E-commerce in B2B: “Would you be ready if Amazon competed with your business?”

Source: Agoria (14/11/2016)

According to Steve Muylle, Professor of Marketing & E-business at Vlerick Business School and Ghent University, as far as the rise of e-commerce is concerned there is no going back. And not for B2B companies, either. On Friday 25 November, he will be explaining his vision in detail at the “E-commerce: game changer for B2B?” event organized by Agoria.

To what extent is e-commerce already established in our country?

Steve Muylle: The phenomenon is showing an upward trend. Among other things, this is clearly evident in the online retail market. According to figures from the Belgium B2C Ecommerce Country Report 2016 issued by the Ecommerce Foundation, in collaboration with BeCommerce, last year no less than 74% of the population – 6.9 million Belgians – made at least one online purchase. If you add up all the e-commerce purchases, that accounts for a turnover of 8.2 billion euros. That's over 34% more than the year before! The products which most frequently end up in our electronic shopping carts are clothing, telecom and media & entertainment products. When it comes to services, it is mainly flights and accommodation, tickets for attractions and events and all-inclusive holidays which are popular. According to the same report, the strong upward trend will continue this year. For example, the online retail industry in our country is predicted to represent a total value of 9.6 billion euros in 2016.

What about the situation in B2B?

Steve Muylle: E-commerce might be new in the consumer market but if you strip it back to its essence, to the purely transactional, it's actually been around in the B2B sectors for decades. Just think of the classic EDI standard for the electronic exchange of purchase orders, invoices and other business documents between two parties in a long-term relationship.

The main question which arises in these markets today is the following: to what extent would it be expedient to replace these classic systems with or expand them to web-based systems which can more easily be opened up to a wider client base? This is partly a technological question but it immediately brings with it an even bigger strategic challenge, namely as a B2B company, how can you further digitalise and automate the process before and after the purely transactional processing of the order? How can you also reach and convince professional buyers, who might not yet be familiar with your company and are looking for new suppliers on the internet? Which after-sales opportunities does e-commerce offer? SEO/SEA, social media, content marketing… what can you do with them, which factors influence the purchasing process and to what extent? This is an important research theme at Vlerick because the trend is clear: as far as e-commerce goes, there is no going back for B2B companies either.

Which successful business models have you observed in e-commerce for B2B?

Steve Muylle: I think the best scenario is that of companies such as Philips Lighting Benelux, which make extremely creative and extensive use of the internet and e-commerce to strengthen their existing dealer channel. This is a healthy model for companies which respect the added value provided by their wholesale or other resellers in the form of additional services, such as stock management or training for the products offered. This isn't something you would be keen to drop, partly because you would lose valuable sales immediately if the resellers went away.

For dealers who are mere ‘box-movers’ and offer no added value, I think the future looks rather bleak. The big threat for these firms naturally comes from the internet-based companies like Amazon, Bol.com, Zalando etc. Their order-handling processes are so efficient that it would be difficult to beat them in that respect.

As a manufacturer, of course, you could always join forces with these kinds of internet giants. For example, Amazon is already active in B2B markets in some countries under the name Amazon Business. Here too, though, you need to stay on your guard. These internet companies might just seek out opportunities of their own. As soon as things start going well, what started out as a win-win partnership could turn into a nightmare if your internet resale partner suddenly starts sourcing similar products from a different, cheaper supplier. Or they might even end up launching their own range. A well-known B2C example was a partnership between Procter & Gamble and Amazon for the sale of baby care products on a subscription basis, which then left a bitter taste in P&G's mouth when Amazon launched its own range Amazon Elements Baby Wipes after a while.

In your opinion, what are the main benefits of a B2B company entering the e-commerce arena?

Steve Muylle: Firstly, there is the extra coverage. With the internet as your shop window, the whole world becomes your potential sales market. In theory, at least. Secondly, there is the increase in efficiency which comes from the smart and well-implemented digitalisation of the sales process. If transactions become increasingly automated and take place online, you should be able to achieve more turnover with the same team. And thirdly, I think it is quite simply the only way to retain your company's position as a link in an ecosystem in the longer term. More and more players in the economy are setting up digital transformation projects in which they wish to involve both their clients and their suppliers. Anyone who refuses to play ball will lose out sooner or later when the other party starts to seek out partnerships which do tie in with its digital strategy.

What is your concrete ‘how to’ advice for B2B companies with e-commerce plans? Could you give us another three tips?

Steve Muylle: First and foremost, you must realise that e-commerce can never be a purely IT project. Although it is based on digital technology, it actually affects the DNA of your entire organisation and your business model. Amongst other things, this means you must make every effort to ensure that the company culture and your people's skills evolve in the same direction. A training programme might be required. A second aspect: previously, I said that the extra coverage would prove a great benefit. Well, that's only true if logistics, operations and after-sales can also follow after the sale. If you are going too far beyond your usual geographical market, this sounds easier than it actually is. And finally, I would advise you to put out feelers and also to think about which external partners you might be able to involve in your project in order to create the optimal ecosystem for your company: start-ups? Targeted acquisitions?.... Only then would you be truly ready if you suddenly found Amazon on your doorstep one day. 

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