When trying to create a B2B online platform, it is tempting to do things the B2C way. Probably because B2C e-commerce platforms like Amazon and Lazada have enjoyed widespread publicity. However, there are significant differences between the two that you should be aware of.

Nature of product

Consumer products are finished goods. These goods are usually manufactured by companies with some form of branding. As such, quality of products not a huge concern. Especially if the manufacturers offer some form of product warranty. To a consumer, an iPhone sold by merchant A is as good as an iPhone sold by merchant B. The only tangible difference consumers will look for is pricing.

In the B2B world, you have distributors and manufacturers. Manufacturers, unlike consumers procure raw materials for the production of finished goods. The challenge with raw materials is that the quality can be hard to judge. Also, procuring products like petrol chemicals might require some form of technical expertise. Even in the presence of industry standards and certifications, quality testing is still complex business.

For distributors of finished goods supplied by contract manufacturing, the quality assurance portion remains relevant. Distributors of purely branded finished goods are spared from the quality management process. However, they still have a whole list of other B2B concerns.

Procurement concerns

With little or no tangible difference in product quality for most consumer goods, the only differentiator is price. Coupon codes do wonders in acquiring customers and the big bang setting cash on fire approach is actually useful.

In B2B procurement, price is not the only concern. The lowest bidder does not always win the tender. Business continuity is important and hence the reliability of your source. Some will opt to have multiple suppliers to diversify risks such a supplier insolvency or trade sanctions.

Next, demand forecasting is part and parcel of any business. Flexibility in purchasing might have a high weightage for a business involved in fresh produce and perishables. Businesses that procure bulky items might be more concerned with the speed of fulfilment. As short lead times gives greater flexibility, it can potentially reduce storage costs through just in time ordering. From a cashflow and working capital perspective, businesses that trade high value items would naturally scrutinise the payment terms carefully.

Procurement process

The typical B2B procurement process involves multiple stakeholders. The person who purchases the item is not the one who uses the item. Flour for cake making usually isn’t purchased by the one baking, nor the one selling the final product. It gets even trickier when procuring services. Service quality is hard to measure and the definition of good service varies from person to person.

Each stakeholder has their own set of concerns. Operations wants something easy to use; Beancounters want the cheapest solution; Quality assurance have their standards; Purchasers need to take everything into account and procure relevant and suitable suppliers. In larger businesses, compliance and corporate governance comes into play. Therefore decision making processes have complex risks and approval matrices attached.

Taking the B2B trade online

Because the B2B trade is a highly complex one, trying to conquer everything at one go would be foolish. There are multiple stakeholders that need to deal with complex pieces of information. Hence, the strongest value proposition would be to consolidate and streamline all the information flow into a single platform.

The concerns of B2B procurement are largely similar.  It is only the weightage given to each factor that differs. The important factors are likely to be similar for the same type of businesses in the same industry. For example, distributors dealing with perishables for the F&B industry. This should give you clear guidance on the features your platform should prioritise.

Remember, B2B is never about promo codes or mobile experience. It is about streamlining a complex process involving multiple stakeholders. Online platforms and the growing API connectivity offers opportunities for vertical process integration traditional softwares have struggled to.

Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at hello@mworks.asia.

 

ad