Is your B2B Company missing out on the $6.7 Trillion B2B E-Commerce Market?

Global trends on B2B E-Commerce, Digital B2B Purchasing Behavior, and Strategic Advice for Next Generation B2B Tycoons in the Philippines & Southeast Asia | Taikuun.com B2B Insights

Jig Young, Taikuun CEO

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September 12, 2018

Hi, I'm Jig, and I left school for a year to become a Product Manager for Marketplace Growth at a Y Combinator Startup based in Manila -- where I helped it grow to 600k users, expand to Indonesia, and build enterprise products that contributed to 30% of our revenue in Q3.

Currently, I'm the co-founder of Taikuun, a business to business marketplace for domestic transactions in Southeast Asia. We're making it significantly easier to find and get quotations from local service providers (cold storage, freight forwarding, customs clearance agents, etc) and suppliers (construction equipment, industrial supplies, heavy duty machinery, etc). For sellers, we increase their revenue by bringing them online sales while serving as their digital marketing department.

With that said, I'd like to personally welcome you, a next-generation B2B Tycoon to our 1st blog post on Taikuun Insights, where we share stories, case studies, best practices, and research on business to business (B2B) E-commerce & trade in the Philippines and Southeast Asia. We built the blog to share to you the various insights we've gained from our products and services as we constantly refine our knowledge during the customer and product discovery phase of our startup.

Our goal is to equip you not only with world-class Information Technology (IT) products and services but also with world-class skills and insights that help you get ahead of the competition.

Today, we will discuss global B2B E-Commerce trends on digital and mobile, share data regarding rapidly changing B2B purchasing habits, and explore why your B2B company (may it be in Manufacturing, Wholesaling, or 3rd party logistics) should start investing the time and resources in B2B E-Commerce and digital marketing strategies in order to thrive within the next 5 to 7 year time horizon.

Definition of B2B E-Commerce
In Taikuun, we differentiate B2B E-commerce on the basis of the front-end purchasing experience:  the (1) entry point of purchaser and/or (2) transaction occurs on the web, third-party platforms such as a marketplace, a company website, or social media. For our mental model, the more consumer-like / web 2.0 -- the experience, the more closely it fits our definition and understanding of B2B E-Commerce.

[EDITED: Thanks to clarifications from our readers, we've added a more detailed definition and caveats of our sources to the blog post on the article below]

What are the Global B2B E-Commerce Trends? 

According to Frost & Sullivan,
Global B2B E-Commerce is expected to reach 6.7 Trillion USD in transaction value by 2020. Interestingly, as much as we are bombarded by Shopee and Lazada ads, B2B E-Commerce is projected to be twice the expected value of Business to Consumer (B2C) E-commerce market. All around the world, manufacturers and wholesalers are switching from legacy systems to online platforms in order to capture the value being generated online. Domestic B2B marketers and new entrants need to actively strategize around how they can capture the present and more importantly future value being generated online.

In the US, Forester shares to us that they estimate B2B E-Commerce to reach 1 Trillion USD in sales with an average year-on-year growth of 8%. Given that emerging markets such as Southeast Asia generally follow the same trend as the US & China in terms of digital growth, the next generation of B2B Tycoons will be made within the digital theater of war.


Mobile & Digital are rapidly growing sales channels

In 2017, Boston Consulting Group and Google published a report that states that for leading B2B Marketers,
mobile engagement is already driving 40% of their revenue. BCG reports that mobile experiences increase the speed of B2B Purchase by 20% and that positive mobile experiences result into recurring purchases.

In 2013, the average monthly spend on online B2B Purchases in the United States per company was at 5,000 USD or 250,000 PHP.  Given that emerging markets such as the Philippines are catching up to more mature E-Commerce markets like the US, we can expect a similar expenditure currently being transacted online. Taikuun customers are keenly aware that not taking part of digital sales is leaving money on the table.

What are the Global B2B Purchasing Trends? 

B2B purchases are rapidly being driven by online search and research.

Forrester reports that 64% of B2B Purchasers conduct research on more than half of their purchases online, with 38% completing the business to business purchase via an online transaction. By observation and through your own experience, you or your purchasers in your company have probably googled an item, a company, and a brand before conducting a B2B purchase.

In fact,
71% of purchasers begin with a generic query of branded and category searches (i.e “hardware supplier in Manila or cold storage provider in Jakarta”), rather than searching immediately for a company.

So what does this all mean for your business? How can you leverage this information to your immediate advantage? An actionable step you can take right now is to go on Google and run a generic search for products and brands that you sell -- note if your business comes out on the first page of the search results. And if your company does not show up on the first page, this means your prospective buyers are more likely to see the competition and/or other brands.

For Taikuun clients who want to be aggressive and not get left behind, we recommend investing in the customer & user experience of your company website on desktop and mobile as a good place to start. After which, you should consider building your Search Engine Optimization (SEO) strategy to ensure that your company and brands are at the top of Google searches for your products. Lastly, investing in 3rd party marketplaces such as Taikuun and Alibaba to digitize your company and open itself to B2B sales is a great way to capture the sales value being generated online.

Mobile generates more traffic, leads, transactions, and revenue for B2B Businesses

In May 2018, Google and the Boston Consulting Group reported that 50% of B2B search queries are made on smartphones and that number is projected to be 70% by 2020.

In the figure below (taken from BCG & Google ), we see that B2B Market leaders who have amazing mobile experiences are capturing 2x more value on search queries, 2x more traffic, 3x more leads, and 8x more transactions.

How can future tycoons, such as yourself, act on this information? Deep investments and strategic thinking around your mobile strategy will be critical for your business: not only for it to thrive but also to simply survive.

The quick action you can take is to simply go on your company website on your phone, and check  if it is mobile-optimized. How about if you use the phone of a friend or family member? What kind of brand experience are you communicating on the mobile form factor? Does it suck? Does your mobile experience make your company look trustworthy and competent? Would you buy from it? Moreover, getting your company website mobile optimized is an easy win when you want to rank higher on google’s search engine! (more actionable insights on this later on!)


Amazing mobile experiences generate recurring revenue for B2B Businesses

The same Boston Consulting Group study shows us that B2B Marketers who have great
mobile experiences cut the purchasing & sales cycle from 89 days to 49 days. B2B companies who make the strategic shift to mobile and digital will experience significant cost savings in overhead and drive down their cost of sales in terms of financial, time, and cognitive resources.

Moreover, investing in a great user and customer experience drives real results towards repeat purchases -- investing in mobile experience is the modern equivalent of investing in cakes & dinners during the sales process.  

B2B buyers expect & demand Shopee / Lazada  consumer-like purchasing experiences

With the rise of adoption of business to consumer (B2C) platforms such as Lazada and Shopee in the Philippines, a growing mobile penetration rate, and Ant Financial investing millions of dollars in Mynt to power mobile & digital transactions, B2B buyers demand greater user and customer experiences when interfacing with your website, online sales representatives, and online customer support teams (if you even have any).  

The B2B companies of tomorrow will be able to deliver on such product and service qualities either through competency building within their own organisation or by hiring third parties such as Taikuun for domestic trade and Alibaba for import/export to support their digital marketing, sales, and relationships.


Purchasers are getting younger

As digital natives take over the workforce and the purchasing departments, the demand for higher fidelity product experiences alongside seamless, contextual, and powerful browsing of online B2B catalogs becomes increasingly more important. The B2B companies who utilize and optimize their companies to operate within the theaters of war of Google Search, company websites, third-party websites, user reviews of their products and company, B2B blogs, and social media will be the B2B companies who capture the purchasers of tomorrow.


Your company websites are not delivering results  

According to Accenture, even if 87% of purchasers use your company website to research, only 37% feel that it was actually helpful.  As consumer-like experiences are being replicated in B2B Purchasing, the need for reviews, ratings, and more comprehensive product information supplemented by third party verification processes are becoming more and more critical for our domestic trade markets. We have yet to replicate the trust of business to consumer E-Commerce transactions to B2B E-Commerce transactions in the Philippines. Taikuun is building towards becoming the mobile-first marketplace that can fill the gap for domestic trade.


What’s the Bottom Line? “B2B Digital leaders drive five times more revenue growth than peers”

A report from Mckinsey & Company, outlines that B2B companies who have committed to digital strategies and have consistent online and offline experiences for buyers, outperform their peers on revenue growth by 5x, operating profit growth by 8x, and return to their shareholders by 2x.
The next generation of B2B Tycoons will capitalize on digital strategies on a sales and consumer experience level and not only on the level of using digital tools to reduce cost. They will be providing consumer-like experiences for B2B purchasers.This integration and investment in the digital sales and customer experience will increase turnaround time for quotes, improve handoffs from customer facing teams to operations, and overall increase recurring revenue.

This shift to B2B Mobile-first E-Commerce experiences will allow new entrants to challenge incumbents.


Final notes as we kick off the Taikuun Blog

For B2B incumbents in the Philippines (traditional family businesses), you must commit to set your next generation up for success by empowering and supporting the second and third generation business owners who want to take on digital strategies.

For second generation and third generation business owners who are reading, have courage. Do not waver -- especially when you believe that a new IT system and digital marketing / sales strategy  should be implemented. Relentlessly defend, pursue, and implement. Run a cheap test and show results.

Lastly, for the next generation of B2B Tycoons, software is leveling the playing field in emerging markets. You have a window of opportunity to disrupt the incumbents using technology by partnering up with organisations who can provide you with the tools and the insights to get ahead of the competition.

If you want to stay tuned about our updates regarding our research, case studies, and product releases --  subscribe to our newsletter!

Our next posts will be about domestic trade data, case studies on how machine learning can improve your inventory management, and more B2B E-Commerce tips!
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Thank you to the following for helping proofread and clean.
Alec Wang, Casper Chan, Luis Gan, Sigmund Ty, Paul Rivera, and Dianne Ashley Tan

Thank you to Jerome Uy @ Medgrocer for asking us for clarity on the definitions used and for reminding us that we should responsibly be communicating the caveats of our sources.

Edits: B2B E-Commerce Definition

[edited September 17, 2018]
Frost & Sullivan, the team behind the 6.7 trillion projection, defines B2B E-Commerce through description and context: “Business-to-business (B2B) online retailing has been witnessing strong growth due to the rapid migration of manufacturers and wholesalers from legacy systems to open, online platforms. As legacy systems involve the use of electronic data interchange, which is expensive and cumbersome to handle, B2B models will continue to move towards ubiquitous online platforms that allow buyers and sellers from anywhere in the world to transact goods and services with ease.” [
https://ww2.frost.com/news/press-releases/global-b2b-e-commerce-market-will-reach-67-trillion-usd-2020-finds-frost-sullivan/ ]

A more concise definition comes from Forrester who uses Frost & Sullivan as a source, the team defines B2B eCommerce as “purchases made online but through non-EDI (Electronic Data Interchange) traditional methods” -- EDI systems are legacy systems such as Oracle that layer on top of the Enterprise Resource Planning system. It is more of a back-end process occurring through digital space, rather than a consumer-like facing experience.

In Taikuun, we differentiate B2B E-commerce on the basis of the front end experience:  the (1) entry point of purchaser and/or (2) transaction occurs on the web, third-party platforms such as a marketplace, a company website, or social media. For our mental model, the more consumer-like / web 2.0 -- the experience, the more closely it fits our definition and understanding of B2B e-commerce.

Where do the lines blur?

The definition is blurred specifically for an email based transaction. When the entry point for a purchaser begins on a company page or social media site and is collaborated on and transacted via an e-mail -- would we consider this a B2B e-commerce sale? Based on a rereading of the reports and our own limited understanding, it seems to be so.

We have to nuance that the main emphasis of the reports from BCG and Mckinsey are about the improvement of B2B digital sales and marketing channels (search engine optimization, company websites, third-party marketplaces) alongside the online behavior of purchasers on mobile and desktop.

We concede that the sales process post-entry point is still very complex and will need a great blend of offline & online experiences. At Taikuun, the eventual use case we want to build for and support are complex B2B transactions within specific industries. We want to be the backbone of an integrated online & offline sales and purchasing experience.

Another caveat to the market projections

It is misleading and irresponsible for us to bulk all categories and industries into one B2B E-Commerce projection. The reports we found do contain differentiation of categories and industries; however -- the information is sitting behind a paid wall of $500 per article. We will surely update the blog (either through revision or thru new posts) as we get more accurate data.
Sources: 

"The Global B2B E-commerce Market Will Reach 6.7 ... - Frost & Sullivan." 9 Apr. 2015, https://ww2.frost.com/news/press-releases/global-b2b-e-commerce-market-will-reach-67-trillion-usd-2020-finds-frost-sullivan/. Accessed 10 Sep. 2018.

“US B2B eCommerce Will Hit $1.2 Trillion By 2021” 5 June. 2017

State of B2B Ecommerce in ANZ, Southeast Asia and India, downloadable here: https://hello.econsultancy.com/b2becommerce/
VIEW ALL SOURCES
"The Global B2B E-commerce Market Will Reach 6.7 ... - Frost & Sullivan." 9 Apr. 2015, https://ww2.frost.com/news/press-releases/global-b2b-e-commerce-market-will-reach-67-trillion-usd-2020-finds-frost-sullivan/. Accessed 10 Sep. 2018.

“US B2B eCommerce Will Hit $1.2 Trillion By 2021” 5 June. 2017, https://www.forrester.com/report/US+B2B+eCommerce+Will+Hit+12+Trillion+By+2021/-/E-RES136173?objectid=RES136173

State of B2B Ecommerce in ANZ, SOutheast Asia and India, downloadable here: https://hello.econsultancy.com/b2becommerce/

"Mobile Marketing and the New B2B Buyer - BCG." 29 Sep. 2017, https://www.bcg.com/publications/2017/marketing-sales-digital-go-to-market-transformation-mobile-marketing-new-b2b-buyer.aspx. Accessed 10 Sep. 2018.

Create a forrester account and log in to access: https://www.forrester.com/report/Make%20Your%20B2B%20Business%20A%20Digital%20Business/-/E-RES89642

The Changing Face of B2B Marketing - Think with Google." https://www.thinkwithgoogle.com/consumer-insights/the-changing-face-b2b-marketing/. Accessed 11 Sep. 2018.

"Mobile Marketing and the New B2B Buyer - BCG." 29 Sep. 2017, https://www.bcg.com/publications/2017/marketing-sales-digital-go-to-market-transformation-mobile-marketing-new-b2b-buyer.aspx. Accessed 11 Sep. 2018.

2014 State of B2B Procurement Study: Uncovering the Shifting Landscape in B2B Commerce. (2014). Retrieved September 11, 2018, from https://www.accenture.com/t20150624T211502__w__/us-en/_acnmedia/Accenture/Conversion-Assets/DotCom/Documents/Global/PDF/Industries_15/Accenture-B2B-Procurement-Study.pdf

"How B2B digital leaders drive five times more revenue growth than ...." https://www.mckinsey.com/business-functions/marketing-and-sales/our-insights/how-b2b-digital-leaders-drive-five-times-more-revenue-growth-than-their-peers. Accessed 11 Sep. 2018.


HIDE SOURCES

Jig Young

Chief Executive Officer at Taikuun

Product Manager for Marketplace Growth  @ YC Startup, PM for Indonesia Expansion @ YC Startup, PM for Seach Engine Optimization & Referrals @ YC Startup

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Your B2B Company is missing out on the $ 6.7 Trillion B2B E-Commerce Market

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