Huge and potentially very profitable. Hardly digitized. Complex and underserved, at least until now. That describes the state of the global business-to-business (B2B) e-commerce market. Not many providers have been able to master the beast. Still fewer focus their energies on small to midsize businesses (SMB) trying to make their way in the digital B2B space.
The U.S. remains the main market, but the unit is eyeing overseas points as well, said Jamin Dick (pictured above), who runs Alibaba.com's North American Supply Chain. "We see this as an anywhere-to-anywhere type business," Dick said in a phone interview in late August.
Long runway, appealing profile
The digital B2B market is massive. According to a 2017 report by the U.S. International Trade Commission, the global addressable market for B2B e-commerce stood at $23.9 trillion, about six times the size of the global B2C market. In 2019, about $1.8 trillion in global B2B e-commerce was transacted, an 18.2% year-over-year increase, according to a January 2020 report by Digital Commerce 360, a research firm.
Yet B2B has been mostly left behind amid the insane rush to penetrate the generally less profitable B2C space. While it seems irrational, the phenomenon is grounded in rational actions. While it is an enormous market, B2B sourcing and trade is also complex and unstructured. Smaller players have been locked out of the market, leaving the playing field open for large trading houses. With fewer participants, the market had little vibrancy and demand would ebb.
In short, everything that made B2C viable and humming was not prevalent in B2B. "A dearth of international B2B procurement platforms that fully facilitated the entire sourcing and procurement operation was part of the cycle keeping freight offline," said Eytan Buchman, chief marketing officer for Freightos.
"Anyone, anywhere, could now, from the comfort of their basement, agilely create a global supply chain," Buchman said. "While big-box retailers were struggling to keep up with toy crazes like fidget spinners, small businesses had already sourced them and were selling them online."
As demand increased due to ease of use, big business began to digitize. This created a virtuous cycle, according to Buchman. "As importers demanded faster digital solutions, logistics providers, carriers and platforms all began to adopt digital trade capabilities," he said. The company's air cargo electronic bookings on its WebCargo freight forwarder-airline platform increased in July by 1,000% over 2019 levels, he said.
B2B from A to Z?
Amazon, Alibaba and other digital purveyors have a common goal: to disintermediate traditional wholesalers and distributors from the B2B chain. Traditional intermediaries have outdated systems, processes and technology, and have not done a stellar job in migrating to the digital world, Maciuba said. That segment of the B2B market is ripe for the digital picking, he said.
Dick of Alibaba said his company respects Amazon's B2B efforts but doesn't fear them. "Anything that Amazon gets involved in you have to take seriously," he said. "But we feel like we've been built from day one for our B2B customers, and we understand the segment better than anybody."
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