Online And Mobile Are Transforming B2B Commerce Firms That Act Now Will Gain Appreciably, Companies That Don t Will Fall Farther Behind

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1 A Forrester Consulting Thought Leadership Paper Commissioned By hybris October 2013 Online And Mobile Are Transforming B2B Commerce Firms That Act Now Will Gain Appreciably, Companies That Don t Will Fall Farther Behind

2 Table Of Contents Executive Summary... 1 The Web Is Changing How B2B Companies Transact With Customers... 2 B2B Customers Are Establishing A New B2B Buyer Journey... 2 Selling Online And On Mobile Represents A Significant New Opportunity3 Demand Is Growing Rapidly For Web-Based Self-Service Capabilities... 6 Managing A Dynamic B2B Commerce Business Presents Challenges... 7 Key Recommendations... 8 Appendix A: Methodology... 9 Appendix C: Demographics... 9 Appendix C: Endnotes ABOUT FORRESTER CONSULTING Forrester Consulting provides independent and objective research-based consulting to help leaders succeed in their organizations. Ranging in scope from a short strategy session to custom projects, Forrester s Consulting services connect you directly with research analysts who apply expert insight to your specific business challenges. For more information, visit forrester.com/consulting. 2013, Forrester Research, Inc. All rights reserved. Unauthorized reproduction is strictly prohibited. Information is based on best available resources. Opinions reflect judgment at the time and are subject to change. Forrester, Technographics, Forrester Wave, RoleView, TechRadar, and Total Economic Impact are trademarks of Forrester Research, Inc. All other trademarks are the property of their respective companies. For additional information, go to [1-M0J34D]

3 1 Executive Summary B2B commerce is experiencing a reformation. A new onlinedriven and omni-channel-centric paradigm has emerged one in which the longer and more often B2B companies sell online, the more pronounced and disproportionate the positive results are. A profound shift in customer behavior from offline to online channels is fundamentally changing the way in which B2B companies interact with, sell products and services to, and build loyalty with their B2B customers. In short, online and mobile are radically remaking the B2B commerce proposition. In May 2013, hybris commissioned a study by Forrester Consulting to explore what impact online and mobile is having on how B2B companies sell their products and services. To that end, Forrester Consulting surveyed 717 B2B companies across North America, EMEA, and Asia Pacific including 353 companies currently selling direct to businesses online. asking them for new and better self-service tools to make buying more convenient. B2B companies that wait too long to implement ecommerce assume a big risk. Every day that B2B companies fail to offer a compelling B2B ecommerce experience, they fall farther behind more advanced competitors. Specifically, they risk losing market share to B2B rivals already executing an ecommerce strategy and B2B versions of consumer websites that have recently emerged in the B2B space. For B2B distributors and wholesalers in particular that rely on adding value as middlemen, failing to exploit online and mobile as leading channels for driving customer engagement represents an existential threat to their businesses. KEY FINDINGS Forrester s study yielded three key findings: Selling online and on mobile devices represents a significant new opportunity for B2B companies. B2B companies are finding that selling online drives higher revenue and builds greater loyalty with customers. Forrester s research shows that online-only and omnichannel B2B customers have higher average order values (AOVs) and are more likely to add items to orders, order in bulk, and make repeat purchases than offlineonly B2B customers. B2B companies also find it easier to build loyalty with online-only B2B customers than with offline-only B2B customers by leveraging targeted crosssell and upsell offers. Self-service tools are changing the way in which B2B customers interact with companies. Demand is growing rapidly for web-based self-service ecommerce capabilities that allow B2B customers to research, make, and service their purchases from a PC, laptop, or mobile device. In a new world of 24x7x365 whenever and wherever commerce, B2B customers are increasingly demanding tools and technologies capable of serving them on their own terms. A majority of B2B companies in Forrester s research indicated that their customers are

4 2 The Web Is Changing How B2B Companies Transact With Customers The Web changed B2C commerce, and now it s fundamentally changing B2B commerce. Like B2C consumers, B2B customers are increasingly performing their product research online. As a result, the days of B2B customers starting their research by fingering through paper catalogs are dying. In fact, 69% of B2B companies currently selling direct to business partners online expect to stop publishing their print catalogs altogether within the next five FIGURE 1 The Majority Of B2B Companies Are Ending Print Catalogs Within Five Years years (see Figure 1).The Web represents an entirely new, interactive buying experience that print catalogs simply cannot rival. In fact, by a ratio of more than to 1, B2B companies that Forrester surveyed across the globe said that buying from us online has fundamentally changed the way our customers interact with us (see Figure 2). And among those B2B companies that derive more than 25% of their total B2B revenue online, the ratio increases to nearly 11 to 1 (76% to 7%).The more B2B companies sell online and the longer they sell online, the more they say that the Web is fundamentally transforming their relationships with their B2B customers. 1 FIGURE 2 ecommerce Is Fundamentally Changing B2B Commerce Base: 225 online B2B companies around the world

5 2 B2B Customers Are Establishing A New B2B Buyer Journey Today s B2B customers are emulating B2C consumers and fundamentally transitioning their browsing and buying into online and mobile environments. This dramatic shift from traditional top-of-the-funnel activity based on searching print catalogs and talking to sales representatives, to starting the browse process by performing digital searches is remaking the B2B buyer journey. In fact, Forrester s research shows that no less than a sea change in B2B buyer behavior is taking place, one reflective of a continuing shift in decision-making power in organizations away from central authorities and toward end users. According to B2B companies around the world that currently sell direct to business partners online, today s B2B end user customers are: Browsing and buying on B2C and B2C-like B2B websites. Fifty percent of B2B companies currently selling direct to business partners online indicated that their end user B2B customers are using either consumer websites or B2B versions of consumer websites to purchase products or services for their companies (see Figure 3). Similarly, nearly one-half of B2B companies said that their customers are starting their research at consumer websites. 2 Further, Forrester s research shows that the more B2B companies sell online, the more likely their customers are to shop in these nontraditional channels. 3 Using mobile devices to research and buy online. Forrester s research shows that 54% of B2B companies selling online report that their customers are using smartphones to research purchases, and 52% say that their customers are using smartphones to actually buy online (see Figure 4). Similarly, majorities of B2B companies report that their customers are using tablets to research and buy products and services. Further, the more B2B companies sell online, the more likely their customers are to use tablets and smartphones to buy products and services. 4 Clearly, mobile is emerging as an important channel for B2B companies both in the awareness and brand-building phase as well as at the point of decision. But unlike three years ago when the iphone was just starting to take hold and the ipad had just been invented, B2B companies today must acknowledge that hundreds of millions of smartphones and tablets have penetrated the corporate world. This emerging reality is forcing B2B companies to develop and execute their mobile strategy in parallel with their online strategy. FIGURE 3 50% Of B2B Companies Say Their Customers Use B2C And B2B Websites To Buy For Work FIGURE 4 B2B Customers Are Using Mobile Devices To Research And Buy Products Online

6 3 Selling Online And On Mobile Represents A Significant New Opportunity FIGURE 5 Twice As Many Companies Believe Their B2B Online Channel Will Grow Faster Than Their B2B Offline Channel Twice as many companies expect their B2B online sales channel be their fastest growing sales channel as those that expect their B2B offline channel to be their fastest growing sales channel within the next six years (see Figure 5). With usually reliable channels seeing business slow, and new channels seeing business grow, B2B companies are now being forced to rethink core tenets of their online strategies. Research conducted for this report, as well as research Forrester published in early 2013, indicates that B2B companies enjoy a net benefit from migrating offline customers online. Specifically, this study shows that B2B customers that buy online are more active buyers and have higher AOVs than customers that buy exclusively offline. In addition, research demonstrates that B2B customers are more easily influenced online and are more loyal in key circumstances than offline-only customers. In contrast to pure offline B2B customers, online and omni-channel B2B customers are: More likely to engage in value-added buying activity than offline customers. Forrester s research shows that by large margins, online-only customers are more likely than offline-only customers to add items to orders, order in bulk, and make repeat purchases (see Figure 6). In addition, B2B companies report that they earn higher AOVs from online-only customers than from offline-only customers. Across the board, greater numbers of B2B companies say that they earn higher AOVs the more they sell online, the longer they sell online, and the more channels in which they sell. As B2B customers increasingly research products and services online, B2B companies that have well-developed online and mobile strategies will be far better positioned to take advantage of the revenue upside associated with meeting the growing needs of B2B customers (see Figure 7).

7 4 FIGURE 6 Online-Only Customers Are More Active Than Offline-Only Customers FIGURE 7 Online-Only Customers Have Higher AOVs Than Offline-Only Customers (147 B2B companies with greater than 25% of sales online, 156 B2B companies that have been selling online for five years or more) Easier to influence online in the short and long-term. By a margin of more than to 1, B2B companies say that they can more effectively reach customers online than offline with cross-sell and upsell offers (see Figure 8). In addition, B2B companies selling online indicate that they can more effectively build customer loyalty online versus offline (see Figure 9). As with AOVs, B2B companies report that the more they sell online and the longer they sell online, the more success they have using cross-sell and upsell offers online and building customer loyalty online. B2B companies that have much experience selling online recognize that it is far less expensive and, if done correctly, much better to build relationships with new and existing customers online than offline especially for small-volume B2B customers.

8 5 FIGURE 8 It s Easier To Reach Customers With Cross-Sell And Upsell Offers Online Than Offline (147 B2B companies with greater than 25% of sales online, 156 B2B companies that have been selling online for five years or more) FIGURE 9 B2B Companies Can Online Than Offline More Effectively Build Loyalty (147 B2B companies with greater than 25% of sales online, 156 B2B companies that have been selling online for five years or more)

9 6 Demand Is Growing Rapidly For Web-Based Self-Service Capabilities By large margins, B2B companies say that our customers are asking us to offer them greater ability to buy online. A majority of B2B companies across the board indicate that their customers want new and better self-service tools in order to research, buy, and get customer service. In a new world of 24x7x365 whenever and wherever commerce, B2B customers are increasingly demanding tools and technologies capable of serving them on their own terms which means online and on mobile phones. B2B companies today are being asked to offer self-service ecommerce technologies that: Facilitate online buying experiences. Forrester found that 62% of B2B companies currently selling direct to business partners online say that their customers want self-service tools for buying online (see Figure 10). For B2B companies that have been selling online for five years or more, the percentage rises to 71%. Moreover, one-half of B2B companies surveyed report that their customers want self-service tools in order to buy via a smartphone a number that rises to 65% for B2B companies that book more than 25% of their business online. B2B companies are finding that the more they sell online and the longer they sell online, the more demand they see from their B2B customers for online and mobile product purchase environments. Make it possible to get customer service online and on mobile phones. B2B customer demands for selfservice tools are not limited to researching and buying environments. B2B customers today are increasingly expecting B2B companies to make the complete customer interaction lifecycle web-centric from the top of the marketing funnel to the bottom. For example, a majority of B2B companies currently selling direct to business partners online report that their customers want self-service tools in order to receive customer service online and on smartphones. Tellingly, 35% of B2B companies that are not currently selling online said that their B2B customers want the ability to get customer service online, and 25% said that their customers want to get customer service on their smartphones. 5 FIGURE 10 B2B Customers Want Self-Service Tools In Order To Get Customer Service Online And On Mobile Phones

10 7 Managing A Dynamic B2B Commerce Business Presents Challenges ecommerce promises to be a game changer for many B2B companies, and there is considerable upside potential for B2B companies that execute well. However, building a world-class B2B ecommerce business does come with its challenges especially in a dynamically evolving commerce ecosystem. B2B companies beginning to sell online, or those ramping up an existing ecommerce operation, must consider that: ecommerce means it s a global market requiring localization capabilities. ecommerce enables B2B companies to sell products in other countries. But by the same token, it enables B2B companies in other countries to sell products into another company s home market. Companies participating in B2B ecommerce today must understand that the market for selling anything today is effectively global. In fact, 60% of B2B companies currently selling direct to business partners online report that their customers are comfortable buying products and services from websites located in other countries. However, nearly equal percentages of B2B companies also say that their B2B customers expect to buy those products or services in a local currency (63%). In addition, B2B customers expect to use sites that are in a local language (67%) and include all relevant shipping fees/duties/taxes before committing to a final purchase price (64%). Scaling requires implementing a robust partner ecosystem. From systems integrators, to digital agencies, to augmented internal and external staffing in key roles, B2B companies must build an effective ecosystem around their ecommerce operation. However, building such an operation often requires securing sizable funding support from C-level executives never a task to be underestimated. B2B companies we interviewed were also clear about the profound challenges associated with recruiting talented ecommerce professionals to help them build a world-class organization. As one B2B ecommerce executive told us: Those people do not grow on trees, and they are hard to lure away from successful B2B ecommerce operations much less from successful B2C companies.

11 8 Key Recommendations With unprecedented numbers of B2B customers beginning the search process online at mostly big B2C and specialized B2B websites, B2B companies are being forced to rethink the fundamentals of their go-to-market strategies. For B2B companies that are early into ecommerce, this research should serve as inspiration and motivation to accelerate existing efforts. For more advanced B2B companies that are actively evolving their business models and recalibrating customer acquisition channels, this study identifies opportunities to further differentiate and gain market share. To succeed in this new, more complex, and rapidly evolving B2B ecommerce space, B2B companies must: Invest aggressively in delivering a world-class customer experience. It isn t enough to match your B2B competitors standards. B2B customers are also B2C consumers, and they increasingly expect that their B2B online customer experiences should rival the gold-standard B2C shopping experiences they enjoy today on leading B2C sites. B2B companies that want to be players on a global B2B commerce stage must recruit talent that can create robust online buying experiences as well as upgrade legacy technology infrastructure that cannot deliver a wherever, whenever commerce experience to customers across all channels. Focus on mobile as a critical channel of the future. With over one-half of B2B companies reporting that their customers are using smartphones and tablets to research purchases, as well as buy online, B2B companies simply must see mobile as an integral part of their next-generation ecommerce offering. Increasingly, B2B companies are reporting that mobile has created whole, compelling new use cases that never existed before such as harnessing new process workflows around approving purchases. For B2B companies that embrace mobile and purpose-built sites and applications for their mobile users, the mobile channel offers new in-the-field sales opportunities as well as more personalized customer service scenarios that were simply impossible or infeasible before. Assiduously woo omni-channel customers. The research is quite clear on this one: B2B companies identified omni-channel customers as their best overall customers. By converting weaker single-channel offline-only and online-only customers into omni-channel customers, B2B companies effectively transform those customers into more active, more loyal, and higher-spending customers. Nearly 80% of B2B companies currently selling direct to business partners online identified omni-channel customers as profitable customers (versus 57% of online-only customers and 53% of offline-only customers). Also, twice as many B2B companies said that their omni-channel customers were their most profitable customers as B2B companies said that either their online-only customers or offline-only customers were. Prepare for competition from all across the broader ecosystem. In today s rapidly evolving B2B ecommerce market, distributors are now selling against wholesalers, and manufacturers are competing with one another by selling direct to customers. In fact, 41% of B2B companies Forrester surveyed said that they are currently selling directly against their own wholesalers, distributors, and suppliers. We are rapidly approaching a time when most companies in the supply and demand chain will likely be selling against one another at the same time as they are partnering with one another. B2B companies must prepare for an emerging new reality wherein channel purity is eroding and co-opetition prevails.

12 9 Appendix A: Methodology In this study, Forrester surveyed 717 B2B companies across three major geographies (North America, Europe/Middle East/Africa [EMEA], and the Asia Pacific region), or an average of about 240 respondents per geography. Nearly 50% of all respondents, or 353 companies across all three major geographies, indicated that they are currently selling direct to business partners online (B2B). Each of the major geographies (North America, Europe/Middle East/Africa [EMEA], and the Asia Pacific region) produced a minimum of 100 respondents that are currently selling direct to business partners online (B2B). All respondents must represent companies that produce a minimum of $250 million in total sales annually, and must be personally responsible for, or deeply involved with, selling the company's products or services online. In addition, Forrester conducted seven in-depth interviews with a variety of B2B ecommerce professionals responsible for managing and maintaining their respective online selling organizations. Questions to the B2B survey participants focused on ecommerce and omni-channel buying behavior, incorporating tools and technologies into the buying experience, and identifying details about the internal organizational structure required to deliver world-class B2B ecommerce. The study began in May 2013 and was completed in July Appendix C: Demographics FIGURE 11 Total Online Revenue (Nearly 50% With Greater Than $100 Million In Revenue)

13 10 FIGURE 12 Company Size Total Number Of Employees (With 71% Having Greater Than 1,000 Employees)

14 11 Appendix: Endnotes Companies that book more than 25% of their B2B sales online indicated that fully 63% of their customers use consumer websites or B2B websites to purchase products.. 4 Seventy-six percent of companies that book more than 25% of their B2B sales online report that their customers use tablets to research products for purchase. behalf of hybris, September

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