Choosing the Right Option in the B2B Marketplace: There Are Four Different Models for B2B between Consumer Goods Manufacturers and Retailers. the Authors Describe an Approach That Helps Managers Find out Which Model Suits Their Company Best and How to Implement It

Article excerpt

From fish auctions to furniture clearance, B2B models are now becoming important marketplaces for consumer goods companies. It is no longer a question of whether e-commerce makes sense for retailers and consumer goods manufacturers. Today's questions are: what business models and tools exist for these marketplaces? Which ones are right for my product range and formats? How and with whom should these models be developed?

Experts believe there are currently well over a thousand marketplaces for electronic trade, one in ten of which is geared to the consumer goods industry. For example, manufacturing and retail companies from all over the world use GlobalNetXchange (GNX) and WorldWide Retail Exchange (WWRE). More than 100,000 suppliers to the affiliated retailers will form the basis for future business.

Most of these marketplaces are aimed at electronic trade between companies. Surveys show that more than eight out of ten e-commerce transactions are B2B, and strong revenue growth is predicted for B2B over the next three years, especially in Europe. This means annual revenues will double, reaching more than [euro]700 billion by 2003.

Consumer goods still lag behind the general trend towards e-commerce. In other industries such as automotive or utilities, one in thirty transactions between companies is concluded online, versus just one in a hundred in the consumer goods industry. But the pace is picking up: growing at a rate of 100 per cent per annum, consumer goods companies are moving their sales online twice as fast as the average increase in B2B in other sectors. Analysts, like Forrester Research, predict that one in eight transactions will soon be carried out via the Internet.

[FIGURE 1 OMITTED]

[FIGURE 2 OMITTED]

But e-commerce is not simply the continuation of trade by other means. In the medium term, developments in individual product assortments and retail formats will bring about major changes to the structure of the industry. Companies are having to adapt their strategies individually, and to do this, they need a clear understanding of Internet business models. They can find the model that's right for them by using two parameters: their transaction efficiency and their market efficiency.

Understanding B2B business models and tools

B2B models in the consumer goods industry can be a good fit at various stages of the 'value chain' that links manufacturers and retailers. But which party gains control and puts its stamp on the model depends mainly on the balance of power among participants. Given retailers' dominance in Europe, it is they who are likely to press through their objectives in e-commerce. It therefore seems natural to examine the trends from the retail perspective.

Each of the B2B models has its own technical tools and opportunities. They range from information systems, catalogues and auctions to online consortia and can involve everything from bilateral e-trade between equal partners and platforms operated by manufacturers or retailers to networks with many partners (Figures 1 and 2).

In the past, retail companies set up links with manufacturers to handle some of their transactions using EDI via telecommunications networks, or via exclusive Value Added Networks (VAN). These models are now gradually being transferred to the Internet. VAN is being replaced by the World Wide Web in the form of 'Internet-EDI'. The next stage is XML (eXtensible Mark-up Language), which is being used to link merchandise information systems via the Internet ('XML-EDI'). In addition, browser solutions, termed 'Web-EDI,' will be implemented to tie in small suppliers. Both Web-EDI and XML-EDI alternatives are much leaner, more efficient, and cost-effective than existing EDI standards and techniques. For example, Metro AG currently concludes 60 per cent of its orders electronically.

Dominant retailers are beginning to use 'buyer-centric' platforms. …