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The Current State of Business-to-Business E-commerce
by Peter De Legge

With all the attention Amazon.com and other consumer Web sites receive, one would think the big money is in business-to-consumer e-commerce. The real story is that business-to-business e-commerce is a much larger market. Forrester research estimates that b-to-b e-commerce for 1998 was $43 billion, or more than five times b-to-c. What's more, Forrester projects that b-to-b e-commerce will reach $1.3 trillion by 2003. The Aberdeen Group estimates actual b-to-b commerce at ten to twenty times that of b-to-c commerce.

A survey by Cahner's Publishing found that "61% of manufacturing professionals have made a purchase as a result of seeing a product or service on the Internet." Their 1998  Internet-influenced purchasing increased 13% from the prior year. It's very clear that the Internet will not soon be an important part of business-to-business marketing, it already is.

Still, many business sectors have yet to embrace e-commerce. Experts are now estimating the cost of putting together a serious, yet status quo, e-commerce Web site at around $1 million. A cutting edge site is much more costly. Clearly, this figure has kept many businesses from moving their Web efforts from the realm of brochureware to become a more serious part of their business.

The potential of b-to-b e-commerce to cut costs in the supply chain is significant -- in some cases, e-commerce has the potential to  eliminate the need for certain channel members completely. E-commerce even allows some manufacturers of consumer products who have traditionally sold to retailers to sell directly to consumers, but this, of course, can greatly upset retailers and others in the value chain. A recent memo from Home Depot to its retail goods suppliers warned them that if they sell their goods directly on the Internet, Home Depot will stop doing business with them -- clearly illustrating some of the temptation and dangers of e-commerce for manufacturers who currently sell to retailers.

Another strong reason why business-to-business e-commerce is certain to grow is its ability to save money for both the buyer and the seller. According to Giga Information Group, by 2002,  e-commerce will save businesses $1.25 billion a year (companies saved approximately $17.6 billion in 1998; US companies saved about $15.2 billion).

But the real killer for companies not embracing e-commerce may be time. Companies who are late to embrace e-commerce may be ruined by e-commerce savvy competitors. The time it takes to develop and implement e-commerce systems can be lengthy. A recent example of the consequences of being too late comes from a Fortune 100 manufacturer of consumer electronics. Recently, the manufacturer told its suppliers that if they do not presently have e-commerce capabilities they will soon be eliminated as suppliers. Companies without current e-commerce capabilities didn't even get the chance to adapt -- they were blindsided. Why did this manufacturer do this? Because they realized that implementing e-commerce systems is a very long and costly process that can be filled with setbacks -- they knew that they would lose potential cost savings in the process.

It is certain that traditional value-added network (VAN)-based EDI (Electronic Data Interchange) will soon be replaced by Internet-based EDI. In fact, Internet-based EDI may be one of the chief factors driving b-to-b e-commerce initiatives. The cost efficiencies of replacing VAN-based EDI with Internet-based EDI is simply too attractive on too many levels to be ignored. For example, VAN based EDI is cost prohibitive for many small businesses, while Internet-based EDI is relatively inexpensive. Consequently, Internet-based EDI will be the technology that levels the playing field for many small businesses.

For many companies, it appears that the largest factors impeding the progress of b-to-b e-commerce are a lack of management commitment, high start-up costs and a lack of technology standards. It seems almost certain that competitive pressures will soon dictate that e-commerce is not simply an option but a standard part of doing business, just as the telephone, fax and e-mail have all become standards. 

So welcome to the e-commerce revolution. The overblown hype about the Internet is now clearing and the real revolution has begun. Unquestionably, every company that implements e-commerce will take risks and make mistakes. However, no mistake is worse than assuming that this revolution will not affect your industry -- because it will eventually touch just about every industry in some way.

Peter De Legge is an Internet Marketing Consultant and Developer with over 10 years of Marketing/Marketing Communications experience, primarily in the business to business arena. Prior to the advent of the commercial Internet, Mr. De Legge worked mostly with print advertising, direct mail, trade shows and collateral pieces. He presently lives in Chicago and handles both business-to-business and business-to-consumer Web site development and strategy for a number of companies. To learn more about his services, visit his Web site at http://www.businessmarketing.net

© Copyright 1999, Peter De Legge. All rights reserved.

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