TABLE OF CONTENTS

EXECUTIVE SUMMARY.............................................................................................................1

INTRODUCTION...........................................................................................................................2

BUSINESS TO BUSINESS................................................................................................................2
E-COMMERCE...............................................................................................................................3
B2B E-COMMERCE.......................................................................................................................3

HISTORICAL OVERVIEW...........................................................................................................4

THE PROCESS OF B2B E-COMMERCE.....................................................................................5

MODELS OF B2B EC....................................................................................................................6

SUPPLIER-ORIENTED MARKETPLACE (SELL-SIDE-SOLUTION).....................................................6

Example of the Supplier-Oriented Marketplace: Cisco Connection Online Case...................7
BUYER-ORIENTED MARKETPLACE (BUY-SIDE-SOLUTION).........................................................8
Example of the Buyer-Oriented Marketplace: GE.................................................................11
INTERMEDIARY-ORIENTED MARKETPLACE................................................................................12
Example of the Intermediary-Oriented Marketplace: Buzzsaw.............................................13

BUILDING A SUCCESSFUL B2B E-COMMERCE STRATEGY............................................13

KEY STRATEGIC CHALLENGES IN B2B E-COMMERCE.................................................................14

BENEFITS OF B2B E COMMERCE:..........................................................................................20

DRAWBACKS..............................................................................................................................21

WAY AHEAD...............................................................................................................................22

B2B 2.0 E-COMMERCE SOLUTION...............................................................................................22

CONCLUSION..............................................................................................................................24

BIBLIOGRAPHY..........................................................................................................................25

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EXECUTIVE SUMMARY

Electronic commerce is an emerging concept that describes the process of buying and selling or
exchanging products, services and information via computer networks including the Internet.
The development of B2B EC took place in three stages. Stage one was the Electronic data
interchange (EDI). The Internet made Internet catalogues was the second stage. The third and
present stage of B2B EC is electronic markets (e-markets). There are many different types of e-
marketplace based on a range of business models. They are classified depending on who controls
the marketplace: the buyer, the supplier or the intermediary. . Effective B2B online marketing is
critical to reach the buyers with timely, personalized offers and pricing. Enhancing online service
levels for buyer with B2B e-commerce best practices can help the firm become easy to do
business with and differentiated from the competition. B2B e commerce has many potential
benefits both from the buyers side and the sellers side, and in addition it has drawbacks as well. .
Thus B2B e-commerce is transforming the existing business models in numerous ways and that
is the reason e-commerce is an integral part of the way companies do business today.

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INTRODUCTION

Business to Business

Business-to-business (B2B) describes commerce transactions between businesses, such as

between a manufacturer and a wholesaler, or between a wholesaler and a retailer. Contrasting
terms are business-to-consumer (B2C) and business-to-government (B2G).

The volume of B2B (Business-to-Business) transactions is much higher than the volume of B2C
transactions. The primary reason for this is that in a typical supply chain there will be many B2B
transactions involving sub component or raw materials, and only one B2C transaction,
specifically sale of the finished product to the end customer. For example, an automobile
manufacturer makes several B2B transactions such as buying tires, glass for windscreens, and
rubber hoses for its vehicles. The final transaction, a finished vehicle sold to the consumer, is a
single (B2C) transaction.

B2B is also used in the context of communication and collaboration. Many businesses are now
using social media to connect with their consumers (B2C); however, they are now using similar
tools within the business so employees can connect with one another. When communication is
taking place amongst employees, this can be referred to as "B2B" communication.

E-Commerce 

A way of doing real-time business transactions via telecommunications networks, when the

customer and the merchant are in different geographical places. Electronic commerce is a broad
concept that includes virtual browsing of goods on sale, selection of goods to buy, and payment
methods. Electronic commerce operates on a bona fide basis, without prior arrangements
between customers and merchants. E-commerce operates via the Internet using all or any
combination of technologies designed to exchange data (such as EDI or e-mail), to access data
(such as shared databases or electronic bulletin boards), and to capture data (through the use of
bar coding and magnetic or optical character readers). Key strategic challenges in B2B e-
commerce are lower costs and increase productivity, retain existing customers, manage product
complexity, innovation through services, exploit new markets and faster time-to-market for new
product introduction.

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B2B E-Commerce

Electronic commerce is an emerging concept that describes the process of buying and selling or
exchanging products, services and information via computer networks including the Internet. E-
Commerce can be mainly divided into Business-to-Business electronic commerce (B2B EC) and
Business-to-Consumer electronic commerce (B2C EC). B2B EC implies that both sellers
(suppliers) and buyers are business corporations, while B2C EC implies that the buyers are
individual consumers.
The leading items in B2B EC are computing electronics, utilities, shipping and warehousing,
motor vehicles, petrochemicals, paper and office products, food and agriculture. B2B EC is the
electronic support of business transactions between companies and covers a broad spectrum of
applications that enable an enterprise or business to form electronic relationships with their
distributors, resellers, suppliers, and other partners. B2B EC does not just comprise the
transaction via the Internet, but also the exchange of information before and the service after a
transaction. From the purchasing company’s point of view, B2B EC is a medium for facilitating
procurement management by reducing the purchase price and the cycle time. Business-to-
Business EC is expected to grow explosively in the next years and to continue to be the major
share of the electronic commerce market. It is estimated that the B2B EC sector is going to be
eight to ten times the size of the B2C EC sector.

Historical Overview

The development of B2B EC took place in three, partly overlapping, stages.

 Stage one was the Electronic data interchange (EDI), which realized the standardized,
bilateral exchange of business information (e.g. orders and requests for products)
electronically. A necessary condition for realizing the exchange of data were expensive,
proprietary networks, called Value Added Networks (VAN). As a consequence, just large
companies were able to use this method. EDI made faster processes possible and lowered
the error rates due to former manual processing. EDI has been used since the 1970s.
 The problem of the highly expensive Value Added Networks was solved through the
worldwide acceptance of the Internet. The Internet made Internet catalogues, which were
the second stage of the B2B EC’s development, possible. Companies were able to present

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 information on their products via the Internet. Prospective buyers had permanent access
to actual data. Providing information this way is a lot more cost-effective than using
paper, telephone and fax. Especially by using Internet catalogues, it was possible to
handle small and standardized transactions more efficiently. Supporting business
transactions with Internet catalogues was given special emphasis until 1999.
 The third and present stage of B2B EC (since 1999) is electronic markets (e-markets). E-
markets are “virtual rooms” in which different participants are able to interact via the
Internet. Several buyers, sellers and service-providers have access to the e-markets. E-
markets do not just provide information like the Internet catalogues, but also support the
negotiation, the transaction and the services afterwards.

The process of B2B e-commerce

(1) The requisitioner uses a web browser to access the E-Procurement application on their
company server.
(2) The server returns an authentication token and a list of approved suppliers to the requistioner.
(3) The requisitioner accesses supplier content to browse the available merchandise (Note: The
supplier content could be buyer, supplier or third party hosted, depending on the nature of the
procurement relationship with the purchasing organization.)
(4) After one or more items are selected, the competed order is transferred to the buyer’s server.
(5) The order is routed to management for approval.

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(6) The approved order is routed to the supplier for processing and fulfillment.
(7) The supplier ships the approved merchandise directly to the buying organization.
(8) The buying organization arranges for payment through a corporate purchasing card.
(9) The payment authority transfers funds to the supplier, completing the transaction.

Models of B2B EC

There are many different types of e-marketplace based on a range of business models.
They are classified depending on who controls the marketplace: the buyer, the supplier or the
intermediary.
- In a Buyer-Orientated Marketplace few buyers face many suppliers.
- In a Supplier-Oriented Marketplace many buyers face few suppliers.
- In an Intermediary-Oriented Marketplace many buyers face many suppliers.
Other important B2B models are virtual corporation, networking between the headquarters and
subsidiaries and online services to business.

Supplier-Oriented Marketplace (Sell-Side-Solution)

Also known as a supplier directory, this marketplace is set up and operated by a number of
suppliers who are seeking to establish an efficient sales channel via the internet to a large number
of buyers. They are usually searchable by the product or service being offered.

Supplier directories benefit buyers by providing information about suppliers for markets and
regions they may not be familiar with. Sellers can use these types of marketplace to increase
their visibility to potential buyers and to get leads.

Characteristics of the Supplier-Oriented Marketplace

The most common model is the supplier-oriented marketplace. Most of the manufacturer driven
electronic stores belong to this category. In this model, both individual consumers and business
buyers use the same supplier-provided marketplace

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 Supplier oriented marketplace

Example of the Supplier-Oriented Marketplace: Cisco Connection Online Case

Cisco uses the Supplier-Oriented Marketplace successfully. The market is operated by Cisco
Connection Online. In 1997 Cisco sold more than US$ 1 billion online (total: US$ 6.4 billion) of
routers, switches and other network interconnect devices. Cisco’s business model also includes
customer service and finding order status. In 1991, Cisco began providing electronic support
using the Internet. The first applications were software downloads, defect tracking and technical
advice. Three years later, in 1994, Cisco put its system on the Web naming it Cisco Connection
Online. By 1998, customers were using Cisco’s Web site about one million times a month to
receive technical assistance, check orders or download software. Nearly 70 percent of the
technical support and customer service calls are handled online. As a result, Cisco increased its
technical support productivity by about 200 to 300 percent per year. Furthermore, the online
technical support reduced technical support staff costs by about US$ 125 million. Since 1996,
Cisco’s Internet Product Center allows customers to buy any products via the Web, saving time
for both Cisco and its customers. Before the development of the Web site, ordering a product
was lengthy and complicated. Cisco also provides tools on its Web site where customers can find
answers to questions like e.g. “When will the order be ready?”.

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Cisco estimates that putting its applications online in 1998 saved the company US $363 million
per year. Additionally, Cisco saves US$ 180 million per year in distribution, packaging and
duplication, because customers download new software releases directly from Cisco’s site. By
providing product and pricing information on the Web site and on Web-based CD-ROMs, Cisco
also saves US$ 50 million per year in printing and distributing catalogues.

Buyer-Oriented Marketplace (Buy-Side-Solution)

A buyer-oriented e-marketplace is normally run by a consortium of buyers in order to establish

an efficient purchasing environment. If you are looking to purchase, participating in this sort of
e-marketplace can help you lower your administrative costs and achieve the best price from
suppliers. As a supplier you can use a buyer-oriented e-marketplace to advertise your catalogue
to a pool of relevant customers who are looking to buy.

Characteristics of the Buyer-Oriented Marketplace

By using Supplier-Oriented Marketplaces, buyers would have to search electronic stores and
electronic malls to find and compare suppliers and products. This would be very costly and time
consuming for big buyers, who purchase thousands of items on the Internet. As a result, such big
buyers prefer to open their own marketplace, which is called a Buyer-Oriented Marketplace. By
supporting transactions and procurement processes, these marketplaces offer great potentials in
cost savings. Buyer-Oriented Marketplaces are found in industrial sectors with few and dominant
buyers.
Essential elements of the marketplace are:
- Guidelines for Transactions
- Internet-Based Product and Supplier Catalogue
- Availability Check
- Informational Support of Negotiations
- Invitation to Bid in Auctions and Submissions
- Catalogue Ordering
- Support of Transactions

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- Delivery Inspection
- Quality Management

Buyer oriented marketplace

Potentials of Electronic Procurement

In many companies, procurement has become one of the most important functions in the last
years. Companies realized the existence of great potentials in cost savings by supporting
procurement electronically. Product-, process- and inventory costs can be reduced by using
electronic procurement (E-Procurement). E-Procurement is mostly realized in Buyer-Oriented
Marketplaces.

Product Costs

Lower product costs can be realized by reducing purchase prices through E-Procurement. This is
achieved mainly by the following points:
- Access to small companies located in foreign countries is facilitated
- Procurement systems aimed at key-suppliers can efficiently be expanded to other suppliers

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- Procurement cycles can be shortened and also be supported by e.g. auctions
- Purchase volume can be bundled up from internal business departments and from partner
companies
These points are mainly true for suppliers e.g. of bolts, nuts and stationeries. Suppliers of highly
specialized products are less affected. In 1999, the Aberdeen Group found out that large-scale
enterprises were able to reduce product costs by 5-10% on average using Buyer-Oriented
Marketplaces.

Process Costs

Reducing the process costs is the greatest potential of E-Procurement. Up to now, one order has
caused costs on average DM 200-300. Internal bureaucracy is responsible for a large part of the
costs. E-Procurement can reduce process costs up to 90 percent. These cost savings are realized
through the following improvements:
- More effective handling of administrative tasks like e.g. delivery inspection or order forms
through electronic support
- Faster and more efficient internal coordination like e.g. signatures that are necessary for an
authorization
- Better information by e.g. updating product catalogues and descriptions regularly
- Avoiding errors (e.g. wrong article numbers)
- Faster searching for products

Inventory Costs

Long delivery times and poor transparency of orders cause higher inventory levels, which lead to
higher capital costs and to partial loss of the inventory’s value. This affects the profitability of
the company negatively. E-Procurement can decrease the inventory levels by 20-40 percent. The
Aberdeen Group showed that inventory costs were reduced by 25-30 percent.

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Possible Problems of Electronic Procurement

The Buyer-Oriented Marketplace offers much potential in cost savings. The marketplace
theoretically offers benefits to all participants but the reality shows that they are mainly realized
by buyers and key suppliers. The automobile manufacturers DaimlerChrysler, Ford and General
Motors joined to form Constrium, a Buyer-Oriented Marketplace. They expect to realize cost
savings of up to US$ 1000 per car. Other automobile companies are interested in joining.
Suppliers like e.g. Continental and Karmann, who manufacture specialized products and who are
market leaders in their segments, welcome the electronic marketplace. There are
interdependencies between these suppliers and the buyers. They can also realize cost savings e.g.
in process costs. Many small and medium-sized companies, on the other hand, are confronted by
a new situation. They often manufacture unspecified products and have largely invested in the
business relationships e.g. by basing their plant close to the buyer. The new marketplace
increases the dominance of the buyers. The buyers can put them under pressure with new
alternatives and can realize lower purchase prices. These companies are threatened by the new
situation

Example of the Buyer-Oriented Marketplace: GE

The buyer’s bidding site is the most popular type of Buyer-Oriented Marketplace. This shows
GE’s electronic bidding site (GE TPN Post) which enhances the company’s procurement
process. GE also opened its site to other buyers which also can profit from the benefits. GE
charges fees for using its site and therefore generates additional profits. For using GE’s bidding
site, buyers prepare bidding project information and post it on the Internet. After the
identification of potential suppliers, these suppliers are invited to bid on the project. Suppliers
can download the project information from the Internet and submit bids for the project. Buyers
then evaluate the supplier’s bids and may negotiate electronically. Buyers accept the bids that
best meet their requirements. By doing so, buyers can identify and build partnerships with new
suppliers worldwide. The information and specifications can be rapidly distributed to business
partners (suppliers). As a result, bids can rapidly be received and compared from a large number
of suppliers to negotiate better prices. GE’s bidding site also offers benefits to suppliers. Sellers

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can gain instant access to a large-scale buyer with over US$ 1 billion in purchasing power.
Therefore the sellers can expand their market reach and can lower costs for sales and marketing
activities. They also lead to profit from the shortened selling cycle.

Intermediary-Oriented Marketplace

Characteristics:
This business model is established by an intermediary company which runs a marketplace where
business buyers and sellers can meet. There are two types of Intermediary-Oriented
Marketplaces: horizontal and vertical marketplaces. Vertical marketplaces concentrate on one
industrial sector whereas horizontal marketplaces offer services to all industrial sectors. The
Intermediary-Oriented Marketplace is a neutral business platform and offers the classical
economic functions of a usual market. The difference is that the participants do not have to be
physically present. There are thousands of Intermediary-Orientated Marketplaces and many of
them are very different in the services they offer. These marketplaces can contain a “virtual
catalogue of the industrial sector”. Companies have the possibility to present themselves in this
virtual catalogue. On an Internet based “notice board” single offers or requests of companies can
be found. An Intermediary-Oriented Marketplace can also contain catalogues where information
on products and prices can be presented. By offering search functions, the marketplace makes the
comparison and transparency of products possible. Marketplaces can also offer auctions. These
auctions can be organized by sellers (products are sold) or by buyers (orders are sold).
Furthermore is it possible to offer electronic functions where participants can negotiate in real
time. The intermediary company running the marketplace can generate profits through provisions
for successful transactions and for negotiation of services (e.g. a logistical company to deliver
the products). The company can also charge fees for membership and for presenting information,
offers or requests. Profits can furthermore be generated by advertising (e.g. banners). The
company can also distribute its own products through the marketplace profiting from more
buyers entering the site than e.g. a normal e-store.

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Example of the Intermediary-Oriented Marketplace: Buzzsaw

Buzzsaw is a vertical electronic marketplace which concentrates on the building industry. Many
different parties are involved in a construction project: e.g. building contractors, builders, manual
workers, architects, merchants and the building owner. Many of these parties are regional sellers.
There are varied business relationships between all participants. The complex structure leads to
inefficient processes of planning and communication. Buzzsaw offers software to improve
planning and communication between the parties. This helps reducing the usual overspending of
the project’s budget and schedule. The heart of Buzzsaw’s services is a software, which
administrates the construction project (administrator). This software can be used to carry out the
entire construction plan of many participants involved in the process. Functions like e.g. the
design, the planning of the project and the supervision of the building’s progress can be
supported. Buzzsaw also offers detailed information about the building industry (e.g. news
affecting the sector, a classified directory and a local weather forecast). The marketplace also
provides the option to do business. All products relevant for the building industry can be traded.
The Web site offers search engines to find the wanted products. Additionally, buyers and sellers
can insert requests and offers on the marketplace. Buzzsaw’s sources of income are fees for
transaction and for the use of the administrator as well as advertising revenue.

Building a successful B2B e-commerce strategy

To have a successful B2B e-commerce strategy, you need to automate the quote-to-cash process
and provide buyers with more than just an online shopping cart, but relevant information from
order status and inventory availability to customized marketing campaigns and promotions. This
makes your B2B e-commerce strategy multifaceted moving beyond simple online order taking to
personalized selling to multiple tiers of customers and strategic partners.

B2B e-commerce has evolved dramatically from basic online transactions to center the online
experience around the buyer. This buyer-centric transformation is driven by today’s best
practices in Business-to-Consumer (B2C) e-commerce. This B2C-B2B convergence is driven by
both B2B sellers and B2B buyers. Sellers want to provide a retail-like online experience that

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offers product recommendations, and tailored promotions. And now, B2B buyers expect the
same rich, personalized experience that B2C Web sites offer.

Businesses that sell to other businesses also need to improve the efficiency of their online
operations, marketing and customer service. Many companies still face challenges such as
processing orders manually, which leads to high customer service costs and increased order
processing time. Effective B2B online marketing is also critical to reach your buyers with timely,
personalized offers and pricing. And finally, enhancing online service levels for buyers— with
B2B e-commerce best practices can help your firm become easy to do business with and
differentiated from the competition.

Key strategic challenges in B2B e-commerce

1. Lower costs and increase productivity

2. Retain existing customers

3. Manage product complexity

4. Innovation through services

5. Exploit new markets

6. Faster time-to-market for new product introduction

Lower costs and increase productivity

● The most relevant pain point that harasses in B2B particularly in today's bad market conditions
– is certainly the ability to find continued ways of gaining additional efficiency and productivity
out of any business processes, thereby to reduce operating costs.
● In a context of an elongated supply chain, the interactions between companies in their selling
and purchasing processes represent a relevant area of operating costs.
● Cost reduction is, thus, a leading driver for suppliers in undertaking a B2B e-commerce
strategy. As literature supports, in fact, it is not unusual for many B2B e-commerce initiatives to
achieve fast return on investments (ROI) with more cost reductions in one year than total cost to
implement. Additionally, the payback from cost savings is augmented by other returns such as
14
increased revenue, faster time-to-market, and improved customer satisfaction, that in turn
support higher margins, and thereby achieve faster ROI.
● Cost advantages are gained through more efficient and streamlined selling and purchasing
processes and can be measured at both the seller side and at the buyer side.
● On the seller side, the extension of the order entry activity towards customers' purchasing
offices and the elimination of internal manual order entry are key to achieving those savings. In
this way, suppliers can attain dramatic returns on investments thanks to the reduction of back-
office support personnel costs and the reduction of expensive traditional communication costs
(such as phones, fax, etc., relative to the Internet alternative).
● These cost advantages come in the form of head count reduction, revenue growth without
incremental head count, internal productivity increase through the reduction in errors and,
therefore, rework, elimination of unnecessary and repetitive tasks and the refocus of back-office
workers towards more added-value activities.
● Estimates of traditional order processing costs vary, but are somewhere in the range of 10€ to
50€. Internet based orders have trended between 1€ and 2€ per order. Additionally, literature
suggests a reduction of 15% in customer support calls and a 10% increase in back-office
productivity.

Retain existing customers

● For suppliers in a B2B value chain, the increasingly tough competition, the heavy cost of
acquiring new customers and the complexities connected with global trading are all reinforcing
the value of existing customers and the importance of retaining them. Additionally, fast
commoditization of products, soaring buyer expectations and weak demand are calling for
businesses to find ways to provide existing customers with additional value as a way to keep
them.
● These trends are increasing the focus on enhancing customer experience during the purchasing
process as a way to add value and thereby improving customer retention.
● An adequate B2B e-commerce capability increases the ease with which customers do business
with suppliers, thereby reducing their need to go to competitors when they want to find product
information, develop specifications, or make purchases. As customers become more familiar
with supplier's e-commerce capabilities – and more so, when these capabilities are immersed in

15
their established purchasing processes – their desire to go elsewhere obviously diminishes. The
result is that customer retention increases.
● Therefore, the approach suppliers should follow in their B2B e-commerce strategy is that they
have to provide their clients a modern "purchasing service" that needs to be tailored to fit
customers' business process workflow.
● The capability of supporting complex workflows over the web is not an option for modern
B2B e-commerce platforms. Indeed, for the majority of B2B interactions – particularly for
buyers in the most structured value chains of automotive, high-tech, and industrial equipments –
the purchasing process requires to follow strict process workflows with milestones to be
achieved, tasks to be completed, due dates to be respected, approval levels to be confirmed, and
contractual thresholds to be considered for pricing, volumes, and product mix.
● Additionally, in today's information-based society, customers are expecting to find extended
information about the products they are looking to buy. Buyers need to search and access
detailed technical specifications to rapidly qualify if and how products fit specifications. Also,
customers are looking for unstructured qualitative information such as product application areas,
customer usage examples, 3D interactive design, and assembly instructions.

Manage product complexity

● If deploying B2B e-commerce is an essential capability for suppliers to increase revenue,
reduce costs, and improve customer loyalty, these efforts are worth nothing if complete, up-to-
date, and consistent product information are not available at buyers' fingertips.
● However, the severe market competition, combined with increasing product variations based
on customer requirements and the need to comply with safety and environmental regulations, has
resulted in a substantial increase in the complexity and number of products. In addition, product
life cycles are shortening, and this means that products reach end-of-life more frequently, with an
increased number of new products coming into force. In this context, product data becomes out
of date sooner and ensuring complete, up-to-date, and consistent product information internally
to the organization and along the value chain is not an easy task.
● For suppliers in a B2B value chain to work effectively, the complete visibility of product
information and the ability to seamlessly transfer product data towards customers as and when
needed is required. Indeed, the availability of good information is critical to managing an

16
efficient B2B e-commerce initiative. In effect, without complete, up-to-date, and consistent
product information, suppliers frequently suffer from flawed orders, incorrect shipments, and
pressing customer support requests.
● The lack of conformity in product data also stems from the fact that product data typically
remains scattered in multiple enterprise systems ranging from engineering, sales, service,
financial, manufacturing, logistics, and marketing databases to word documents and excel
spreadsheets on individual desktops.
● When considering the opportunities of B2B e-commerce initiatives, suppliers need to examine
the possibility to aggregate all product information into a central repository, thereby resolving
discrepancies and updating information gathered from different internal systems. These
initiatives – that goes under the name of Products Information Management (PIM) – result is a
single version of the truth that can eliminate many of the product data hiccups that turn customer
relationships sour and that create most of selling process costs and inefficiencies.
● PIM initiatives are thus an essential ingredient in a successful B2B e-commerce
implementation. The key benefits include lower delivery costs, accelerated time-to-market,
increased sales, reduced errors, and improved efficiency.

Innovation through services

● In today's flat global markets, commoditization of products is advancing rapidly, as
"traditional" product features (such as functions, quality, or design) are no more assurance of
lasting competitive advantage.
● As part of the strategic response to the above trend, manufacturers are turning their attention to
the delivery of product-related services that, not only provides an additional revenue source, but
also enables higher customer satisfaction.
● With soaring R&D costs and falling return on investment (ROI) on R&D spending, the service
business represents a safer harbour to maintain healthy growth and sales margins, as service
products can be introduced faster and with lower investment.
● Most importantly, higher profit margins are originated from services provided on top of
physical products. For example colour cartridge selling provides higher margins than printers
themselves, and the same applies for spare parts and aftermarket services in the automotive
industry or servicing equipment operations in the machinery industry.

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● These trends towards service-based revenues are deeply changing manufacturers' way of doing
business as they are blurring the boundaries between products and services. Indeed, many
physical products are today the platforms for delivery of services.
● A B2B e-commerce strategy may effectively help suppliers carry on this massive business
transformation, as it enables them to stay closer to customers and better understand their product-
related service needs.
● An adequate B2B e-commerce capability, in fact, provides suppliers with detailed insights on
buyer behavior and preferences and represents a fast channel to fulfill support-intensive products
such as spare parts, servicing equipment operations, or warranty management.
● Through the analysis of information that B2B e-commerce provides, suppliers are much better
placed to decide which products-related service will appeal or be necessary to which customers
and when. By leveraging on cross-selling and up-selling techniques, suppliers can direct a buyer
towards product-related services and consumable products that better fit customers' applications,
thereby increasing the proportion of revenues coming from the sales of product-related services.

Exploit new markets

● Many organizations – particularly mid to small sized ones – are limited in their ability to reach
new customers or enter into new markets. Often, this inability is simply due to prohibitive cost of
sales when compared to the potential return of investments.
● Setting up an adequate B2B e-commerce capability eliminates those restrictions and reduces
business risks. Indeed, opening a new sales channel over the Internet allows B2B suppliers to
market their products to new geographies or industries with a fraction of the investments that
would have been necessary to establishing an onsite or telemarketing sales force for that targeted
market.
● Additionally, a B2B e-commerce initiative enhances suppliers' ability to sell to new buyers
within existing accounts. In fact, it is often the case that even for customers who are serviced
directly, the best account team cannot penetrate all of the potential opportunity. By establishing a
B2B e-commerce capability, suppliers can leverage the reach and penetration of existing sales
force to incremental buyers in those accounts.
● When deploying B2B e-commerce applications, it is important that suppliers take steps to raise
awareness of the Internet e-commerce site. Particularly when selling in new accounts represents

18
a relevant share of business, suppliers need to make sure that the site can be easily found via
search engines.
● Achieving better ranking and relevance at Google or on other search engines might represent a
good opportunity to raise awareness particularly in new markets. However, suppliers need to
take into consideration that their new potential buyers will be searching for specific products
features or attributes and not at all for product names. Therefore, suppliers need to pay attention
when choosing their B2B e-commerce platform as it must have the modern technology that
provides automated search engine optimisation functionalities. The latter ease the task of making
relevant pages with product attributes visible on search engines.
● Communication is another key element to attract new customers. In a world overwhelmed by
tons of information – B2B suppliers needs to be able to provide the right in-context information
at the right time it is needed. Providing editorial contents that make the B2B e-commerce site
more "sticky" to the needs of buyers and – most interestingly – creating communities of buyers
sharing the same needs is showing rapid return on investments through up-selling and cross-
selling opportunities.
● It is also important for the solution deployed to support multiple languages, currencies, unit of
measures, and specific local regulations to maximize the benefit of the geographic coverage

Faster time-to-market for new product introduction

● Most of our surveys show that today, among the most critical business objectives
manufacturers are prioritizing, there is the ability to streamline new product design and
introduction.
● With the reduction in product life cycles and with the continued emphasis in selling to
narrower market segments or micro niches, the time it takes to bring a product to market – to be
ready to announce, sell, deliver, and support – becomes a larger percentage of a product’s useful
economic life.
● Therefore, shortening time-to-market is an essential task for any business, as, not only it
assures that new products are available into the market quicker, but also ensures that there's
enough time to reach return on investment through adequate selling during the narrowing
product’s life cycle.

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● Introducing new products and services to customers points to the need to focus on enhancing
sales, marketing and after-market business processes. In particular, companies with a diverse set
of product lines have to deal with lengthy new product introduction cycle that includes
traditional catalogue creation, product pricing definition, available product configurations,
phone-based channel announcement, readiness, and support activities.
● The implementation of B2B e-commerce capability can eliminate a significant amount of the
time it takes to go to market or to be ready to introduce new products. Research findings suggest
the possibility of a 40% reduction in the time from product readiness to product availability to
buyers, and in the time it takes to edit and change products, pricing, and configurations.
● For some companies, the ability to put a product up for sale, or to change a product in less time
than a competitor may mean the difference between being able to profitably market a product at
all.

Benefits of b2b e commerce:

The potential advantages to be gained by joining an e-marketplace will vary between industries
and businesses, and indeed between buyers and sellers. Some of the potential benefits are
summarized below.

General business benefits

 There are greater opportunities for suppliers and buyers to establish new trading
partnerships, either within their supply chain or across supply chains.
 E-marketplaces can provide greater transparency in the purchasing process since
availability, prices and stock levels are all accessible in an open environment.
 Time constraints and problems with different office hours for international trade are
removed as it is possible to operate on a round-the-clock basis.

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Benefits for the buyer

 Updated information on price and availability makes it easier to secure the best deal.
 E-marketplaces offer a convenient way to compare prices and products from a single
source rather than spending time contacting each individual supplier.
 Established e-marketplaces provide a level of trust for the buyer as they are dealing
exclusively with suppliers who are members.

Benefits for the seller

 Regular requests for quotations from both new and current customers are possible.
 It provides an additional sales channel to market and sell products.
 E-marketplaces can offer reduced marketing costs when compared with other sales
channels.
 The use of international e-marketplaces can provide opportunities for overseas sales that
you would not otherwise be aware of.

Drawbacks

 Sustaining good relationships between suppliers and buyers is a must in business to

business transactions where trust and credibility is built through personal relationship..
But in b2b e commerce, where the transactions are done online, this component of
maintaining personal relationship becomes difficult and thus the trust and credibility
among the suppliers and buyers are at a stake. The way out for this situation is, though
the entire business process happens virtually, both the parties have to build personal
rapport in order to sustain their long term relationship.
 In today’s business scenario, being tech savvy is mandatory and that is the reason many
companies are adopting high technology process in their businesses. But this becomes
effective only if the counter party is advanced enough to understand that technology and
adopt it. If this does not happen, the entire idea of e commerce in business transactions
itself becomes meaningless. So this turns out to be one of the major drawbacks of b2b e
commerce.

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  One more drawback worth mentioning is that, if the organizations completely bank upon
the technology to carry out the transactions, for suppose if there arises a problem in the
software or any other technology being used, the entire business process comes to a halt,
thereby causing devastating effects on the organizations involved. Though the possibility
of this mishap is very less, it cannot be ignored since the effects caused are disastrous.

Way ahead

E-commerce is an integral part of the way companies do business today. More than simply
taking orders online, companies are leveraging the Web channel to market and sell online. From
small and mid-size businesses to large enterprises, a successful B2B e-commerce strategy can
reduce operational costs, increase sales and strengthen relationships with trading partners.

Since B2B e commerce has many potential benefits, many companies, small and big, across the
world are adopting this into their business processes.

One of the best examples for this is IBM Websphere. IBM has formulated this next generation
business solution which helps to redefine the business strategy and help the firms become easy to
do business with and differentiated from the competition.

B2B 2.0 e-commerce solution

IBM WebSphere Commerce is the industry’s leading customer interaction platform that provides
next generation B2B e-commerce (B2B 2.0) capabilities that can help you redefine your strategy
by:

• Streamlining and automating business processes to increase operational management

efficiencies

• Optimizing sales and marketing effectiveness with buyer-centric marketing

• Strengthening relationships and customer satisfaction with a rich customer experience

Operational Management – lowering costs with quote-to-cash automation

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B2B e-commerce helps companies increase operational management efficiencies by replacing
manual order processes, such as phone, fax and e-mail, with online, customer self-service tools.
With online ordering processes and self-service tools, cost-to-serve is reduced significantly.
Furthermore, automated operations can improve order processing times and reduce order errors,
improving customer satisfaction levels.

Online self service tools such as contract-specific price, order status, and inventory availability
can help reduce call center volumes and drive more buyers online.

Buyer-centric Marketing – increasing top-line revenue by selling more

Buyer-centric B2B marketing can help you deliver targeted online offers and promotions tailored
to customer segments. From targeted cross/up sell offers to quantity-based promotions, buyer-
centric marketing means increased conversion rates. IBM WebSphere Commerce provides easy
to use tools that enable marketing and merchandising managers to easily create and manage
promotions, campaigns across multiple partner sites or storefronts.

Rich Customer Experience – building loyalty and satisfaction

Delivering a rich experience is fundamentally about becoming easier to do business with, from
providing online access to catalog, pricing, and order information to offering online communities
to support customers post-purchase. The solution is to adopt some of the proven technologies
and concepts from the B2C world like Rich Internet Applications (RIA) and Web 2.0
technologies.

Maintaining strong business relationships with your customers depends on delivering high levels
of satisfaction to retain their loyalty. Increasingly, customers expect companies to fulfill their
unique needs with a rich, online customer experience, whether it’s B2C or B2B. With a focus on
the customer experience, IBM WebSphere Commerce can help you give your B2B e-commerce
clients a rich customer experience and help differentiate from the competition.

B2B e-commerce solution

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IBM WebSphere Commerce offers capabilities to support transforming your online business into
a next generation B2B e-commerce experience. By focusing on operational management, buyer-
centric marketing, and delivering a rich, online customer experience, your B2B e-Commerce
strategy can help you reduce operational costs, increase sales and deliver a differentiated online
experience for your customers.

Conclusion

Business-to-Business Electronic Commerce changes traditional markets. Companies are offered

new possibilities in buying and selling products as well as in forming new business relationships.
By supporting many transactions electronically, companies work more efficiently and can realize
considerable savings in process costs. Buyers in the Buyer-Oriented and Intermediary-Oriented
Marketplaces can achieve cheaper purchase prices. Sellers of specialized products in the
Supplier-Oriented and Intermediary-Oriented Marketplaces can realize higher selling prices.
Thus B2B e-commerce is transforming the existing business models in numerous ways and that
is the reason e-commerce is an integral part of the way companies do business today.

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Bibliography

 A book on “E-commerce And It’s Applications” by U.S.Pandey, Rahul Srivatsava and

Saurabh Shukla
 A book on “E-commerce concepts, models and strategies” by C.S.V Murthy
 A book on “E-commerce from vision to fulfillment” by Eliza.M.Awad
 An article named “B2B E-Commerce” by Birger Groblinghoff
 An article named “The Impact of Electronic Commerce on Business-Level Strategies”,
Journal of Electronic Commerce Research, VOL. 1, NO. 1, 2000, by Ann L. Fruhling and
Lester A. Digman
 www.ibm.com

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