- eCommerce Market Worth $ 6.7 Trillion by 2020
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eCommerce Market Worth $ 6.7 Trillion by 2020

Article written by Sarwant Singh, a forbes.com Contributor

 Alibaba is known for a number of achievements; the most noteworthy is the fact that it is larger than Amazon and eBay EBAY +0.61% combined – it is recording more trade volume than the two together. While this is certainly an incredible achievement, perhaps the most disruptive move the 11-year-old Chinese behemoth has made is their focus on B2B markets.

According to recent research from Frost & Sullivan, Alibaba is a pioneer of B2B eCommerce with gross merchandise value of $     27.28 billion, about 11 percent of their total; this dominant leadership position in a market expected to grow to $     6.7 trillion in gross merchandise value by 2020. This trend will make the B2B eCommerce market two times bigger than the B2C market ($     3.2 trillion) within that timeframe. With China expected to emerge as the largest online B2B market with an estimated potential of $     2.1 trillion by 2020, there is a huge opportunity for Alibaba to stamp its authority on this important and growing market segment.

But before we begin drawing parallels between the B2C and B2B eCommerce markets’ ecosystems, which sounds similar, it is important to note the key differences between the two. In B2C, sales are relatively simple. Prices are fixed, quantities are low, and shipping is easy. Very little regulation or tax complexity comes into play, and products are easy to showcase and market. In the contrasting B2B setting, prices are highly variable. Similarly, volumes are much higher, but also of a much wider range, necessitating a flexible shipping and logistics solution. Tax and regulatory concerns impact sales highly, and providers typically employ large staffs whose only responsibility is delivering products and services within these restrictions. Marketing (or as many firms prefer, “client educational initiatives”) is more complex, as clients need to understand how products work and interact with other systems they already have or are considering for purchase. The “black box” effect, where a customer buys a device without a real interest in learning how it works, barely exists in B2B, while it is dominant in B2C. For this reason, a B2B eCommerce implementation is fundamentally more complex than in a B2C environment. While this makes the successful design and implementation of a B2B eCommerce platform more difficult, it also dramatically increases the value of that system, as the problems solved are costly to address using conventional means.

The B2B marketplace is currently dominated by industry-sponsored marketplaces and consortia-led exchanges thriving on low-cost Internet platforms and harnessing the value proposition of collective bargaining/selling. In recent years, many large global corporations have started their own independent, B2B markets to migrate-specific services such as aftermarket, support or lead generation to online platforms. B2B business models vary from single firm-sponsored, e-procurement solutions and consortiums to collaborative marketplaces that aggregate demand-and-supply services. The below images show the different models in place.

Most B2B models are moving away from legacy systems that involved the use of EDI (electronic data interchange), which were expensive and cumbersome to handle, toward ubiquitous and affordable online platforms where buyers and sellers can meet from anywhere in the world on the Web to transact goods and services, using only standard PC and Internet. This transition marks a move from the “one-to-many” model, where one company had to work with many suppliers using EDIs, to “many-to-many,” where organizations are integrating their processes with e-procurement companies and pure-play online B2B retailers to automate and facilitate the purchase of their goods online.

From: http://www.forbes.com/sites/sarwantsingh/2014/11/06/b2b-ecommerce-market-worth-6-7-trillion-by-2020/



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