Digital Transformation - from B2B to e-Commerce
The transformation from a B2B to an e-Commerce business: A transition that companies consider one of the most pivotal challenges of today’s business world, particularly if they want further relationships with other businesses and have the desire to stay competitive in the future.
In order to successfully complete this transformation, there are several obstacles to overcome, which companies in Germany, Austria and Switzerland should be aware of. As Head of Marketing you are always representing your company while constantly being involved in the decision-making-process. Supporting you in this role is our goal. We provide vital information about e-Commerce in B2B environments and offer great pointers regarding your marketing strategy’s future direction.
What is B2B e-Commerce? An Assessment
In B2B e-Commerce all transactions between companies take place online. The products and services traded between those businesses are often the same as in the traditional B2B business models, however, the sale itself happens through an online shop for example. This development in B2B mirrors the trend as seen in B2C. Direct customer sales have been shifting over to the e-commerce sector for several years already, and the same thing is happening in the B2B sector now. The impact is expected to be just as dramatic as what we have witnessed in direct consumer sales.
Important studies suggest that e-commerce in the B2B sector is going to soon surpass B2C e-Commerce. As soon as in the year 2020 the overall sales are projected to reach 6.7 billion CHF, while the B2C market is supposed to settle at 3.2 billion CHF. The growth rates of the past suggest this rapid development. The average yearly growth between 2009 and 2014 amounted to a whopping 21%.
There are many factors acting as catalysts for the enormously fast digitalization in the sales sector. A very current reason is the increased availability of 5G and the increased bandwidth of mobile networks. In 2019 there were approx. 8 billion connected devices registered and this number is projected to increase to 20 billion by 2025. For the future it is probably a good idea to get used to thinking in terms of e-Commerce whenever the topic of B2B comes up.
Differences Between B2B and B2C
The transactions in the B2B sector are typically sales from manufacturers to wholesalers or between wholesalers and retailers. The sales volume in these cases is considerably larger than it would be the case with B2C sales. The relationships between seller and customer are ongoing and generally speaking a lot closer, as the customer base is overall smaller. Negotiation tactics are a crucial factor to the price determination just as much as discounts are. Since European companies are entitled to deduct tax beforehand, all items are solely considered to be in transit, so we are only referring to net pricing here. Equally important is the precise and current status of stock levels. Real-time information must be available.
Therefore, B2B users naturally have different requirements when it comes to e-Commerce software solutions than B2C dependent businesses. In today’s business world, companies run their business processes through ERP-systems and rely heavily on automated processes. Users generally experience the greatest benefit when their web shop seamlessly integrates into their ERP solution. This type of arrangement is generally preferred by businesses over a sheer interface solution, due to the fact that all data is already available in the ERP system and therefore can easily be utilized.
How do B2B Businesses Differ from Each Other?
B2B businesses can be categorized by their target groups or the type of goods sold. Some companies only target large customers, while other sellers mainly deliver to small and medium size businesses. The classification by goods traditionally happens based on value and importance. The parts get divided into A-, B- and C-parts. A-parts strategically hold the most value as well as importance and are available in the lowest quantities, while B-parts are less valuable, but have a share of 10 to 40% in quantity. Lastly C-parts are common low-cost parts that are typically stocked in high quantities of at least 50%. The type of the good dictates the actual replenishment process. With A-parts supplier evaluation is a priority and intense price negotiations are common. For C-parts on the other hand the company is always trying to keep the processing cost as low as possible. This classification of goods sets the tone of the customer approach in the web shop and determines which functions are of particular importance for the user.
An Overview of B2B e-Commerce Profits
Swiss analysts are expecting Switzerland’s trade volume to settle anywhere between 28.5 and 47.5 billion CHF. These numbers are based on the assumption that B2B online sales will top regular B2C sales by 5:1. However, many experts suggest that the final number might end up being much higher than that because these studies only include actual online store sales. Additional transactions, including electronic data interchange, are not part of this calculation. Therefore, it is very likely that the actual numbers will turn out to be higher than originally anticipated.
Take a look at what is happening in Germany and the situation will become even clearer. The Institute for Trade Research estimates e-commerce sales at around 180 billion Euros, but the sales reported including EDI are approx. 1.3 billion Euros. That would indicate that in reality, the Swiss economy also had e-Commerce sales that were a lot higher than what was actually reported.
However, to be fair, the concept of electronic data interchange is not exclusively considered an e-Commerce process. The interactive element is lacking with this concept, instead the process conducts the transfer of data with the push system. Small and medium-sized companies are facing the challenge of having to allocate a lot of resources when data is being exchanged this way. Since the Swiss economy consists of a high number of small and medium-sized businesses, it is expected that EDI is not going to be such a big factor in the evaluation of e-Commerce in Switzerland.
Recognizing B2B e-Commerce Trends
There are several trends that are easily identifiable in B2B e-Commerce. This includes the implementation of functions already known from selling online directly to end customers. For example incorporating seamless payments, which essentially is meant to simplify e-commerce transactions. This form of payment is not triggered by the buyer. The seller actually initiates it. Both parties initially have to come to an agreement regarding the terms of this payment process and once consent has been established, the buyer typically puts a payment method, such as a credit card, on file. This makes the payment process overall smoother and more seamless. This trend is particularly interesting because generally speaking, B2B transactions are still mainly invoiced to the buyer and paid within a certain number of days. This development shows a shift to new payment methods, for example, a credit card in this case.
Another critical trend is the online store or web shop factor. Those stores offer several benefits in comparison with online marketplaces. Especially B2B companies with the desire to foster closer relationships with their customers make the conscious decision to establish web stores. There are no third party-fees and the customer knows exactly who he is doing business with. This too decreases transactional costs and triggers something called consumerization. B2C customers, for example, also appear on platforms like Amazon as B2B customers for offers like Amazon Business. The goal here is to convert B2C into B2B customer relationships with as little effort as possible.
Statistics show that businesses are clearly leaning towards having their own web shop. In B2B e-Commerce, online stores are already responsible for more than half of all sales. This is a very clear indicator that more and more companies will continue to opt to have a web shop in the future. It is not uncommon for these online stores to be self-developed shop systems that are tailored very precisely to the company's own requirements.
Some of the most important developments include changing behaviors and values in our society. When looking at the situation in Switzerland, the so-called Digital Natives will make up the majority of the population as of 2020. The traditional consumer’s majority in the analog world only lasted until 2010, followed by a wave of digital converts, who went through the transition from analog to digital. This change of generations brings far-reaching consequences with it, the people as a whole and B2B users in particular are open to the digitalization of processes because they are no strangers to “going digital” in other areas of their lives. Businesses can no longer afford not to address these e-Commerce target groups with corresponding offers. Customers and suppliers interact on central platforms, all within the realm of the so-called platform economy. To ensure the future success of your company, it is crucial to align your business more and more with the needs of Digital Natives.
What you Should Look out for with B2B e-Commerce Agencies
Companies looking to establish a new web store, in order to process B2B e-Commerce transactions, typically turn to agencies that have experience in this area to realize their project. There are a number of factors to consider when choosing a reliable partner. One of those factors is that the agency should work with innovative project methods such as Scrum. For a successful implementation of the online shop it is crucial that continuous improvements and adjustments can be made. Supervision and support provided by the agency are also important in the period after first going live with the web shop. Many small milestones lead to the goal rather than one all-inclusive grand plan. This is mainly driven by the fact that the requirements of the online store users are constantly changing. Continuous adjustments play an essential role here.
How to Start a Successful B2B e-Commerce Project
Companies that have made the decision to get on board with selling online must meet a number of requirements in order to get the project off the ground. This includes having enough staff with knowledge of the digitization process to successfully implement such a project. The advice and support from external service providers also play an important role here, as they can make up for the lack of expert knowledge within the company. As a decision-maker, you should not be afraid to take advantage of this outside expertise.
One of the most important challenges is for example the preparation of existing product data so that it can effectively be applied in the e-Commerce environment. If you have not been involved in online sales up until this point, this is likely the first roadblock you will hit on your quest to get your e-Commerce business started. For a successful project implementation it is of crucial importance to adjust your product descriptions in a way that your customers can work with them. That means that you will also need to provide explanations that your customer base can understand. Users expect to be able to search your product database by filtering for specific characteristics and descriptions. Business customers are often overwhelmed by all of the abbrevations and technical words that are commonly used in the B2B sector. Therefore, it is strongly recommended to reduce or at least explain those terms in descriptions. Furthermore, another vital requirement for a successful web store implementation is that you have high quality product images to put online. If not available, employees should be making every effort to replace poor pictures with high resolution images before going live. If the pictures are too small, adding a zoom-in function may be possible. This is almost expected by users. To sum it up, in order to ensure a successful start into this new venture, companies have to make absolutely sure that the quality of their product data is as good as possible. Professional agencies are able to lend support and can provide an unbiased assessment so that weak points can be identified and eliminated before it is too late.
How to Market a B2B Web Store?
Just as it is the case with the shop system itself, the marketing concepts of a B2B online shop also differ greatly from those of its B2C counterpart. That starts with the fact that business customers desire a different approach. It is important to view the web shop itself as a marketing tool. B2B customers expect B2B marketing to provide them with facts about the products and services, all pleasantly presented in a way that the customer can easily digest. This includes, for example, expert articles, case studies or videos which offer detailed explanations of the items or services offered. A variety of information can be covered here without the danger of the presentation being too dry.
Additionally, it is recommended for companies to use as many channels as possible for marketing the B2B online shop. This includes your own company website as well as a company blog or social media. You can also publish press releases on Facebook to introduce your new web shop to your customers. Keywords from these press releases can be used in search engine optimization (SEO). In B2B marketing, long-tail keywords are particularly relevant, which refers to search queries that are made up of several terms. Press releases and other high quality texts give the SEO experts more material to work with.
It is of vital importance that your B2B business participates in the unavoidable digitalization process. Establishing your own web store appears to be the first step in this direction, which many companies take. This gives you full control over your customer approach as well as the way product information is presented. Additionally, it is also possible to tailor the web shop’s functions precisely to the corresponding target group. After all, a strategic buyer working for a wholesaler has different expectations than a one-person-company. Electronic data exchange and marketplaces provide further opportunities for businesses that are participating in e-Commerce. One thing is for certain: From now on, Digital Natives will make up the majority of customers of those companies and they expect all processes to be digitized. The transformation to B2B e-commerce is therefore not a choice, it is a necessity. With a competent agency by your side you can receive the support that you need to set up a web shop so that your company can also benefit from all of the amazing opportunities that e-Commerce has to offer.