The B2B e-commerce network will generate $6.7 trillion in revenue by 2020, a report from Frost & Sullivan into the developing distribution platform finds. In total, e-commerce platforms supporting business trade will make up 27% of the $25 trillion market by 2020. The move to e-commerce is facilitated by a transfer away from costly legacy systems, as well as the advantage of automating many of the time consuming and costly aspects of procurement.
Large e-commerce businesses have recently attracted considerable attention, with the IPO of Alibaba raising a staggering $21.8 billion. Each year, the use of online e-commerce based platforms is increasing, as recent research from Capgemini shows. Last year, the UK e-commerce business-to-consumer (B2C) market grew by 12% and now accounts for 24% of the retail spend.
In a report from Frost & Sullivan, titled the ‘Future of B2B Online Retailing’, the consulting firm looks at the rise of the business-to-business (B2B) e-commerce market that too has seen considerable growth over the past decade.
Budding to business procurement
In recent years, with the aging and the costly upkeep of legacy procurement systems, the development of disruptive online e-commerce models has seen manufacturers and wholesalers move large parts of their procurement operations through online e-commerce platforms. These platforms provide the advantage of automating many of the time consuming and costly aspects of procurement.
The research shows that by 2020, 27% of the $25 trillion trade by manufacturing and wholesale businesses is projected to move through online e-commerce platforms – a total of more than $6.7 trillion. China and the US are set to lead the B2B online market, of which the latter is anticipated to double its revenue contribution to $1.2 trillion by 2020.
These platforms are, like their B2C counterparts, often being developed to facilitate a wide range of businesses. Thus rather than providing a facility that is one-to-many, the development of the market will see more many-to-many businesses arrive. The consultancy expects to see solutions developed that will allow any business to integrate an e-procurement process that facilitates the purchase of required goods online.
“As such, private industrial networks, where specific companies come together to exchange products, and public market places that are employed for on-the-spot purchasing, have gained prominence over the last decade,” explains Frost & Sullivan Visionary Innovation Group Team Lead Archana Vidyasekar. “With businesses buying more than selling online, these sells driven B2Ctype open public networks will help provide more visibility and storefront capabilities to sellers.”
In the B2B sector the complexities that wholesale e-commerce platforms need to deal with are of a magnitude bigger than in the B2C sector. Businesses tend to buy in bulk and in greater variety, while – unlike in the B2C setup – prices are variable. The necessity for flexible shipping introduces further complexities into logistics solution. The B2B platforms need to comply with more complex tax and regulatory concerns, thus, providers typically employ large staff whose only responsibility is to deliver products and services within these restrictions.
“Nonetheless, with technological advancements facilitating the procurement of goods on the move through smartphones and tablets, business use of online platforms will rapidly grow,” comments Pramod Dibble, Frost & Sullivan Visionary Innovation Group Consultant. “The emergence of cloud platforms that offer more scalability, both as a software and infrastructure service, too is pushing businesses towards B2B online retailing.”