The coronavirus pandemic has permanently accelerated the pace of B2B eCommerce, widening the gap between digital winners and digital losers across many B2B industries. As a result, for most manufacturers and distributors, selling even more online - or offering eCommerce for the first time - is rapidly becoming a strategic priority. This article reviews three basic eCommerce strategies, five critical business requirements for their successful implementation, and five technology best practices.
Amazon Business Gross Merchandise Volume (GMV) grew from $1 billion in 2016 to $25 billion in 2020. According to BofA Global Research analyst Justin Post's estimates, Amazon Business's share of U.S. B2B eCommerce sales will be about 10% in 2021, and by 2025 its global GMV will be $83 billion. The global addressable market for B2B eCommerce by the same year, according to his estimates, will be $5.7 trillion.
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In the next section, we'll review three basic strategies that B2B companies can leverage to accelerate sales through eCommerce (i.e., build a traditional eCommerce application, join a third-party online marketplace, or create an online marketplace). But first, in this section, let us discuss five critical business requirements that are essential to promote eCommerce adoption and increase sales from existing and new customers.
A common mistake that too many B2B companies still make is considering implementing an eCommerce strategy as a predominantly IT project.
While IT contribution will be significant, especially when building a traditional eCommerce application or an online marketplace, it is the related marketing and sales activities that will drive the difference between success and failure. Like for any other "product" or "service", the benefits provided by an eCommerce solution (i.e., faster and less time-consuming ordering, improvement in decision making or working capital, etc.) will need effective marketing and selling to produce a positive return on investment.
For most B2B companies, achieving significant customers' eCommerce usage will follow a typical technology adoption cycle. Using the framework and terminology originally introduced by Geoffrey Moore about 20 years ago, "crossing the chasm" - that is, moving from a few early adopters to a large majority of customers - will require proactive and persistent efforts to help customers understand and realize the benefits.
The following best practices apply to B2B companies that want to accelerate value creation through their eCommerce application or a third-party online marketplace.
B2B eCommerce's adoption will only increase when the online ordering process provides a superior customer experience relative to the offline ordering process.
When customers are forced into unnatural workflows or when the online ordering process misses essential features, most customers will stick to proven offline processes. When designing a new eCommerce application or selecting a third-party online marketplace, therefore, B2B companies should ensure that the chosen solution embraces the following proven best practices:
B2B eCommerce applications that do not meet customers' specific requirements typically result in broken user's experiences, limited adoption, and poor data integrity (like, for example, when order summary statistics at the account level are not available because users from the same account are treated as separate individuals).
Most B2B buyers usually appreciate the convenience and time savings provided by well-designed B2B eCommerce applications. However, while some of them will prefer a self-service ordering process, others will want to retain some of the benefits offered by assisted sales. Therefore, the best B2B eCommerce applications enable product discovery and ordering processes that accommodate both kinds of buyers.
For buyers who prefer a self-service experience, a superior product category taxonomy and advanced search functionality will increase adoption and revenue. For most middle-market companies, integrating their eCommerce application with a managed search service (like, for example, Algolia or elastic) will be the most cost-effective approach to offer state-of-the-art search functionalities.
For buyers who would instead opt for an assisted sales experience, to increase adoption and revenue, the eCommerce application should allow buyers to share an order brief with their account executive, enable account executives to create draft orders on behalf of buyers, and notify buyers when draft orders are ready for review and final approval. Virtual assisted shopping, that is getting on a video call with a sales representative while creating an order, is also a feature becoming more and more appreciated.
Understanding how customers interact or don't interact with your eCommerce application is essential to promote adoption and increase sales. This requires using a customer data platform to capture and process data like, for example, how frequently customers access the eCommerce application, which products they look at or ignore, what functionalities they use or do not use, and detailed information about customers' orders. That data is essential to generate insights on improving the eCommerce application design and creating personalized communications to help customers understand and learn how to realize the most benefits from using the eCommerce application.
B2B companies that have joined a third-party online marketplace will not be able to capture and process detailed data regarding customers' usage of that application. However, they should still implement a customer data platform tracking exposure to marketing and sales campaigns and detailed order flow data to generate insight into the most effective strategies to promote adoption and increase sales.
After developing a well-designed eCommerce application or joining a leading third-party marketplace that offers further convenience relative to existing ordering processes, the first challenge most B2B companies encounter is how to drive awareness and interest among current and new customers. That requires dedicated efforts and investments that B2B companies often fail to anticipate.
Engaging existing customers first is usually the most logical and cost-effective approach for most B2B companies. Existing customers are known entities, already appreciate your product offering, and they only need to understand and develop an interest in the benefits provided by the new eCommerce offering. Sending a newsletter to all existing customers articulating the new eCommerce application's benefits is often an excellent way to start engaging a few early adopters.
However, developing interest among a large majority of customers will demand a more substantial and personalized approach (i.e., one leveraging customer data and marketing automation) to convey customized communications over a prolonged period with specific benefits, customer testimonials, and customer success stories in a scalable and cost-effective way.
To engage potential new customers, account-based outreach prospecting campaigns articulating specific benefits, customer testimonials, and customer success stories will often be the most cost-effective approach.
In both cases, the number of sign-ups in each period (i.e., newly created accounts) will be the key success metric for these essential top-of-the-funnel activities.
The large majority of B2B buyers will only adopt a new eCommerce solution when its benefits are more significant than the cost of the required changes (i.e., learning to use the new application, modifying some internal processes, etc.).
Therefore, a key objective for any B2B eCommerce provider is to reduce the time-to-value for most buyers in a scalable and cost-effective way. Only then will they start placing more and more orders using the new sales channel, take advantage of the newly available functionalities and services, and become valuable and sticky repeat customers.
Using the sales team to promote the new eCommerce option or having marketing run training webinars usually does not produce the best results. Instead, a significantly more effective approach uses in-app real-time contextual help and usage-based marketing automation to provide customers with personalized sequences of small information and training bites to quickly turn them into valuable repeat buyers.
To quickly achieve those results cost-effectively, B2B companies can easily integrate their eCommerce application with a few existing and affordable SaaS tools:
Historically, most B2B companies regarded eCommerce as an add-on sales channel only applicable to businesses characterized by simple products, straightforward pricing, low shipping costs, and a simple sales process suitable for a self-service approach.
More recently, however, several B2B companies are proving that eCommerce is an enabler of core business strategies aiming to develop a competitive advantage in various industries with complex products, sophisticated pricing, articulated supply chains, and high-touch sales processes.
For B2B manufacturing and distribution companies that have not yet finalized their eCommerce strategy, this section discusses three basic strategic options and a few reference examples to help facilitate senior management discussions.
Building an eCommerce application can create uniquely desirable add-on services to enhance a business core value proposition. Therefore, it's an essential component of a go-to-market strategy for any B2B manufacturing and distribution company seeking a competitive advantage through differentiation.
Providing greater convenience to B2B customers and helping them reduce costs, improve decision-making, and achieve a higher speed to market, are just a few examples of business strategies that a well-designed eCommerce application can enable for B2B companies.
However, simply deploying an online product catalog with a basic cart functionality to enable online ordering is insufficient to achieve a competitive advantage. As a result, more and more companies across many B2B industries are developing creative eCommerce applications with sophisticated functionalities to execute articulated business strategies.
Following are just three examples illustrating the wide range of possibilities and several best practices in B2B eCommerce and digital transformation:
Tenaris, a global manufacturer of steel pipes for the oil-and-gas industry, has set itself apart as a clear leader in the digital transformation of the pipe business. Their strategy aims to develop and deploy digital tools to streamline processes for their customers and save them time, money, and resources while increasing safety, efficiency, and reliability through the supply chain. Currently, five digital applications enable their eCommerce strategy:
Emerson Electric, a Missouri-based manufacturer and distributor of industrial valves and instruments used in operating industrial and residential facilities, is another B2B company that has recently embraced digital transformation and eCommerce as a source of differentiation and competitive advantage. To enable its strategy, the company has so far developed:
For any B2B manufacturing and distribution company pursuing a differentiation strategy, developing a sophisticated eCommerce application is crucial for sustainable growth and profitability. Assembling a team with the required expertise and an aligned incentive system, developing the initial concept and investment case, and developing ad hoc marketing and sales programs to encourage customers to embrace the change required on their side, are often the critical challenges when executing the strategy.
Joining a third-party B2B online marketplace is an option becoming available across a more significant number of B2B industries.
Customers often like online marketplaces because of the more substantial product assortment and price transparency they provide. For a B2B company, the rationale for joining a third-party online marketplace depends on its source of competitive advantage (i.e., cost leadership vs. differentiation).
For B2B companies pursuing a competitive advantage through cost leadership, when a third-party online marketplace exists for their industry vertical, joining a marketplace instead of building a proprietary eCommerce application is often the best strategy to develop an omnichannel presence while minimizing technology and marketing investments.
For B2B companies leveraging differentiation as a source of competitive advantage, developing a proprietary eCommerce application is usually a strategic imperative. However, in industries with a fragmented demand (i.e., a large number of potential customers), joining a third-party online marketplace as a complementary strategy can help accelerate sales growth while optimizing customer acquisition costs (in this case, the company will typically offer only a subset of its products on the third-party marketplace to gain awareness and initial interest among potential new customers, with the ultimate goal of switching at least a portion of the newly acquired customers to its eCommerce application for full assortment and differentiated services).
B2B companies joining a third-party online marketplace can reduce technology or marketing investments but give up control over creating a differentiated customer experience and their proprietary order flow data (i.e., the marketplace will have access to information about the products selling the most and the customers buying the most).
In addition to Amazon Business, several B2B online marketplaces have emerged in the last few years offering more specialized customer experiences across different industry verticals. Following are just a few selected examples:
In an increasing number of cases, some B2B companies have concluded that becoming the promoter of an online marketplace open to other businesses in their industry (i.e., other producers or their own distribution partners) is the best strategy to create a differentiated experience for their customers or distribution partners, retain control of their valuable order flow data, and generate a greater return on their technology and marketing investments. Following are just three examples:
Nowadays, developing a well-designed and architected eCommerce application does not require advanced software engineering capabilities. Several specialized cloud-based platforms and managed services providing various backend functionalities can be easily integrated and customized to produce the desired eCommerce solution and, to develop the application's front-end, companies can leverage open-source software components to create the desired customer experience.
An essential factor for long-term success is to select an application architecture that will optimize the eCommerce application's total cost of ownership (TCO) over time, including updating expenses for both technology and content.
At a high level, the following are a few selected technology best practices:
Augeo Partners is a group of senior leaders with a passion and significant track record in driving organic growth and operational productivity through strategy, change management, and digital technologies, dedicated to partnering with middle-market PE firms and portfolio companies to accelerate organic growth and value creation. The time for B2B manufacturers and distributors to leverage eCommerce to accelerate organic revenue growth is now, and Augeo Partners can help.