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1 E-COMMERCE REPORT A Radical Transformation: B2B Commerce is Learning from B2C, Developing More Touchpoints, Becoming More Consistent and More Complex INTERSHOP, FALL 2013

2 INTRODUCTION Many companies have long overlooked the full potential of online commerce. For the majority of businesses, the process of bidding, negotiating, ordering, and drawing up contracts has been conducted by telephone, through ERP systems or catalogs, or directly with sales representatives. Major changes in channel strategies are afoot. An increasing number of organizations are beginning to embrace the potential of electronic and mobile commerce, while adopting innovations and experience from B2C commerce. The world of B2B commerce is thus undergoing radical transformation. Just as there are many different factors driving this change, there are many different ways in which businesses can profit from it. What really matters is the ability to recognize the associated challenges and opportunities, evaluate them for one s own organization, and draw the right conclusions that are sustainable in the long term. The Intershop E-Commerce Report for 2013 provides a basis for that. It includes significantly more information than the material presented here and we would be delighted to share our additional insights with you, e.g., on specific regions and/or industries. Simply get in touch and together we can better understand and utilize the ongoing transformation in B2B commerce. 2

3 Contents Introduction 2... The e-commerce landscape today 4... The transformation of B2B commerce 8... Developing and designing the future of B2B commerce Summary Closing remarks by Jochen Moll, Intershop About this study: Research methodology 24 3

4 The e-commerce landscape today 75% WILL OFFER MOBILE COMMERCE E-COMMERCE IS PART OF B2B, M-COMMERCE WILL BE SOON: ALMOST ALL OF THE COMPANIES SURVEYED MARKET THEIR PRODUCTS ONLINE; OVER THE NEXT 12 MONTHS, 75% WILL ALSO OFFER MOBILE COMMERCE. The e-commerce boom continues Approximately 92% of the 400 companies surveyed already market their products online. The remaining 8% plan to follow suit. The fact that, on average, online sales in the B2B sector account for 35% of total revenue clearly indicates the importance of online channels for B2B commerce. Of the organizations that are already selling online, 95% stated that they plan to boost the online share of their revenue, by an average of 27%. Almost one-fourth (23%) of these businesses plan to increase online sales by 40% or more. From a regional perspective, US companies seem to use their online channels the most, averaging 42% of B2B revenue through e-commerce. They also have a more ambitious goal of increasing this share by an average of 31%. The Benelux countries, on the other hand, are lagging. This region has the highest number of respondents who are still at the planning stage with regard to selling online (20%) and the lowest percentage of online revenue (26%) among companies that already sell on the Internet. Interestingly, Germany is one of the markets where a high percentage of B2B revenue is generated through online channels (34%). But many German companies surveyed are satisfied with that percentage. In fact, 14% of the German companies surveyed stated that they have no specific plans to increase this share. Across industries surveyed, the sector with the highest percentage of online B2B sales is pharmaceuticals (40%), while the lowest is automotive (33%). The sector with the lowest projected increase in the share of online sales is telecommunications (22%). 4

5 B2B goes mobile There are geographic and industry-specific variations in the touchpoints that companies use to present their products and services to customers. There is, however, one touchpoint that is growing in importance everywhere: mobile. Just over half of all companies surveyed currently use mobile touchpoints (including mobile stores and apps). Almost half of the remaining organizations are already planning a mobile presence, we can expect to see approximately 75% of all surveyed companies using mobile touchpoints, ahead of catalogs (48%) and telemarketing (45%). Current sales channels: Website 98% Mobile (including stores and apps) 51% Catalogue 48% Telephone (direct sales) 45% Physical stores 45% Self-service B2B online store 45% The most important channels in Germany (after websites) are catalogs and dealers (both 52%) while the US leads with self-service B2B online stores (53% compared with only 30% in the Nordic countries). In the UK, the main channels are telemarketing (62%) and physical stores (57%), while the Benelux countries rely heavily on catalog-based marketing (58%). Viewed by industry, the automotive sector scores highest for catalog-based marketing (60%) and physical stores (60%). The most important touchpoints in the telecommunications sector are telemarketing (51%) and mobile (46%). In the industrial/high-tech and pharmaceutical sectors, the majority of sales are through self-service B2B online stores (52% and 60%, respectively). 5

6 MORE CONTACT OPTIONS: ONE IN THREE COMPANIES WILL ADD MORE CUSTOMER TOUCHPOINTS Looking ahead: Mobile, marketplaces, self-service When asked about the customer touchpoints they don t currently use but would like to add over the next 12 months, the most common response from companies worldwide apart from mobile was online marketplaces (25%). Another finding is that companies in the Nordic and Benelux countries are more likely to be planning B2B online stores with self-service functionality (both 30%). Planned sales channels for the next 12 months: Mobile (including stores and apps) 48% Online marketplaces 25% Self-service B2B online store 19% Telephone (direct sales) 19% Call center 19% 6

7 Vision: More touchpoints, more consistency, more customer focus Asked about their vision for B2B commerce, almost one-third of respondents (31%) mentioned the integration of new touchpoints, such as mobile apps for order entry, order history, and status, as well as apps for sales representatives. Approximately one-fifth (22% and 21%, respectively) want to add online and offline touchpoints to create a more consistent shopping experience or enable self-service ordering with a consistent purchasing experience across multiple touchpoints. Visions for B2B commerce: We will integrate new touch points such as mobile apps for order entry, order history and status as well as sales rep apps 31% We will integrate online and offline touch points and offer seamless purchasing experience 22% We provide self-service ordering and consistent purchasing experience across multiple touch points 21% B2B multi-touch point commerce enables us to grow globally 10% The key challenge: Consistency Adding more touchpoints is only half the battle. To be successful, companies need to create a consistent customer experience across all of their touchpoints. According to the Intershop E-Commerce Report for 2012, almost 50% of retailers surveyed believed they could increase conversion rates and shopping cart values by using consistent marketing across multiple touchpoints. This is also true in B2B commerce, since business buyers increasingly expect the same levels of service they are accustomed to from B2C retailers. Companies that use this opportunity can boost customer satisfaction and, even more importantly, secure the potential for future growth. 7

8 The transformation of B2B commerce COMPLEX CHANGE, MULTIPLE OPTIONS: B2B COMMERCE IS UNDERGOING A TRANSFORMATION Multifaceted transition: Consumerization, self-service, social networks, and mobile commerce While the survey results clearly indicate that B2B commerce is changing, they also point in many different directions. More than half of all respondents (57%) said that B2B commerce is shifting from offline to online and self-service platforms. A similar number (51%) recognize that internal organizations must be adapted in order to achieve new online goals. In addition, over 40% of respondents agreed with the following statements: B2B commerce is adopting B2C best practices to optimize the B2B purchasing experience; business customers require intuitive self-service tools for order processing and management; social networks have an impact on brand awareness, purchase recommendations, and reputation. Smartphones add to the challenge. A full 34% stated that these devices demand localization and the development of apps both for sales reps and business buyers. Multifaceted transformation in B2B commerce: B2B commerce is shifting from offline to online and self-service The internal organization has to adapt in order to meet new online goals 51% 57% B2B commerce adopts B2C best-practices to optimize B2B purchasing experience Business buyers demand intuitive self-service tools for order processing and management Social media impacts the brand awareness, purchase recommendations and reputation 44% 43% 42% Smartphones enforce localization and usage of apps both for sales reps as well as business buyers 34% Consistent and relevant content becomes essential across multiple touch points 27% None of these 2% 8

9 Regionally, the United States is again the pioneer: Nearly three-fourths (72%) of U.S. respondents indicated that B2B transactions are moving from offline channels to online commerce and self-service. Nearly two-thirds (63) believed that B2B commerce is adopting best practices from the B2C sector. Pharmaceuticals is the sector with the most dynamic B2B commerce transformation. In this industry, 77% of respondents agreed with the statement that B2B commerce is shifting from offline to online and self-service. Diverse drivers: Customer expectations, technology, variety of information The current transition is being driven by a number of different forces. On average, companies recognize eight different factors that they have to consider when evolving their commerce strategy which is obviously no easy task.? B2C B2B?...? POSSIBILITIES AND CUSTOMER EXPECTATIONS: NEW TECHNOLOGIES OPEN UP NEW POSSIBILITIES AND STIMULATE DEMAND - FIRST IN B2C, THEN IN B2B. The most important factor according to respondents are customer expectations (81%). This is closely followed by a number of similarly weighted drivers, including the fact that customers are now applying B2C expectations when using B2B commerce (70%). This is a classic example of what is being termed the consumerization of IT. Across the board, survey respondents agreed that the world of B2B commerce is evolving fast, and that B2C trends are being reflected in the B2B environment. 9

10 Drivers of change in B2B commerce: Customer demand/expectations 81% Developing technology, permitting what was impossible before 74% Business buyers engaging through various offline and online touch points with their peers 73% Competitor activity, performance 72% Corporate revenue/market share growth initiatives 71% Mobile device use 71% Web 2.0 technologies enabling new ways of collaboration 71% Business buyers carrying expectations from home to the office 70% Logistics/demand chain 68% Supplier/supply chain 64% Board/shareholder expectations 62% Among the factors specific to e-commerce are the possibilities offered by new technologies (74%), the use of mobile devices and social networking (71%), and the fact that business buyers communicate with their peers across various offline and online touchpoints and consult multiple sources of information during the decision-making process (73%). The latter factor is particularly important in the pharmaceutical sector (90%). 10

11 Major challenges Given the radical changes in B2B commerce, it is hardly surprising that almost all of the organizations surveyed (96%) are facing challenges. Half of them find it difficult to provide intuitive and user-friendly interfaces for multiple touchpoints, such as B2B online stores, mobile apps, etc. A similar number (48%) stated that it is difficult to manage complex organizational structures, such as different user roles, multiple business models, multiple commerce touchpoints, and multiple data domains particularly in the high-tech sector (60%). In addition, almost half of all respondents faced the challenge of convincing their offline customers to use e-commerce and self-service, as well as providing flexible and responsive customer service. This task is viewed as particularly difficult in the automotive and pharmaceutical sectors (67% and 57%, respectively). UNNECESSARY CONCERNS? COMPANIES THAT HAVE YET TO ENTER THE WORLD OF E-COMMERCE SEE GREATER OBSTACLES THAN COMPANIES THAT ARE ALREADY ACTIVE ONLINE There is, however, one clear point of difference between respondents. More than half (61%) of companies that are currently planning to introduce online commerce think convincing existing customers to make the switch to online and self-service alternatives will be a challenge. Among companies that already have an online presence, only 45% considered this to be a challenge. The latter group of companies appear to have better marketing and more powerful touchpoints through which they can stimulate customers to shop online. In fact, the majority of these organizations have probably already overcome this particular challenge. In addition, there are significant differences with regard to returns and inventory management. Half of the organizations that are not yet online anticipate problems, while only 31% of businesses that are already online have concerns. As we can see, the reality of online selling can often differ greatly from prior expectations usually in a positive way. Challenges in B2B commerce: Providing intuitive and user-friendly interfaces for multiple touch points 50% Managing complex organizational structure 48% Bringing customers from offline to online self service Delivering responsive and flexible customer service in order to respond quickly to any customer request 47% 46% Being able to capture, analyze and reuse customer data for better engagements with business buyers Simplifying handling of returns and inventory 33% 32% Consolidation of supplier content 14% None of these 4% 11

12 . EVERY CHALLENGE IS AN OPPORTUNITY: THOSE ORGANIZATIONS ABLE TO RECOGNIZE AND OVERCOME CHALLENGES QUICKLY CAN ACHIEVE A VALUABLE COMPETITIVE EDGE WHICH MEANS LARGER SHOPPING CART VOLUMES, INCREASED SALES, AND GREATER CUSTOMER LOYALTY....and important advantages On the other hand, companies understand the many benefits of convincing business customers to use online commerce and selfservice platforms. Almost half anticipate an increase in total revenue, 44% expect higher average shopping cart values, and 43% expect increased repurchasing rates and/or brand loyalty if their customers move to buying online. On average, organizations cited five benefits, with US and Nordic organizations having slightly higher expectations. In the UK, US, and Nordic countries, reduced transaction costs, as well as the positive effects of driving sales across multiple channels, were named as other important benefits, while the pharmaceutical industry in particular expected to shorten transactions and fulfillment cycles by serving customers online. 12

13 . Benefits of developing online commerce: It could result in a higher overall bottom line 49% It could result in higher average basket values 44% It could result in more return customers/higher brand loyalty 43% Drive offline sales online 41% Efficiently serve different customer segments 38% Reduced transaction costs 37% Drive sales across multiple channels 37% We would be able to efficiently serve a large number of smaller accounts It could separate us from other competitors in our sector 33% 33% Capture and understand customer behavior and preferences 33% Shorten transactions and fulfillment cycles 31% Increase productivity of business buyers 28% Don t know 3% B2B COMMERCE CHANNELS Organizations that develop their B2B commerce channels now and offer a consumer-like experience will be well placed to compete in their markets. However, it is also important that they master the complex requirements and specific characteristics of the new touchpoints. The effort will be worth it in the long run. In a separate survey, Intershop looked at the percentage of revenue that B2B organizations invest in e-commerce each year and compared this with how e-commerce contributes to total annual revenue. The findings showed that organizations get back more than they put in, and that e-commerce delivers a good return on investment. 13

14 . Developing and designing the future of B2B commerce Optimizing the B2B experience: Customer expectations and business needs When it comes to creating B2B online stores with a B2C-like experience, organizations have a pretty good idea of the features their customers expect. Ingredients for a more B2C-like offering: Intuitive search and navigation 77% Online order approval 75% Self-service account management 74% Category and product pages 73% Online store analytics/monitoring in real time 72% Intuitive management tools 71% Search engine optimization and search engine marketing 70% Personalization 68% A/B testing 57% 14

15 . When considering their B2B e-commerce site, 55% of organizations would like to enable B2B buyers to better manage routine orders, for example, by setting up automatic re-ordering using the previous order already a standard feature on many B2C websites. In addition, 51% would like to give customers the ability to access the B2B store directly from an ERP system, including all the familiar buying features. In the retail and pharmaceutical sectors in particular, companies would like to enable their B2B customers to customize the storefront based on their own purchasing policies. Website functionality desired by B2B online retailers: Enable B2B buyers to better manage routine orders 55% Ability to access the B2B store directly from ERP, including all normal buying features 51% B2B buyers customize the storefront based on corporate purchasing policy 44% Order templates that can be saved and used in the next session 43% Multi-step order requisition steps and checkout 40% Bulk order entry by uploading purchasing list or entering a product ID 37% Allow B2B buyers to submit and negotiate a quote with the account manager online 36% Enable the B2B buyer to initiate the order approval process within his organization by using the B2B self-service portal 26% 15

16 . B2C AS TEST BED: WHETHER YOU CALL IT CONSUMERIZATION OR SOMETHING ELSE, B2B COMMERCE CAN LEARN A LOT FROM B2C BECAUSE EVERY COMMERCIAL BUYER IS ALSO A CONSUMER Consumerization: B2B is learning from B2C Consumerization is one of the latest buzzwords in the industry, but what does it actually mean? Nearly half of all respondents (48%) associate the term consumerize with making things simpler in general, while 46% think it has to do with easier online purchasing. In other words, there is no clear answer the term is open to very different interpretations. Only 4% of respondents think that consumerization is just hype. Even if it is not possible to replicate every aspect of B2C commerce, companies are using it as a test bed to investigate how e-commerce technologies can be used to implement their B2B marketing strategies. Since every B2B customer is also a B2C customer, with corresponding expectations and habits, learning from B2C is crucial for companies that want to understand the future of B2B. Sales: Direct access and easy management Organizations also have a clear understanding of how their e-commerce platform can support their sales teams, for example, by offering customized product, price, and catalog management (77%), viewing sales reports, such as total sales, sales value by cost center, etc. (75%), or creating and managing B2B accounts, cost centers, and budgets (74%). For 70% of respondents, it is also important that sales reps are able to conduct price negotiations online. CUSTOMER RANKINGS AS MARKETING RESOURCE: ALMOST TWO-THIRDS OF ALL ONLINE MERCHANTS USE SOCIAL NETWORK RANKINGS TO HELP PROMOTE THEIR OFFERINGS. Social media: Product rankings wanted In line with the trend toward consumerization, the acceptance and use of social networks and mobile technologies in the B2B environment is growing. Almost two-thirds (63%) encourage the ranking or scoring of their products on social networking sites. A clear majority of companies welcome social networking and the opportunities it provides, rather than vainly trying to oppose it. Acceptance is higher in the United States (76%), while both the UK and Germany are more cautious (both 47%). In the automotive industry, just under one-third of respondents (27%) try to avoid product ranking. Interestingly, 10% of companies in the UK are not at all interested in monitoring how their products are rated on social networking sites; the global average was just 3%. 16

17 . Vendor attitudes to product ranking on social networking sites: 21% 3% This is a good thing and it s something we are trying to encourage 13% 63% This is not a good thing and is something we try and discourage We have no strong views either way, but we do monitor it We don t monitor it, so are not bothered RAPID GROWTH: WITH MARKETS AND TECHNOLOGIES DEVELOPING THE WAY THEY ARE, THE IMPORTANCE OF MOBILE COMMERCE CANNOT BE IGNORED. Mobile commerce: The future of online selling Echoing the findings in the E-Commerce Report for 2012, mobile commerce will be an important issue for almost all organizations (94%) over the next 12 months. For 50%, it has already been important for more than six months. Again, the proportion in the United States is higher. Here, m-commerce has been an important consideration for more than six months among 68% of respondents. At the other end of the scale, the uptake of mobile commerce seems slower in Benelux and Germany, with 15% and 10% respectively saying it would not be important to them over the next 12 months. 17

18 . Importance of mobile commerce: 17% 6% Yes - and it has been for over 6 months 50% Yes - and it has been for the last 6 months or less 28% Yes - but it will start in the next 12 months No Of those organizations that say mobile commerce will be important in the next 12 months, a total of 65% are planning to create a mobile-optimized store version that allows business buyers to view products, to purchase, to access their account profile, and to track orders. 56% would like to develop a mobile app that enables business buyers to view products, negotiate prices, buy more easily, and track their orders. MOBILE COMMERCE AND SOCIAL MEDIA Adding more touchpoints is only half the battle. To be successful, companies need to create a consistent customer experience across all of their touchpoints. According to the Intershop E-Commerce Report for 2012, almost 50% of retailers surveyed believed they could increase conversion rates and shopping cart values by using consistent marketing across multiple touchpoints. This is also true in B2B commerce, since business buyers increasingly expect the same levels of service they are accustomed to from B2C retailers. Companies that use this opportunity can boost customer satisfaction and, even more importantly, secure the potential for future growth. 18

19 . Complexity: B2B customer service and cross-touchpoint functionality Most organizations use more than one touchpoint to communicate with their B2B customers. These include telephone contact (88%), (80%), and chat functionality (59%). The latter is particularly widespread in the United States at 76%. In Germany, companies rely more on telephone contact (95%), while chat is much less common (33%). Most organizations consider it important that their customer service representatives can access order and account information e.g., order status data (78%) and technical support information (75%) and edit the customer account page (75%). For 74%, it is important to provide B2B customers with access to user guides, upgrades, downloads, news, press releases, and FAQs. In the high-tech and pharmaceutical sectors, this proportion is even higher (80% and 83%, respectively). ONLINE PLUS OFFLINE: THE MOST POPULAR REQUIREMENTS INCLUDE THE ABILITY TO PICK UP AND/OR RETURN ITEMS PURCHASED ONLINE AT A PHYSICAL LOCATION, A DEMAND THAT POSES SOME DIFFICULT TECHNICAL PROBLEMS. Of all the possible multi-touchpoint services that organizations can provide, purchase online, pick up in store is the most popular: 68% offer this service already or are planning to offer it. Purchase online, return in-store is another service that many companies either already offer or would like to offer (54%). Proper consideration must be given here to the way in which the technologies used at these touchpoints are integrated. Just over half (51%) have or plan to implement a store locator. Not surprisingly, the store locator is more important (62%) to companies that have already found mobile commerce important for over six months. 19

20 . Existing or planned multi-touchpoint offerings: Purchase online, pick up in-store 68% Purchase online, return in-store 54% Store locator 51% Mobile coupons 37% Print QR-codes 29% None 13% FULL EXPANDABILITY: ALMOST ALL ORGANIZATIONS WANT TO EXPAND THEIR COMMERCE PLATFORM TO SUPPORT MULTI-TOUCHPOINT B2B COMMERCE. 20

21 . To support B2B commerce across multiple touchpoints, almost all (97%) organizations surveyed have plans to add new functionalities to their commerce platform. Accordingly, 59% plan to include features for tracking order status online. The next most popular services are the ability to search shared and in-store inventories (48%), order routing (47%), and online ordering with in-store collection (44%). In the automotive and pharmaceutical industries, cross-border fulfillment was another important new feature, with 60% and 53% respectively planning to implement the capability. Existing or planned multi-touchpoint offerings: Track order status 59% Shared inventory and in-store inventory lookup 48% Order routing 47% Click and collect 44% Integrated customer service 44% Inventory management across multiple locations 40% None of these 3% 21

22 . SUMMARY The dramatic transformation of B2B commerce is impossible to overlook. B2C commerce trends drive progressive organizations to advance their online B2B platforms while laggards slog through bureaucracy, complexity or simply the reluctance to change. Whatever the current attitudes, online commerce is here to stay, and mobile commerce continues to gain acceptance. There is a long list of factors driving B2B transformation that must be considered. They include the B2C experience and resulting expectations among business buyers and their colleagues, the sharing of opinions about that experience, social networks, mobile applications, the response from competitors, and of course the technical capabilities of the latest e-commerce solutions. Addressing all of these factors while achieving corporate growth targets is one of the most significant challenges facing modern enterprises. In order to succeed, organizations must create an appealing B2B shopping environment, implement as many touchpoints as possible in a way that is intuitive, user-friendly, and consistent, and master the complex systems required for these offerings while streamlining internal processes. And they must do it all faster and better than their competitors. Often it is possible to apply concepts, experience, and technologies from the world of B2C commerce. Although not always interpreted in the same way, the term used to describe this development is consumerization. In many respects, American companies and the pharmaceutical industry already appear to be one step ahead. Although each market and sector has its own specific requirements, it may be worth studying these two in greater detail as they could well offer a glimpse into the future. Along with many other findings, this report confirms that the ability to recognize challenges, find appropriate solutions in a timely fashion, and adapt accordingly is key to achieving a strong competitive edge and with it the opportunity to help shape the future of B2B commerce. Closing remarks by Jochen Moll, Intershop The study confirms what we have heard in conversations with many of our customers: B2B commerce is undergoing radical transformation in The multiple challenges that organizations face also represent enormous opportunities to help shape the future of B2B commerce and share in its success. To do that, companies need an e-commerce solution that is equipped for the future and capable of handling increasing complexity. It is equally important to leverage existing experience and understanding of markets to make the right strategic decisions. In both regards, Intershop is the ideal partner, thanks to its innovative and future-proof Intershop 7 e-commerce solution and more than 20 years experience as a pioneer in B2C and B2B commerce across many diverse sectors. More than 500 companies already benefit from Intershop s expertise

23 . About this study: Research methodology Intershop commissioned this second annual survey in order to gain insights into the changing nature of B2B commerce in the USA and Europe, across traditional and emerging sales channels. The following questions were central to the study: How are B2B vendors responding to changing customer expectations? How well are organizations responding to challenges, such as the integration of online and offline touchpoints or introducing mobile commerce? What action do organizations plan to take to develop their B2B offerings over the next 12 months? The study was conducted by Vanson Bourne, a market research company specializing in technology. Vanson Bourne interviewed 400 senior IT and business decision makers from merchants with a B2B focus and annual online revenues ranging from $1 million to more than $100 million, in April and May % of respondents came from the following sectors, which were selected on account of the relative maturity of their sales models: automotive (30), industrial/high-tech (88), retail (89), pharmaceuticals (30), and telecommunication (63). The remaining 25% came from other sectors. 120 interviews were conducted in the USA, 60 each in the UK, France, Germany, and Nordics, while 40 were conducted in the Benelux countries. 23

24 . Intershop Communications AG Intershop Tower, Jena, Germany Phone: fax:

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