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Business-to-Business Ecommerce

Business-to-Business Ecommerce. Robert Chi. B2B EC Introduction. Introduction Size of B2B B2B Business Processes B2B Evolution. B2B Definition. B2B is referring to business-to-business commerce conducted over the Internet.

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Business-to-Business Ecommerce

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  1. Business-to-Business Ecommerce Robert Chi

  2. B2B EC Introduction • Introduction • Size of B2B • B2B Business Processes • B2B Evolution

  3. B2B Definition • B2B is referring to business-to-business commerce conducted over the Internet. • The primary components of the B2B marketplace include e·frastructure and e·markets. • E·frastructure is essential architecture of B2B consisting of: • auction solutions software, • content management software, and • Web-based commerce enablers. • E·markets are Web sites where buyers and sellers come together to: • communicate, • exchange ideas, • advertise, • bid in auctions, • conduct transactions, and • coordinate inventory and fulfillment.

  4. B2B Size CAGR: Compound Annual Growth Rate

  5. B2B E-Commerce Revenues http://www.tradeum.com/pages/frset-3forum_white.html

  6. Global B2B Market Opportunity. That’s Thousands of Billions.

  7. B2B eCommerce Introduces Powerful Benefitsto Both Buyers and Sellers • Lower transaction costs • Shorter purchasing cycles • Improve inventory control • Lower prices paid or higher price sold

  8. What Is Behind B2C? B2B

  9. B2C vs. B2B

  10. B2B Markets Are Truly Global • Multi-lingual, multi-currency • Cross-border financing, taxation, customs, regulations • Complex shipping and logistics

  11. B2B Business Models • Seller-side: Direct-sell • Buyer-side: eProcurement • Vertical vs. Horizontal • B2B marketplace • B2B consortia • Case studies

  12. Business Models Based on the Value Chain in the Market Place Raw material producer Exchange • Independent market operators • Consortia Manufacturer Distributor C2B New Middleman Retailer B2C C2C • Examples: • B2B: Vericalnet.com • B2C: Amazon.com • C2B: Priceline.com • C2C: eBay.com Consumer • Service Providers: • Logistics • Financial B2C

  13. Business Models: Multiple Dimensions • Buy-sell direction: Buyer-side, seller side, and marketplace • Industry covered: single vs. multiple (Vertical vs. Horizontal) • Ownership: Buyer, seller, independent, software vendor, consortia • Service: Core vs. extended services • Products: Core vs. MRO; Direct vs. Indirect; • Pricing: Fixed price, Auction, Reversed auction, negotiated • Timing of purchase: Contact vs. spot vs. ad hoc

  14. Number of Sellers and Buyers

  15. Features of Various Business Models

  16. Seller Side B2B

  17. First Generation Model: Sell-side Solutions • Benefits • Reduced cost of sale • Extended customer reach • Enhanced customer service • Challenges • Buyers must find individual suppliers • Supplier’s process does not match buyer’s purchasing procedures • Buying power lost Buyer Supplier Buyer

  18. Direct Sales • Selling Directly to Buyers from Own Website • Examples: Dell, Cisco

  19. Dell.com

  20. Dell

  21. Dell • Implementing a B2B integration model offers a number of advantages, many of which were deciding factors in Dell’ s decision to pursue a B2B integration strategy: • Fewer errors. • Improved customer satisfaction and support. • Improved inventory management. • Reduced time to market. • Improved manufacturer-distributor coordination. • Better outsourcing coordination. • Improved order management. • Tighter links with logistics providers. • Better delivery of information required for planning and forecasting. • Value-add for customers.

  22. Cisco’s Business Web Source: Digital Capital

  23. Cisco Systems Case Study:Winning With the Force of Technology Cisco Industry Peers Gross Margin • 47.6% • Just starting to adopt Web sales • Longer lead times due to component shortages • Slow to react to demand shifts • In-house manufacturing (beginning to sell off manufacturing operations) • Accounting updated weekly or bi-weekly • 64.8% • 90% of orders booked over Web • Enhanced supply forecasting - better component pricing and availability • Enhanced demand forecasting - rapid shift to regional demand changes • Outsourced manufacturing (build to order) • “Virtual Close” - updates accounting on a daily basis Note: Industry peers comprised of COMS, JNPR, LU and NT

  24. Buyer-Side B2B

  25. Buy-side Solutions • Benefits • Reduced purchasing costs • Buying power is captured • Challenges • Supplier has to conform to buyerpurchasing procedures • Only affordable by large companies Supplier Buyer Supplier

  26. General Purchasing Process

  27. Buy-Side Solution-Enabled Purchasing Process

  28. Functionality of the Marketplace

  29. The Cost Savings Created by Buy-Side Solutions

  30. Division of Corporate Spending (Typical Manufacturer)

  31. Buying Activities and Suitable E-Procurement Solutions

  32. Selected eMarketplaces Powered by eProcurement Vendors

  33. Ariba.com and Ariba Network

  34. Marketplace

  35. Overlapping Models Address the Unique Dynamics of Each Market

  36. Net Markets • Many Buyers • Many Sellers • One Marketplace • Examples: Chemdex, VerticalNet, Altra Supplier Buyer NMM Buyer Supplier

  37. Auction • eBay Approach • One Seller, Multiple Bidders • Prices Move up Only • Surplus Equipment, Inventory • Dovebid Example www.dovebid.com

  38. Auction Example • Dovebidwww.dovebid.com • Used Capital Equipment • Click and Mortar Spin-off • Bidders– Contact Sellers; Warrantees • Can Touch the Merchandise

  39. Exchange • Nasdaq-style Bid/ask • Prices Move Up and Down • Best for Commodities, Perishables • Example: Altra Energy

  40. Exchange Example • Altra Energy • www.altra.com • Natural Gas, Electricity, Crude Oil • Grand-daddy Site • Bought Energy Brokerages

  41. Critical Success Factors for e·markets • Sustainable Business Model • Market Size (Large addressable market size) • Industry Domain Expertise • Structural Inertia: Fragmentation and technology adoption maturity in the industry • First Mover Advantage - “land grab” • Branding • Community Features • Technology • Blending Revenue Streams • Management Execution Hustle & Expertise • Strong Partnerships for Distribution & Logistics • Neutrality: Neutrality has quickly become the “First Commandment” of B2B markets. • Liquidity: The “holy grail” for every market maker, they must build a critical mass (large number) of buyers and suppliers. No much behavior change and adoption “spark”. • Going Public (if ready): Provides them with highly valued currency to quickly grow their businesses through acquisition.

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