business-to-business ecommerce
DESCRIPTION
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. - PowerPoint PPT PresentationTRANSCRIPT
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Business-to-Business Ecommerce
Robert Chi
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B2B EC - 2
B2B EC Introduction
• Introduction
• Size of B2B
• B2B Business Processes
• B2B Evolution
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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.
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B2B Size
CAGR: Compound Annual Growth Rate
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B2B E-Commerce Revenues
http://www.tradeum.com/pages/frset-3forum_white.html
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Global B2B Market Opportunity.
B2B On-Line Commerce Gross Revenue (USD B)
$0$500
$1,000$1,500$2,000$2,500
$3,000$3,500$4,000$4,500$5,000
1999 2000 2001 2002 2003 2004 2005
Source: Goldman Sachs
Asia Less Japan
East Europe
Mid East/Africa
Latin America
Japan
Europe Union
NA Less USA
USA
That’s Thousands of Billions.
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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
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B2B EC - 9
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What Is Behind B2C? B2B
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B2C vs. B2B
B2C B2B
Switching Switching CostsCosts
Low with multiple suppliers
High when integrated with e-frastructure; few qualified suppliers
Relationship Relationship TypeType
Transactional Long term, mission critical
Transaction Transaction TypeType
Smaller average selling price
Larger average selling price
Revenue Revenue ModelModel
Traffic volume is critical; Large customer base is key
Don’t need every customer, only need the right customers
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B2B Markets Are Truly Global
• Multi-lingual, multi-currency
• Cross-border financing, taxation, customs, regulations
• Complex shipping and logistics
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B2B Business Models
• Seller-side: Direct-sell
• Buyer-side: eProcurement
• Vertical vs. Horizontal
• B2B marketplace
• B2B consortia
• Case studies
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Business Models Based on the Value Chain in the Market Place
Raw material producer
Manufacturer
Distributor
Retailer
Consumer
ExchangeExchange
Examples: • B2B: Vericalnet.com• B2C: Amazon.com
• C2B: Priceline.com• C2C: eBay.com
C2B
B2C
B2C C2CNew Middleman
• Independent market operators
• Consortia
Service Providers: • Logistics• Financial
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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
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Number of Sellers and Buyers
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Features of Various Business Models
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Seller Side B2B
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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
Buyer
Supplier
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Direct Sales
•Selling Directly to Buyers from Own Website
•Examples: Dell, Cisco
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Dell.com
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Dell
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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.
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Cisco’s Business Web
Source: Digital Capital
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Cisco Systems Case Study:Winning With the Force of Technology
CiscoCiscoCiscoCisco
Gross Margin 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
Industry PeersIndustry PeersIndustry PeersIndustry Peers
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
Note: Industry peers comprised of COMS, JNPR, LU and NT
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Buyer-Side B2B
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Buyer
Supplier
Supplier
Buy-side Solutions
• Benefits– Reduced purchasing costs
– Buying power is captured
• Challenges– Supplier has to conform to buyer
purchasing procedures
– Only affordable by large companies
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General Purchasing Process
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Buy-Side Solution-Enabled Purchasing Process
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Functionality of the Marketplace
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The Cost Savings Created by Buy-Side Solutions
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Division of Corporate Spending (Typical Manufacturer)
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Buying Activities and Suitable E-Procurement Solutions
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Selected eMarketplaces Powered by eProcurement Vendors
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Ariba.com and Ariba Network
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Marketplace
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Overlapping Models Address the Unique Dynamics of Each Market
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Net Markets
• Many Buyers
• Many Sellers
• One Marketplace
• Examples: Chemdex, VerticalNet, Altra
NMM
Buyer
Buyer
Supplier
Supplier
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Auction
eBay Approach
One Seller, Multiple Bidders
Prices Move up Only
Surplus Equipment, Inventory
Dovebid Example
www.dovebid.comwww.dovebid.com
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DovebidDovebid www.dovebid.comwww.dovebid.com
• Used Capital Equipment
• Click and Mortar Spin-off
• Bidders– Contact Sellers; Warrantees
• Can Touch the Merchandise
Auction ExampleAuction Example
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Exchange
• Nasdaq-style Bid/ask
• Prices Move Up and Down
• Best for Commodities, Perishables
• Example: Altra Energy
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Exchange ExampleExchange Example
Altra Energy Altra Energy
www.altra.comwww.altra.com
• Natural Gas, Electricity, Crude Oil
• Grand-daddy Site
• Bought Energy Brokerages
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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.