Procurement managers expect Amazon-like ease of use from b2b e-commerce sites.
Paul Demery , Managing Editor, B2B E-commerce
Capitol Scientific Inc., as its name suggests, focuses mostly on selling things like hydrometers, optical coatings and other laboratory equipment and supplies to universities, government research agencies and manufacturers. But nowadays it's also becoming common for the company to get orders from a new breed of business-to-business customers who find its e-commerce site during a web search.
"With our new web site, we reach people we've never targeted before," says Tylee Van Waes, Capitol Scientific's senior e-commerce marketing manager. She adds that optimizing her site for natural search, using paid search marketing and offering promotional information via social media have helped extend Capitol's market reach.
Among the 70,000 product SKUs on its web site, for example, are cotton-tipped wooden applicators that a doctor or scientist might use to gather and test bacteria. But recently an association of model builders placed a large online order for the applicators to give to its members, and has since put a link on its members' web site to CapitolScientific.com. "These people are great customers, but they probably would've never found us if not for our e-commerce site," Van Waes says. "It probably never would have crossed their minds that a scientific supplies provider would be a source for them."
A brave new b2b world
That's an example of how business is changing in the business-to-business world. The spread of user-friendly e-commerce sites that have enveloped the consumer-facing retail world is spilling over into b2b markets, as more companies recognize they must provide web sites where customers can easily research and buy, both to keep existing business and win new clients. It's not all businesses, to be sure, and it's not always easy to connect user-friendly web sites to existing business software and policies. But some companies are finding a way.
Avoiding the web, many b2b experts like Van Waes say, just isn't an option for companies that want to grow instead of fall behind.
"It's a different game now," says Greg Baldwin, director of e-commerce at Noble Supply & Logistics, which sells to government agencies more than 1 million product SKUs ranging from nuts and bolts to power generators costing thousands of dollars. "These customers today require and look for companies that have a strong e-commerce presence, and we see that as an opportunity to stand out among a lot of our competitors who are still focused on catalogs."
But while companies like Noble and Capitol Scientific are making aggressive moves into b2b e-commerce, many others are lagging behind. According to a study released last year by business software provider Oracle Corp., which surveyed 120 business and technology executives, only 25% of b2b companies had an e-commerce site.
And just as retailers must look over their shoulders at Amazon.com Inc. and other innovative merchants, b2b players are threatened by competitors aggressively moving to the web. One of the biggest competitors in the b2b space, W.W. Grainger Inc., a provider of industrial and office supplies, is investing $40 million over the next few years to upgrade its e-commerce technology and operations.
Amazon.com last year launched its own b2b site, AmazonSupply.com, where it sells everything from lab equipment and metal materials to power tools, janitorial products and office supplies. That alone should serve as a wake-up call to b2b sellers still selling only offline, technology research and advisory firm Gartner Inc. says. "Like Amazon's business-to-consumer site, Amazon.com, AmazonSupply provides a complete e-commerce merchant site, including product catalogs, search and merchandising, shopping cart, payment processing and shipping," Gartner e-commerce analysts Chris Fletcher and Gene Alvarez say in the June 2012 report, "Prepare Now for the Impact of AmazonSupply on the B2B E-Commerce Market."
At Capitol Scientific, Van Waes says she's wary of Amazon but also encouraged by its entry into the b2b market as a healthy source of competition. "While having such stiff competition is a threat, it also forces us to step up our game," she says. "To effectively compete with an e-commerce powerhouse such as Amazon, we need to have a solid, user-friendly e-commerce site that truly provides something of value to the customer."
It's not that b2b e-commerce is something completely new. B2b companies have been engaged in electronic transactions for decades through electronic data interchange, or EDI, providing companies with a system of electronically transmitting business documents like purchase orders and invoices and sending payments and confirmations. In a May 2012 E-Stats report, the U.S. Commerce Department noted that U.S. wholesale e-commerce sales, including manufacturers' wholesale sales through branch offices and including EDI, totaled $1.42 trillion in 2010, up about 12% from $1.27 trillion in 2009. (Separate direct b2b e-commerce transactions by manufacturers accounted for another $2.28 billion in 2010, up 21% from $1.89 billion in 2009.)
b2b's big promise
Non-EDI e-commerce sales—those transacted over web sites equipped with online shopping carts for processing payments—accounted for just less than 30% of the total wholesale e-commerce totals, rising to $402.56 billion in 2010, up nearly 14% from $354.74 in 2009, the Commerce Department reported. By comparison, it noted that total retail e-commerce sales in 2010 were $168.97 billion, up 16% from $145.26 billion in 2009. Forrester Research Inc. "conservatively" projects that U.S. b2b e-commerce sales will reach $559 billion this year.
Even with b2b's big sales numbers, however, industry experts say the b2b e-commerce market is still in its infancy. For the sake of comparison, total wholesale sales compiled by the Commerce Department were $5.77 trillion in 2010.
The question isn't whether online b2b sales will keep growing; it's which sellers will reap those sales. The answer, says Forrester analyst Andy Hoar, lies within the ability of b2b companies to follow the lead of retail e-commerce sites to provide customer-friendly shopping experiences.
"B2b e-commerce is now being judged against a largely superior b2c buying experience," Hoar writes in the November 2012 report, "Thrive By Adopting Proven B2C Principles." To succeed, he says, b2b sellers need to build sophisticated and compelling online merchandising techniques along with a strong breadth and depth of available products, while also making it easy to find products and check out.
At the same time, of course, b2b online sellers also need to provide features that go beyond the typical online b2c experience. Many b2b buyers negotiate contracts that provide them with a tailored set of pricing terms, for instance, and they may need to first request a price quote and route the quotation to several managers, before placing an order. A b2b e-commerce site also needs to mesh with customers' order-approval workflow.
B2b buyers also may want to place sizable orders for items not readily available on a supplier's site. While Noble provides about 1.4 million SKUs from more than 1,000 suppliers on NobleGov.com, its site for the U.S. Defense Department and other government agencies, there are still times when a customer needs something the site doesn't carry. In response, Noble designed on its checkout page a "Request an Item" window that prompts a shopper to enter information about the product he seeks, including a description, product number and name of manufacturer.
The web site, which is built on eBay Inc.'s Magento Enterprise e-commerce platform, was customized to route such requests to the most qualified person on Noble's procurement staff, who searches for a supplier. The inquiring customer gets an e-mail confirmation of her request from the procurement staffer, followed by an alert within days detailing the item's availability, price and expected delivery date. The mostly automated process, which was developed with Noble's Magento systems integrator CorraTech, expedites what would be a much longer process if the customer had to first request the item through a sales representative. "It allows us to meet the needs of customers more quickly, and retain more sales from customers who instead might go to another web site," Baldwin says.
CorraTech specializes in developing e-commerce sites using technology from either Magento for mid-size clients or hybris Software for larger ones. Although Magento comes with some b2b e-commerce functionality like contract pricing built into its technology, it also lets companies customize their web sites with technology extensions developed by outside developers to meet additional needs, Michael Harvey, CorraTech's chief operating officer, says. Noble uses tiered pricing within Magento that allows it to provide contract pricing for individual customer groups. Working with CorraTech, Noble automated the process of placing new buyers into their proper contract group based on their e-mail address. New buyers from government agencies with ".gov" and other letters in their e-mail address identifying their agency, for example, can automatically see products and pricing approved for their buying group.
Magento also provides an extension from technology developer Cart2Quote that lets a buyer on a b2b site request a pricing quote for a particular product order not already covered under a contract, negotiate a final price, then click to buy if buyer and seller agree on terms. The Cart2Quote pricing quote module runs from $399 to $799; installing the Magento Enterprise platform starts at just over $14,000.
Capitol Scientific, which runs its e-commerce site on a technology platform hosted on the web by NetSuite Inc., worked with web development firm 360 Cloud Solutions LLC, a certified NetSuite technology partner, to build a custom pricing application that lets each customer log on to see product pricing based on its contract terms, saving the time of sorting through products marked at general list prices.
For customers who request new price quotes on carted products but then abandon Capitol's web site before receiving a price quote, Capitol is working with NetSuite technology partner Audaxium Inc. to develop an application integrated with NetSuite's customer relationship management system that will automatically send repeated e-mails as necessary after the first hour, after three days, then after a week. Each e-mail will be personalized based on the product a customer had placed in the cart, with the final message typically offering a special promotion, Van Waes says.
As b2b companies seek out technology vendors to support their e-commerce strategies, they face the challenge of getting new applications to work with their existing technologies. That was the case at J.O. Galloup Co., a Battle Creek, Mich.-based unit of Kendall Electric Inc. that sells industrial pipes, valves and related fittings to utility companies and automakers in the Midwest.
Several years ago Galloup launched a b2c site on the free Magento Community e-commerce platform, selling small items like thermometers and gauges to learn the basics of operating a shopper-friendly site. It then tested a b2b site, but among other problems, found it couldn't integrate well with Galloup's back-end SAP financial and inventory management software, says Gary Merritt, director of marketing for Galloup. As a result, as the site tried to pull up specific pricing figures according to each customer's contract terms, pages loaded painfully slowly, taking up to 15 seconds.
So when Galloup decided to build a new b2b site, it wanted to make sure it had both a b2c look and feel while also integrating well with SAP software. Galloup chose Insite Software, whose e-commerce technology clients include manufacturers, distributors and retailers.
The new b2b site, which launched last year, avoids the problem of slowly loading pages and offers a user-friendly interface, including large images of products, site search and images of related items in the shopping cart, Merritt says. It also connects with the SAP software in ways that provide important purchasing features that many customers want, he adds.
A Galloup customer creating a new purchase order in his own company's software system, for example, can electronically send the purchase order to the Galloup b2b site's shopping cart, then receive the purchase order back with pricing and shipping details to route through his company's approval process. "That's part of what prompted us to work with Insite," Merritt says. "Our former e-commerce software couldn't pull that off." He adds that e-commerce accounts for a small percentage of total sales, but that Galloup expects that percentage to grow as more customers get accustomed to using the new site.
Freeing up sales reps
Among all the advantages of working with b2b e-commerce technology, none is more important than the support it provides to teams of sales reps, b2b companies say. Most contract customers continue to work with an assigned rep, who routinely check to see that clients' online orders are shipped properly, Van Waes of Capitol Scientific says.
Capitol Scientific immediately assigns a rep to contact each new online customer, using the e-mail address a customer uses when signing up for an account. Reps then learn more about a customer's interests as well as if and when she needs assistance in placing orders; reps' commission models take into account all of a customer's purchases.
Freed from handling all the details of each order that customers can process themselves online, reps can focus more on finding new customers and building customer relationships, building on their base of sales and commissions, Van Waes says. Other b2b sellers follow a similar strategy.
"That's one of our goals," Baldwin of Noble Supply & Logistics, says. "To free up sales reps to look for new customers."
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