Business-to-Business (B E-Commerce (2B) - B2b E-commerce Quantified

B E-COMMERCE QUANTIFIED (2B)

A March 2001 study by the Gartner Group reported that $433 billion was spent worldwide on B2B e-commerce in 2000, reflecting a 189 percent increase over the $145 billion spent online in 1999. The study noted that online B2B marketplaces accounted for only a small percentage of B2B Internet commerce in 2000. Looking ahead, Gartner predicted that B2B e-commerce would reach $919 billion in 2001 and $1.9 trillion in 2002, estimates that took into account the general economic downturn that was taking place.

A U.S. Census Bureau survey of U.S. manufacturers found that, for all of 1999, the most frequently used electronic networks for accepting orders were electronic data interchange (EDI), which more than half of the manufacturers used, and the Internet, which about one-third of the manufactures used to accept orders. However, the value of EDI-based orders accounted for 67 percent of electronic sales in 1999, while the value of Internet-based orders only accounted for 5 percent. The findings reflect the fact that manufacturers have been conducting business electronically using EDI systems for several years.

In terms of procurement, the same survey, conducted in June 2000, revealed that the Internet was used most frequently to make electronic purchases. Still, the value of EDI-based purchases accounted for 65 percent of electronic purchases, and the Internet only 14 percent. Overall, e-commerce activity accounted for 12 percent of all sales among U.S. manufacturers in 1999.

B2B is far and away the largest sector of e-commerce. Comparing B2B with B2C e-commerce, the U.S. Department of Commerce reported that B2B online sales accounted for 90 percent of all online transactions during 1999. Still, the study noted that less than one percent of all U.S. transactions in 1999 were conducted over the Internet. It attributed the high percentage of B2B e-commerce sales to the longstanding use of proprietary networks, such as EDI, in the B2B sector. The manufacturing industry was the leader in e-commerce, with $485 billion or 12 percent of its total shipments resulting from electronic sales. Merchant wholesalers were second, with $134 billion in electronic sales, or 5 percent of their total sales. Drugs and pharmaceuticals accounted for 75 percent of all e-commerce merchant wholesale deals.

B2B e-commerce requires a significant investment in infrastructure. ActivMedia Research predicted in May 2001 that sales of B2B software would reach $10 billion by 2004, as B2B Web sites invested heavily in marketing, infrastructure, and e-procurement. The research firm also noted that the percentage of B2B Web sites that had been in business for less than a year grew from 32 percent in 2000 to 38 percent in the first part of 2001, a finding that suggested that more new initiatives were being launched despite the relatively austere conditions facing many Internet businesses. Separately, an April 2001 study by Jupiter Media Metrix predicted that spending on infrastructure technology for private B2B trading networks would grow from $230 million in 2000 to $37 billion in 2005. Through 2003 the study projected that spending on private networks would grow 300 percent a year, compared to 95 percent a year for public networks.