce modules.
To compete successfully in the B2B marketplace arena, market makers need a
fully functional solution that accommodates the needs of their buyers and suppliers.
This should allow market makers to extend advanced services to the trading
community. The advantage will accrue to those market makers who ally themselves
with technology solutions vendors with the expertise to launch and customize
B2B marketplaces quickly.
Make the First Move
Speed-to-market is another front on which small, third-party players can potentially
gain valuable ground over existing players. Slow-moving, complacent large buyers
can be outdone by small, nimble competitors able to establish and quickly populate
a B2B marketplace. If not anticipated by the larger market maker, this early-strike
strategy can leave the market with no true consolidation of buyer power, allowing
the third-party platform to grow into industry-standard status. Once established,
the new marketplace may be able to resist pressure from the lagging rivals.
The Future of B2B
From the perspective of today's business managers, the new B2B e-commerce
wave consists of equal parts threat and opportunity. It will split most industries'
competitive field in into two camps — the prepared and the unaware. Like
every great paradigm shift, the global rise in electronic B2B trading relationships
presents a potentially massive shift in power. Small suppliers can establish
access to an entirely new class of technology-enabled customer, and rapidly
develop into a major market player. Established giants can suddenly find themselves
vulnerable, threatened by faster moving and more technology-enabled competitors.
Suppliers who want to be an industry leader must seize the opportunity presented
by the new economy. For those aggressive and focused enough to perform online,
the upheaval and pace of today's electronic business world can yield tremendous
The compelling benefits that B2B marketplaces offer for buyers, suppliers,
and market makers are driving the rapid adoption of these new markets. Marketplaces
are the latest and most significant weapons to reshape B2B commerce relationships,
and will soon affect all businesses in one way or another. The primary beneficiaries
of the coming B2B wave will be those who use the web to extend, deepen, and
create business relationships.
Marketplaces offer companies the chance to develop and enhance their most
important relationships — those with buyers and suppliers — while
enabling market makers to profit from new revenue opportunities. Companies
can use B2B marketplaces to strengthen their existing trade relationships,
discover and develop new ones, and promote faster and more efficient trading.
The rapid adoption of B2B marketplaces will shape the future of global business.
In the years to come, marketplaces of all types will proliferate on the worldwide
stage, integrating progressively deeper layers of the global business ecosystem.
The aggregation of buyers and sellers in centralized e-markets has significant
implications for competition, pricing, and efficiencies. These exchanges will
likely reshape some industries greatly, depending on what transparencies are
lacking and to what degree.
It will vary significantly by industry, and we think blanket assumptions are
dangerous. It's like we're in Pamplona, and that click behind you was the latch
on the gate for the running of the e-commerce bulls, and we'll see who gets
trampled. A few predictions:
- Strong competitors will become dominant in efficient markets, since their
comparative advantages become known and applicable across the entire market.
- Weak competitors will get weaker as they lose geographic protection from
- Intermediaries who profited from the geographic fragmentation could be
at risk if their only added value was bridging the spatial gap.
- Suppliers will become more specialized as they search for comparative advantages
by squaring off against the top tier of national and global competitors,
instead of regional competitors. Specialization will lead to more choice,
service, and customization.
- Since buyers will be able to initiate and terminate supplier relation ships
more easily, the cost of searching for and establishing new commercial relationships
- In all likelihood, prices won't be driven through the floor and suppliers’ margins
will not completely erode.
- There will be some savings, but they’re more likely to come in the
form of uniform prices for similar buyer needs. Transparency will root out
inefficiencies and aberrations. Buyers with less efficient processes that
enforce uniform buying across their own organizations will now have the tools
to implement and monitor procurement policy. Suppliers can't count on the
unknowledgeable buyer to prop up margins and will have to take care to target
customers who value their products and services.