The High Tech Office: Business to business selling on
the Net poised
to take off
by Alan Zisman Nov 11 1997
While many have been focussing on the growth of direct
sales over the
Internet, commerce between companies over the Net may be poised to take
off. According to a recent report, ?The total value of goods and
traded between companies over the Internet will reach $8 billion this
and $327 billion in the year 2002,? according to Cambridge, MA
Their recent survey of 150 companies found that 63 were already
actively conducting business over the Net, and that for those
Net-based business-to-business activities had tripled compared to last
year. Companies report that they?ve reduced order-processing time and
and improved information flow. One distributor, for example, reported
it was two-thirds less expensive to process an order over the Net
to using phone-based salespeople. Another business reported that by
information on-line, costs of printing and shipping were reduced, while
customers received the information immediately.
The job of salespeople changes? they become account
than order-takers. Customers spend less time on hold, by being able to
access the company Web site seven days a week, 24 hours a day.
While it?s a relatively simple process to place
and catalogues on-line, building a complete commerce-ready system is
difficult; many businesses are implementing such sites in
adding secure mechanisms to receive and confirm payment, to allow
to track orders, and even, where feasible, to deliver product.
Unlike the ?Field of Dreams? cliché, ?Build it and
come?, it?s not enough to simply create a Net-based commerce site. It
time to get clients to move from a personal relationship with a
to an Internet-based system. Companies that were successful actively
out the lower prices and better information that could be obtained
Three groups of businesses are in the lead in this
growth of business-to-business
sales. Companies involved range in size from industry giants to smaller
¨ Manufacturers: Durable goods producers will account
for over a
third of the Internet business trade this year, with the electronics
aerospace industries particularly making use of this channel. Apparel,
business forms, and other non-durable producers are lagging behind.
expects annual durable goods sales over the Net to jump to $99 billion
over the next five years.
¨ Distributors are making increasing use of the Internet channel,
which is seeing activity ranging from computer suppliers like MicroAge
to office supplies distributors like Boise Cascade. On-line auctions
connecting buyers and sellers.
¨ Services and Utilities: $2 billion of crude oil and natural gas
will be traded over the Net this year, though Forrester predicts
slow growth in on-line sales by the energy sector. Not surprising,
sales over the Net is growing, with predictions that 50% of all such
will take place on-line within a few years. Despite increased use of
Net by courier firms like FedEx, the transportation area in general,
will account for only a tiny fraction of on-line sales. Service
in general can be expected to increasingly provide information on-line,
but will rarely be using this channel to generate sales.
As sales continue to increase, Forrester expects that
see generally higher profits, but that increased Net-based competition
will result in at least some of these profits plowed back to customers
as lower prices. Increased on-line competition will also require better
on-line services. Expect to need to eventually provide on-line order
payment verification, inventory status, and shipping date confirmation.
As well, expect a blurring between wholesaler and
retailer, as each
uses the Net to move into the other?s turf. Computer distributor Ingram
Micro, for example, lets end-users compare features and prices for
products from 100 manufacturers, all on-line.
Dell Computers has been cited as a model; they are
about $1 million worth of business from home and small office customers
over the Net each day. This represents only a fraction of last year?s
billion in sales for the company, but they expect their on-line sales
jump dramatically when they begin to offer a way for larger businesses
to place orders for custom configurations and pricing.
Another model is FastParts. They are one of several
enterprises, in this case, specializing in semiconductors. Over 300
firms use their services to anonymously buy and sell to one another,
transactions that range from North America to Europe to Hong Kong.
reports that arranging the sale is easy?the tough part is fulfilling
order. They arrange shipment of the goods, then hold the payment for
days to allow for buyer inspection.
Just as e-mail accounts for an increasing proportion
of business communication,
expect the Net to provide an increasingly dynamic and profitable
for business-to-business sales. Ignore it at your company?s peril.