Business-to-Business (B E-Commerce (2B) - B2b E-commerce In Early Adopter Stage

B E-COMMERCE IN EARLY ADOPTER STAGE (2B)

Although companies have been doing business electronically for many years using proprietary EDI systems, B2B commerce over the Internet remained in the early adopter stage at the start of the 2000s. The notion of an early adopter comes from a popular marketing theory which holds that buyers of a new product enter the market in several stages, starting with the early adopters who set the trends and ending with so-called laggards who purchase only after the vast majority has already bought. If B2B is still attracting mainly the early crowd, it suggests great potential for growth, as do the figures from the Census Bureau and private firms. However, another part of the theory suggests there is a gap, sometimes called a chasm, that must be bridged between the early adopters and the early majority buyers; many products are believed to fail after doing well among early buyers but failing to catch on in the wider market. Whether B2B Internet commerce crosses the chasm remains to be seen.

The economic slowdown that began in 2000 was expected to dampen the development of B2B e-commerce and decelerate the migration from proprietary EDI systems to the Internet. All this came on top of the reality that corporate decision-makers were slow to adopt the benefits of B2B e-commerce, even though the technology was available. Some believe part of the problem has been that adopting B2B e-commerce could be challenging to the existing corporate culture. Additional barriers, ranging from a shortage of technology resources to competitive strategies, are discussed below.

Often a prerequisite to certain types of B2B e-commerce is compatibility between a company's computer systems and the online exchanges or marketplaces where it seeks to conduct e-commerce. A survey by Computer Sciences Corp. found that in late 2000, less than 15 percent of North American businesses' Web sites had the ability to conduct business online. Other estimates of enterprises able to transact business online ranged up to 20 percent.

There are several reasons why businesses have remained on the sidelines of e-commerce. Small and mid-size suppliers appear to be waiting to see what kind of e-commerce initiatives their larger trading partners will undertake. Suppliers are faced with a choice of building their own Web site, selling over a public exchange, or joining the private exchanges of multiple trading partners. They may feel there is not enough demand from their customers to sell online. Also, many businesses do not have the internal information technology (IT) resources to enter into e-commerce. E-commerce operations typically require significant deployment costs and integration work, much more than simply offering a hosted Web site.

Surveys have suggested that first-generation B2B e-commerce Web sites were difficult for customers to use. Problems included too many Web pages to click through, distracting and unhelpful content, difficulty signing up for online service, and difficulty researching products. Next-generation B2B Web sites are expected to be more customer-friendly. They will incorporate such elements as personalization software that will reduce the number of click-throughs required. Other features will facilitate customer self-service, letting them check such things as inventory status on potential orders and track order shipping. Next-generation sites will reflect customer service as business's top priority, with companies leveraging the Internet to better serve their customers.

A May 2001 study by Jupiter Media Metrix also noted the slow adoption among businesses of online marketplaces. Since it is expensive for suppliers to move online, there must be more of an incentive than to simply meet the few buyers already online. Suppliers were urged to research and study the top buyers, implement buyer training programs, move existing buyers online, and attract new business through the exchange. Critics have pointed out that the slow growth of online B2B marketplaces is due in part to a heavy reliance on generating transactions. As part of its study of online B2B marketplaces, Jupiter Media Metrix recommended focusing on strengthening the quality of buyer-seller relationships, with new efficiencies to follow.

The Jupiter Media Metrix study also suggested that suppliers would be in a better position to become "preferred vendors" if they offered more value-added services online, including collaborative product design and supply chain inventory. Buyers wanted suppliers to provide services that would help simplify routine contact.

In May 2001 Accenture, a large consulting firm, released a study of B2B buyers that categorized them into five types:

1. Traditionalists (28 percent), who were principally brand sensitive but also valued customer service and good prices
2. eService Seekers (23 percent), for whom customer service was the most important
3. Price Sensitives (21 percent), for whom value lay in the price
4. eSkeptics (17 percent), who valued brand above all
5. and eVanguard (17 percent), who were comparison buyers.

The study aimed to help sellers understand online B2B buyers and help them market to companies that were or could be potentially involved in online buying.

In April 2001 InfoWorld reported that "fizzling interest in public [B2B] exchanges, coupled with the general slowdown, is forcing e-business vendors to refocus their development energies." The IT periodical noted that B2B technology vendors were shifting their focus away from building public supplier marketplaces to integration technologies and getting suppliers' content online. While some businesses began to question the value of public B2B marketplaces, claiming they would lose their competitive advantage by participating in a public exchange, private exchanges and highly focused public exchanges were being developed. One example of a specialty public exchange was eScout.com, which worked with regional banks to help small businesses make online purchases. Trade Matrix Network was a series of private exchanges that focused on vertical industries and offered a range of services, including financial settlement, collaboration, catalog management, and fulfillment and logistics.

Analysts highlight several key factors for private and public exchanges to survive and achieve success. For private exchanges, they include focusing on direct procurement, serving specialty markets, and offering extra services. Keys for public exchanges include focusing on specific business needs, providing economies of scale, providing scalable technology, and building a community.