B2B E-COMMERCE Concepts, characteristics, and models of B2B e-commerce One-to-many: Sell-side e-marketplaces One-from-many: Buy-side e-marketplaces and e-procurement Buy-side e-marketplaces: Reverse auctions Other e-procurement methods B2B electronic exchanges: Definitions and concepts B2B portals, directories, and ownership of B2B marketplaces B2B in the Web 2.0 environment and social networking

Basic B2B Concepts Business-to-business e-commerce (B2B EC / eB2B) “Transactions between businesses conducted electronically over the Internet, extranets, intranets, or private networks”. Gain competitive advantage; collaborate between suppliers & buyers; save money; reduce delays; improve collaborate. Market size & content of B2B Dollar value of B2B > 85% of the total transaction value of e-commerce. Items: Chemicals, computer electronics, utilities, agriculture, shipping & warehousing, motor vehicles, food, etc.

Generations of B2B E-commerce

The Basic Types of B2B Transactions and Activities

The Basic Types of B2B E-Marketplaces and Services One-to-many and many-to-one: Private e-marketplaces Company-centric EC “E-commerce that focuses on a single company’s buying needs (many-to-one / buy-side) or selling needs (one-to- many / sell-side)”. Many-to-many: Exchanges Exchanges (trading communities / trading exchanges) “Many-to-many e-marketplaces, usually owned and run by a third party or a consortium, in which many buyers and many sellers meet electronically to trade with each other”. Supply chain improvements and collaborative commerce Collaborative commerce: Communication, design, planning, and information sharing among business partners.

B2B Characteristics Parties: Sellers, buyers, intermediaries 2 types of transactions Spot buying: Purchase when needed, at market prices. Strategic sourcing: Purchases involving long-term contracts, based on private negotiations between sellers & buyers. 2 types of materials traded Direct materials: For the production of a product (e.g. steel in a car). Indirect materials: Support production (e.g. office supplies). The direction of the trades Vertical marketplaces: Deal with one industry / industry segment (e.g. electronics, cars). Horizontal marketplaces: Concentrate on a service, material, or a product that is used in all types of industries (e.g. office supplies, PCs).

The Benefits of B2B Benefits For Creates new sales (purchase) opportunities Eliminates paper, reduces administrative costs Expedites processing, reduces cycle time Lowers search costs & time for buyers to find products & vendors Increases productivity of employees dealing with buying/selling Reduces errors, improves quality of services Makes product configuration easier Reduces marketing & sales costs Reduces inventory levels & costs Enables customized online catalogs with different prices for different customers Increases production flexibility, permitting just-in-time delivery Reduces procurement costs Facilitates customization via configuration Provides for efficient customer service Increases opportunities for collaboration Both

The Content of the B2B Field

One-To-Many: Sell-Side E-Marketplaces “A Web-based marketplace in which one company sells to many businesses buyers from e-catalogs/auctions, frequently over an extranet”. 3 marketing models Selling from electronic catalogs Selling via forward auctions One-to-one selling

Sell-side configuration intermediations in B2B E.g Intel, Dell (Value-added retailer)

One-To-Many: Sell-Side E-Marketplaces Sales from catalogs One catalog for all customers; a customized catalog for each large customer; a buyer-customized shopping cart. Selling via E-Auctions Using auctions on the sell side For large & well-known companies. Benefits offered by forward auctions to B2B sellers: Revenue generation Support & expand online & overall sales; quickly & easily disposing of excess, obsolete, returned products. Cost savings Reduce the costs of selling the auctioned items ➡ Increase the seller’s profits. Increased “stickiness” Increase the customer loyalty. Member acquisition & retention Increase the no. of registered members; sellers search & report on every relevant auction activity for future analysis & use.

One-To-Many: Sell-Side E-Marketplaces Using intermediaries in auctions Benefits: No additional resources (e.g. hardware, IT personnel) are required. No hiring costs / opportunity costs associated with the redeployment of corporate resources. Offer fast time-to-market: The robust, customized auction is ready. Show the branding of the merchant who owns & controls the auction information. Billing & collection efforts are handled by the intermediary, e.g. charging customers for shipping of auctioned items. Examples of B2B forward auctions Whirlpool Corp. sold $20 millions in scrap metal in 2003 via asset-auctions.com, increasing the price received by 15%.

One-From-Many: Buy-Side E-Marketplaces and E-Procurement “A corporate-based acquisition site that uses reverse auctions, negotiations, group purchasing, or any other e-procurement method”. Invite sellers to browse, offer to fulfill orders. Procurement methods A Traditional Procurement Process Inefficient: Time & effort spent

E-procurement methods “The electronic acquisition of goods and services for organizations”

The e-procurement process: The buyer’s view

Goals & Benefits of E-Procurement Increase the productivity of purchasing agents. Lower purchase prices (volume discounts). Improve information flow & management. Minimize the purchases from noncontract vendors. Improve the payment process & savings. Establish efficient, collaborative supplier relationships. Ensure delivery on time, every time. Slash order-fulfillment & processing times. Reduce the skill & training needs of purchasing agents. Reduce the no. of suppliers. Streamline the purchasing process. Streamline invoice reconciliation & dispute resolution. Reduce the administrative processing cost per order by 90%. Find new suppliers & vendors faster & cheaper. Integrate budgetary controls into the procurement process. Minimize human errors in the buying/shipping processes. Monitor & regulate buying behavior.

Buy-Side E-Marketplaces: Reverse Auctions Request for quote (RFQ) “The “invitation” to participate in a tendering (bidding) system”. E-tendering by governments Group reverse auctions B2B reverse auctions done at an aggregator’s site for a group of buying companies.

The reverse auction process

Other-Procurement Methods An internal purchasing marketplace: Aggregating suppliers’ catalogs & desktop purchasing Internal procurement marketplace “The aggregated catalogs of all approved suppliers combined into a single internal electronic catalog”. Good for large organization with purchasing agents in different departments & locations. Desktop purchasing “Direct purchasing from internal marketplaces without the approval of supervisors and without the intervention of a procurement department”. Effective for MRO (maintenance, repair, operating) purchases. Buying at sellers’ e-auctions

Other-Procurement Methods The group purchasing process Group purchasing “The aggregation of orders from several buyers into volume purchases so that better prices can be negotiated”.

Other-Procurement Methods Buying at sellers’ sites and collaborative commerce Purchasing direct goods Take place in the sell-side of large vendors. Use e-purchasing to acquire direct goods. Electronic bartering Bartering exchange “An intermediary that links parties in a barter; a company submits its surplus to the exchange and receives points of credit, which can be used to buy the items that the company needs from other exchange participants”. Items, e.g. office space, idle facilities & labor, products, banner ads.

B2B Electronic Exchanges: Definitions and Concepts Exchange (E-marketplaces / e-markets / trading exchanges / trading communities / exchange hubs / Internet exchanges / Net marketplaces / B2B portals) Electronic meeting places for many sellers, buyers, business partners. Support community activities, e.g. industry news, online discussion groups, blogs, research, services (payments, logistics).

B2B Electronic Exchanges: Definitions and Concepts The 3rd party that operates & owns the exchange

3 Major Functions of Exchanges Matching buyers & sellers Establish product offerings Aggregate & post different products Provide price & product information Organize bids, bartering, auctions Match supplier offerings with buyer preferences Enable price & product comparisons Support negotiations & agreements Provide directories of buyers & sellers Facilitating transactions Provide the trading platform & mechanisms, e.g. arrange logistics of delivering goods to buyers Provide billing & payment information Define terms & other transactions values Input searchable information Grant exchange access to users, identify company users for using the exchange Settle transaction payments, collect transaction fees, provide other escrow services Register & qualify buyers & suppliers Maintain security Arrange for group purchasing Maintaining exchange policies & infrastructure Ascertain compliance with commercial code, contract law, export & import laws, intellectual property law for transactions made Maintain technological infrastructure to support volume & complexity of transactions Provide interface capability to standard systems of buyers & suppliers Obtain site advertisers, collect advertising & other fees

Services Provided by Exchanges

Advantages & Limitations of Exchanges For buyers For sellers Potential gains One-stop shopping, huge Search & comparison shopping Volume discounts 24/7 ordering from any location Make one order from several suppliers Huge, detailed information Access to new suppliers Status review & easy reordering Community participation Fast delivery Less maverick buying Better partner relationship management New sales channel No physical store is needed Reduced ordering errors Sell 24/7 Reach new customers at little extra cost Promote the business via the exchange An outlet for surplus inventory Can go global more easily Efficient inventory management Potential risks Unknown vendors: may not be reliable Loss of customer service quality Loss of direct CRM & PRM More price wars Competition for value-added services Must pay transaction fees Possible loss of customers to competitors

B2B Portals Information portals (directories of products offered by each seller; lists of buyers and what they want, etc.). Get commission for referrals, derive revenue from advertisements, offer additional services (e.g. shipments) for a fee. Horizontal, offers a wide range of products of different industries; or Vortals, focuses on a single industry / industry segment, as vertical portals. E.g. Thomas Global (thomasgobal.com) - An information portal A directory of over 700,000 manufacturers & distributors from 28 countries, encompassing over 11,000 products & service categories in 9 languages. E.g. Alibaba.com Corporation.

Ownership of B2B Marketplaces Third-party exchanges Neutral, presents catalogs, matches buyers & sellers. Team up with partners (e.g. financial institutions, logistics companies) Consortium exchanges Consortium trading exchange (CTE) “An exchange formed and operated by a group of major companies in an industry to provide industry-wide transaction services”.

Comparing the Many-to-Many B2B Models Name Major Characteristics Types B2B portals & directories Community services, news, information Communication tools Classified ads Employment markets May support selling (buying) Fixed prices May do auctions Vertical (vortals), horizontal Shopping directory, usually with hyperlinks B2B trading exchanges Matches buyer/seller orders at dynamic prices, auctions Provides trading-related information & services (payment, logistics) Highly regulated May provide general information, news, etc. May provide for negotiations Vertical, horizontal Forward auctions Reverse auctions Bid/ask exchanges

B2B in the Web 2.0 Environment and Social Networking Corporations are using social networks to: Create brand awareness Advertise products & services, promote new ones Create buzz about upcoming product releases Drive traffic to online Web properties. Encourage discussions among business partners ➡ Feedback Recruit new talent, to obtain more insight into potential new hires. 3 suggested strategies for B2B social networking Participate: Executives become bloggers & social media participants. Monitor: Assign a team to report on how the company is mentioned in social media. Use existing applications: Create a private B2B network / work with one of the public networks.