B2B e-commerce — 3L-Initiatives

B2B E-commerce

ALBRIGHT AND WILSON AUSTRALIA (AWAL) is considering the introduction of a new e-commerce channel to market. AWAL provides commoditised products with significant technical support to significant proportion of the surfactant and phosphate market and in particular already services all the large volume customers. E-commerce is seen as a potential new channel to access new customers and therefore grow revenue. However, this new channel is unknown to AWAL and therefore presents both risk and opportunity.

B2B E-commerce is a growing proportion of global buyer-supplier transactions. Most businesses developing an e-commerce relationship, whether supplier or buyer, will be forced to make strategic, cultural, organisational and process changes to accommodate this new virtual business connectivity.

Global chemical businesses such as Dow, BASF and Eastman, have each developed strategies which have led to the adoption of quite different e-commerce models. These businesses report up to 50% of sales are occurring through one of several e-commerce platforms. However most available independent data suggests that this level represents aspirational targets and the true level of incremental revenue in the chemical industry is approximately 10% achieved over three years of operation. Given the competitive environment there is also an element of sales protection as without the platform customers with a preference for ecommerce and a demand for a commoditised product will choose another supplier

AWAL appears well suited to an e-commerce strategy. There is strong correlation between operational performance improvement using e-commerce in low growth high competition manufacturing environments and the more standardised the product the more suitable the product is to an on-line procurement strategy.

While this provides an indicative level of sales upon which Albright & Wilson could base a business case further steps can be taken to confirm potential adoption rates. This will require assessing targeted customers against factors which indicate their likelihood to adopt e-commerce.

Based on the analysis Albright & Wilson should consider an aggregated, independent website as the most likely effective channel to market. However, the initial implementation may take a simpler form while web design, business processes and organisational cultural issues are addressed in a low risk environment.

While Albright & Wilson may be driven by the opportunity to grow revenue in a low cost environment, encouraging adoption of the site requires the identification and responsiveness to the customer need being resolved by an e-commerce solution. For a business customer the drivers are transaction cost and time, product cost and supporting information. To meet these needs and encourage adoption the following recommendations should be considered:

Consider a site which is not branded directly as Albright and Wilson to accommodate the inclusion of other products and service to create a broad purchasing base for the buyer, thus reducing the buyer’s overall transaction costs.
Consider customer volume aggregation options in the web site design which could generate cost reduction that could be (partially) passed to customers creating incremental margin growth but reducing the product cost to the customer.
Consider B2C website design features to ensure key issues of website effectiveness such as organisation, interactivity, information and personalisation reduce the time taken to identify and purchase the product required.
Recognise the website will perform both sales and marketing functions and market the site to the multiple influencers of purchasing decisions within a business context and thus support the need for information.

By preparing and educating customers for on-line purchasing process Albright & Wilson needs to be concerned that customers do not migrate to other platforms such as global chemical markets. Strategies should be established to prevent the erosion of new market gains including monitoring of trends in website design and available complementary products. This reinforces the need for Albright & Wilson to consider a strategic multilayered approach to the implementation of a digital sales channel.

In summarising these various elements it is possible to develop a B2B e-commerce assessment model which will support a decision to invest in an e-commerce solution. This model includes existing market share, business readiness, market readiness, customer readiness and investment to quantify the potential success of an e-commerce platform.

For many businesses this presents two compelling reasons to build a B2B e-commerce strategy. Firstly, implementing a B2B e-commerce strategy will present an opportunity to grow sales, although the revenue growth may not necessarily achieve typical investment hurdle rates. However, a business embarking on a B2B e-commerce project is developing the internal skills and capacity to meet inevitable prospect of digital business interaction becoming the business norm. AWAL should consider the introduction of an e-commerce channel as part of an overarching sales channel strategy incorporating sales growth and security rather than a stand-alone activity.