US B2B eCommerce Sales To Reach $559 Billion By The End Of 2013

Today Forrester is releasing a report entitled “Key Trends in B2B eCommerce for 2013” that, for the first time in over 10 years, sizes the US business-to-business (B2B) eCommerce market in the US.  Forrester estimates that by the end of 2013, customer-facing front-end B2B eCommerce will reach $559 billion.  This figure includes transactions placed online (independent of whether payment is taken online or not), but does exclude EDI-based commerce.

By comparison, US B2C eCommerce will be a $252B market--which would make B2B eCommerce fully twice the size of B2C eCommerce. In addition to sizing the US B2B eCommerce market, “Key Trends in B2B eCommerce for 2013” explores three important trends in B2B eCommerce for the coming year:

  • Ever-Growing Demand For B2C-like B2B eCommerce Experiences. With key B2C sites having set a high standard for what constitutes a compelling online customer experience, B2B eCommerce companies are now actively retooling their existing B2B sites or building whole new sites to deliver B2C-like eCommerce experiences.
  • Increasing Channel Conflict Between Direct Sales Organizations and eCommerce Operations. As the eCommerce option becomes a more viable alternative to a traditional direct sales model, companies are increasingly migrating their offline customers to more cost-effective, self-serve, online-only environments.  In addition, they’re now focusing their sales reps exclusively on acquiring and retaining higher-margin and higher-volume key account customers.
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15 Minutes Into The Future

I often tell audiences that if you want to see the future of B2B eCommerce, look to the present and recent past of B2C eCommerce. Be it personalization, robust search, or targeted pricing, B2B eBusiness and channel strategy professionals today are closely studying B2C eCommerce for proven opportunities to drive more business online.   

On October 25 at the Forrester eBusiness and Channel Strategy Forum in Chicago, I’ll be highlighting how the best and most innovative B2B eCommerce organizations are incorporating B2C best practices into their plans, processes, and platforms. At the Forum, I’ll be discussing: 

  •  The impact consumerization is having on B2B eCommerce. Because all B2B customers are also B2C consumers, they’re comparing their B2B eCommerce experiences with gold-standard B2C eCommerce experiences from the likes of Amazon. And like B2C consumers these days, B2B customers demand that products and services be delivered faster, less expensively, and more conveniently than ever before. The bar has been raised . . . and B2B companies must deliver.
  • How successful B2B eCommerce organizations are leveraging classic B2C eCommerce principles. Early winners in the B2B eCommerce space have successfully incorporated B2C-like personalization, recommendations, interactivity, search, self-help, and ratings/reviews into their B2B eCommerce shopping experiences. Not everything from B2C will translate perfectly, or even at all, into B2B. But much will. And much already has.  
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Lessons Learned: What B2C eCommerce Can Teach B2B

In our new report, B2B eCommerce: Going from Surviving to Thriving By Adopting Proven B2C Principles, we assess the current state of B2B eCommerce, what impact B2C has had on customers’ expectations for B2B eCommerce, and how B2B eCommerce professionals are leveraging lessons learned from B2C to drive more business online. 

We conclude that B2B eCommerce enterprises have something to learn from their more experienced B2C brethren who have set a standard for customer expectations and established a series of eCommerce best practices. A few key findings:   

  • B2B eCommerce is still in its infancy but making impressive gains. In 2009, the latest year for which data was available, the US Census Bureau reported that US B2B eCommerce (net of EDI) totaled $352 billion. By comparison, that’s over twice the size of the $145B market for US B2C eCommerce. Further, a growing number of companies now report that B2B eCommerce will represent nearly 50% of their total sales within a few short years.    
  • Consumerization is driving the B2B eCommerce experience.  All B2B customers are also B2C consumers. And like it or not, they’re comparing their B2B eCommerce experiences with gold-standard B2C eCommerce experiences from Amazon and others. And like B2C consumers these days, B2B customers demand products faster, less expensively, and more conveniently than ever before.
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AmazonSupply . . . Amazon's Camel's Nose Under The B2B eCommerce Tent?

For years the cognoscenti have speculated that Amazon would make an official move into B2B eCommerce. Well . . . they’re finally right. Just a few days ago, Amazon launched their first purpose-built B2B eCommerce site called AmazonSupply.

And yes . . . the entrenched and established e-distributers in the B2B space should be worried.  Here’s why:

  • B2C core assets are very leveragable into B2B. Online merchandising is online merchandising. Logistical support is logistical support.  World-class customer service is world-class customer service. And don’t forget about economies of scale and low prices. It can all be extended into this new space. And Amazon’sB2C infrastructure is similar enough to the infrastructure required to sell B2B that Amazon can do it -- and with relative ease.
  • Integration with Amazon’s buying process is inherently powerful. By bringing their universal login and one-click checkout to the table, Amazon’s vaunted ease-of-use and frictionless eCommerce will now live fully within AmazonSupply’s B2B offering. Customer behavior will not have to change and the user experience will remain second-to-none. Both are powerful influences. 
  • Amazon Marketplace is a force multiplier. Now accounting for nearly 1/3 of Amazon’s unit shipment volume, Amazon Marketplace has clearly established itself as a force to be reckoned with.  AmazonSupply nicely complements the already compelling Amazon Marketplace value proposition for B2B companies and further expands Amazon's B2B eCommerce story.
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Ways Manufacturers Can Drive Higher Conversion Rates Through The Online Retail Channel

In a keyword-driven Web world, brand manufacturers get more than their fair share of Web shopping traffic.  But because most manufacturers maintain a relatively small direct-to-consumer business, they largely rely on online retail partners to convert leads that originate on their websites.  Disintermediated from the final sale, manufacturers often know little about how to optimize the lead referral process that begins on their own websites.

To gain some valuable insight into how manufacturers can help optimize sales conversions downstream, Forrester teamed up with Channel Intelligence, a company that tracks the purchase path of leads from manufacturers’ websites to online retailers’ websites.  Forrester and Channel Intelligence analyzed over 44 million clicks across 150 manufacturer websites spanning two full years of closed-loop sales data (2010-2011).  In our new report, “Top Three Ways Manufacturers Can Drive Higher Conversion Rates Through the Online Retail Channel,” we identify clear best practices from the clickstream analysis.  A sample of key findings:     

  • Be direct and aggressive with “Buy” button language and placement. For example, manufacturers that put the word “buy” first on a purchase button see 53% higher average conversion rates downstream at online retail websites than those that display the word “buy” as the second or third word (e.g. Where To Buy).
  • Be maximally transparent on price.  Manufacturers that display both MSRP and actual retail prices experience a 111% higher conversion rate downstream on online retail websites than those manufacturers that show an MSRP but no actual online retail prices.
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Optimizing the Affiliate Channel for Deal-Driven Customers

With consumers increasingly looking for discounts online and flocking to horizontal coupon sites (e.g. ShopatHome and RetailMeNot), vertical coupon sites (e.g. TechBargains), and cashback sites (e.g. Ebates), eBusiness professionals face a new “coupon-driven” shopping normal. As a result, eBusiness professionals are increasingly considering, and reconsidering, the affiliate deal space as a channel for both acquiring and retaining online shoppers.

As stated in my new report, “Optimizing the Affiliate Channel for Deal-Driven Customers,” while some historical questions persist around measuring incrementality, sales crediting, and brand association, affiliate deal sites today now help eBusiness professionals address a growing number of “deal-insistent” customers by offering:     

  • Advanced targeting capabilities. Today’s affiliate deal sites have modernized to accommodate eBusiness professionals’ higher targeting, tracking, and geographic coverage standards. They now offer sort and search functionality, rich editorial content, exclusive deals, and reach into international markets.  
  • New means to optimize offers and commission payments.  Advanced technology now enables eBusiness professionals to more accurately align commissions with affiliate deal site performance.  Affiliate deal sites operating within a broader affiliate network can tie commissions to the quality of the sale and the quantity of margin available.  
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“Cyber Friday”

When we think about the Thanksgiving weekend and online sales, we’re conditioned to think "Cyber Monday."  But now there’s another online sales story to report -- Black Friday.

While Cyber Monday saw a record $1.25B in online sales this year, a somewhat underreported story was that Black Friday also set a record by bringing in $816MM– or nearly the same amount spent on Cyber Monday just two years ago.   

Increased Black Friday online sales are being driven by:

  • A behavioral shift among consumers. In 2010, 49% of consumers surveyed after the Thanksgiving holiday weekend said that they shopped less in stores on Thanksgiving weekend because they were shopping online instead. In addition, an increasing number of online shoppers report that they are now pre-shopping online for Black Friday deals.
  • High traffic throughout the weekend. This year, Thanksgiving Day took the top spot for holiday weekend online traffic, but Black Friday finished second -- edging out Cyber Monday by a nose.  Data from Experian Hitwise shows that traffic to the top 500 online retailers increased by 2% YOY on Black Friday to more than 170 million unique visits.
  • The consumer perception that better deals can be found online. 58% of US online adults say that they are more price-conscious today than they were a year ago. 48% maintained that they found better values and deals online.   
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The Unemployment Rate Fell On Friday . . . But Don’t Brace For A Surge In Holiday Spending

The US unemployment rate fell on Friday to its lowest level since March 2009 (http://www.bls.gov/news.release/empsit.nr0.htm). And on paper...that’s a very good thing. 

But before we get too excited about what that could mean for 2011 holiday spending, consider this: The reason the unemployment rate dropped from 9.0% to 8.6% in the household survey was as much due to the fact that 315,000 people gave up looking for work as that 120,000 people actually found work. It’s a big flaw in the way the US unemployment rate is calculated that the rate can actually go down (so appear to improve) when people just stop looking for work. 

(http://blogs.wsj.com/economics/2011/12/02/why-did-the-unemployment-rate-drop-5/).

The reality is we won’t know the true unemployment rate until those who’ve given up looking for work re-engage in the job hunt and fill out that total workforce denominator (at which time the unemployment rate will actually go up temporarily before then finally coming down as we start seeing that recovery).  But we’re not there yet.

The co-reported payroll employment number is a better indicator of job growth because it comes from a much broader and deeper survey called the payroll survey. But for November that number (120K new jobs created) only matched expectations and is actually below the minimum number (approximately 150K) needed to keep pace with population growth in America. So, unfortunately, not much real gain there. And sadly, there’s probably not much to say about a jolt to the 2011 holiday shopping season either.  

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The New Normal – Light Spending, Heavy Coupon Usage

A few days ago, online coupon site Retailmenot.com released results from its inaugural holiday edition Shoppers Trend Report. A combination of consumer trend data pulled from activity on Retailmenot.com and a survey by Ipsos regarding near-term consumer sentiments, the report corroborates much of what Forrester recently predicted for this year’s holiday shopping season:

  • Growth in overall retail spend will be positive but small. According to the Shoppers Trend Report, only 11% of consumers surveyed intend to increase their holiday spending.  Similarly, the National Retail Federation (NRF) and Forrester predict the U.S. will see only a marginal increase of 2.8% growth in overall retail spending this holiday season. 
  • Coupon use is on the rise. 58% of US online adults say that they are more price-conscious today than they were a year ago.  Not surprisingly, Experian Hitwise has seen downstream traffic from retailers to couponing sites grow 69% in the last three years. Similarly, Retailmenot.com has seen online coupon usage increase 23% in the months leading up to the holiday season.  Seems if there’s a deal lurking out there on the internet, price conscious consumers are out to find it.
  • Free shipping is preferred by online shoppers. 59%of US online adults say that they shop online more often with retailers that offer free shipping.  In fact, according to the Shoppers Trend Report, free shipping is the coupon promotional offer most favored by consumers – preferred by 26% of all shoppers.
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Magnificent Mile - Yes. Multichannel Mile…Still A Work in Progress

Recently two colleagues of mine, Patti Freeman Evans and Martin Gill, put their respective cities’ shopping meccas to the multichannel test.  The question: To what extent were bricks and mortar retailers on Fifth Ave in New York and Oxford Street in London using their physical stores to advertise and promote their digital channels?  

Eager not to be left out...and curious to see how my city of Chicago would fare…I paid a visit to our world famous “Magnificent Mile” to see if/how bricks and mortar retailers promoted a connection to their own digital channels.

As I walked both sides of Michigan Ave (home to retailers such as Northface, Macys and Gap…as well as high-end retailers such as Tiffanys, Louis Vuitton, and Chanel)…I thought to myself, would Chicago be different from London and New York?  Would America’s heartland have a better feel for a large and growing number of shoppers today who may physically “be” in stores but whose shopping “attention” may reside elsewhere?

Some findings:

  • Traditional Brands Disappointed.  Count among this grouphigh-end/luxury brands and more established brands (e.g. Louis Vuitton, Macys).  Which is not to say that all youth-oriented brands excelled (e.g. Zara, Disney)…in fact, a surprising number of them failed to show their multichannel chops (e.g. no URLS in store, no discernable mobile presence). For example, The Disney Store was heavily promoting the “Cars 2” movie on monitors in its store, but I could not find any links anywhere to their content-rich website.
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