B2B E-Commerce: Payday Still Years Away

| February 3, 2016 | 0 Comments
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bolajiojoNotwithstanding any claims to the contrary not a single company globally is today reaping the full benefits electronic commerce can have on relationship with suppliers and customers. This is not for want of trying; manufacturers and retailers are spending massive amounts of money on tools, equipment and software applications that would enable them shift operations to digital platforms.

Global e-commerce sales are surging: Retail web-transactions were forecast to climb to $1.67 trillion in 2015, representing about 7.3 percent of total retail sales, according to numbers from researcher eMarketer. Over the next several years, online sales transactions are expected to more than double to $3.6 trillion by 2019, accounting for 12.4 percent of global retail sales, the researcher said.

“China and the U.S. are by far the world’s leading e-commerce markets, combining for more than 55 percent of global internet retail sales in 2014,” eMarketer said in a report. “China’s growth over the next five years will widen the gap between the two countries, and China will exceed $1 trillion in retail e-commerce sales by 2018, accounting for more than 40 percent of the total worldwide.”

Numbers for business-to-business (b2b) web-based transactions are harder to find, partly because companies over decades engaged in other forms of online transactions, including the once pervasive dedicated EDI (Electronic Data Interchange) that has been giving way to Internet-based services. However, Frost & Sullivan believes total b2b e-commerce sales would more than double to $12 trillion by 2020, up from $5.5 trillion in 2012. The consulting firm estimated non-EDI b2b e-commerce in 2013 at $600 billion and in a report projects this would grow into trillions of dollars in only a few years.

“B2b online retail is projected to grow to $6.7 trillion by 2020 due to the rapid migration of manufacturers and wholesalers from legacy systems to open, online platforms. The market is expected to double the b2c online market size and witness much higher transaction volumes,” Archana Devi Vidyasekar, a researcher with Frost & Sullivan said in a report issued late in 2014. “B2b online relationships are expected to move from one-to-many to many-to-many, as marketplaces become more common and cross-industry public platforms such as Alibaba and Amazon gain b2b prominence. A transition to seller-driven platforms is also likely, as online relationships become less about procurement and more about selling.”

Nowhere is this more obvious than in the electronics supply chain and especially in the components distribution business. All of the major components distributors have over years shifted to a model where more of the transactions between them and customers as well as suppliers now occur online. Tools and applications have been put in place to assure participants the new systems are not only reliable but transparent and equitable.

With the encouragement of small and large customers and suppliers alike, manufacturers in the electronics market are plunging headlong into e-commerce-transactions. In fact, all of the major electronic component distributors have invested heavily in online commerce, updating their websites to handle thousands of transactions simultaneously and in different currencies. Companies like Verical, a unit of Arrow Electronics, have centered operations on e-commerce, leveraging the strength of the web to offer customers hitch-free and more cost-efficient transactions.

In addition to providing sales and pricing opportunities, e-commerce also enabled the provision of facts about product availability, technical data and additional supply chain information. This has resulted in the elimination of paper catalog materials and a reduction in overhead. Overall, e-commerce has not only made b2b transactions easier and more cost-effective, it is becoming the single, most important channel for sales and supply activities in the electronics industry.

And yet economists and analysts believe these digital investments have the potential for greater returns than have been seen so far. Current returns are acknowledged to be limited due to various factors, including the fact that changes often occur over time especially where they involve swapping one ecosystem for another.

Dumping the old system and starting anew is not a viable option despite the obvious attraction of b2b e-commerce. Today, the new digital world is being layered upon an old system that is decades-old but that cannot be first erased without a huge loss to companies and regional economies.

For many companies, therefore, the e-commerce world must for now co-exist with the old system until all part of a manufacturer’s operation and the extended supply chain have been updated, tested and validated. Until the entire economy is e-commerce certified, the e-commerce platform will make only incremental advances except in new economic areas with virtually no legacy systems in place.

Only companies that can quickly get their extended supply chain certified as e-commerce-certified will reap the full benefits of this digital transformation.

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Category: Featured Blogs, News Analysis

About the Author ()

Bolaji Ojo is editor-in-chief and publisher of Electronics Purchasing Strategies. He can be reached at bolaji.ojo@epsnewsonline.com

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