Breaking Down Barriers to B-to-B Online Commerce

B-to-B commerce organizations have always operated in a complex multichannel world. Engaging customers in this world remains increasingly complicated. It requires a focus first on breaking down barriers — i.e., taking the necessary steps to minimize channel conflict with internal sales teams and outside partners and then going directly to the business buyer. For companies that can move nimbly to navigate the channel complexities and bring value directly to the business buyer, the future has never looked brighter for B-to-B online commerce.

The B-to-B Online Opportunity
B-to-B online commerce continues to grow at a tremendous clip. According to a recent report from Forrester Research, in 2009 — the latest year for which data was available — the U.S. Census Bureau reported that B-to-B online commerce totaled $352 billion, net of electronic data interchange (EDI). That's up from just $25 billion in 2000, a 34 percent compound annual growth rate in nine years. In addition, many B-to-B companies predict that e-commerce will soon comprise 50 percent of their total sales.

Challenge Dominates the B-to-B Ecosystem
As great as the B-to-B online opportunity is, so are some of the challenges in deploying a successful B-to-B program. One of the biggest barriers may be your own organization. An existing channel strategy and architecture often looms as the most formidable obstacle. Many organizations aren't structurally or culturally ready for the challenges of a robust, direct-to-business-buyer e-commerce operation.

In a sense, with any direct-to-business-buyer sales effort, channel conflict is unavoidable. Many businesses were built largely on the strength and growth of their traditional channel strategy. The sales pipeline, its accompanying organizational structure, and incentives and compensation are specifically designed to funnel sales efficiently and in large volumes.

Attempting to bypass any partner in your channel operations by going direct-to-business-buyer could conceivably threaten to upend an established and, potentially, well-functioning system. If carried out strategically, however, a well thought out B-to-B e-commerce plan can provide the best of both worlds: opening new revenue sources while boosting the success of the entire organization and all of its channel partners.

Keys to Optimizing Your B-to-B Model
Evolving your channel strategy to go direct to buyer requires a nuanced approach that fits your overall company goals and appetite for risk. The following three areas of focus can unlock significant additional revenue from your B-to-B e-commerce program:

1. Improved user experience. Customers’ expectations for B-to-B online commerce have dramatically shifted and continue to evolve rapidly. Just like everyone else, your customers are spending time — whether work or personal — on social networks and retail shopping sites. B-to-C sites are increasingly setting the bar for B-to-B brands in terms of the level of customer service, ease of navigation and overall online shopping experience that users look for, whether in a B-to-B or B-to-C setting.

Understanding how your business buyers are shopping means meeting their desire for a richer, deeper browsing experience. One area where B-to-C e-commerce sites typically excel is in their ability to gather relevant data and provide recommendations tailored to each shopper. Knowing the right products or bundles of products to place in front of your business buyer opens tremendous opportunities for upselling, cross-selling and cross-promotion.

2. Subscription and renewal revenue. Your relationship with a business buyer doesn't end at the initial sale. In fact, it's only beginning. That said, marketing channels usually focus on landing that initial sale. They often overlook the customer lifecycle, ignoring opportunities for follow-up sales and other ongoing revenue streams such as subscriptions and renewals.

This occurs for a number of reasons: sales may fall below minimum order sizes; sales cycles are different; compensation structures don't create sufficient incentive to pursue renewals; etc.

Nonetheless, an attempt to capture subscription revenue through direct-to-business buyer sales is likely to be viewed as a channel conflict. Some of your sales teams and/or channels may feel threatened that they're being asked to give up their customers and in the process lose opportunities for future sales.

The reality is that many resellers aren't set up to manage subscription and renewal sales. A direct online channel can more effectively service those customers. Your resellers can be compensated for the loss in potential sales through an annuity-like revenue stream. I've seen some leading-edge businesses employ this type of arrangement, resulting in improved renewal rates, lower channel costs and closer relationships with customers — all while freeing up resellers to pursue larger, more lucrative sales.

3. Closing open niches. The various B-to-B sales channels that companies rely on can deliver significant value doing what they do best — pursuing enterprise sales and large group orders. These channels may also be leaving significant money on the table by neglecting smaller orders, however, everything from small businesses to individual orders from inside large organizations.

In fact, some of the sales channels companies rely on, both internally and externally, to deliver revenue are typically built to focus on large orders. Their compensation structures, order processing, sales training and management are specifically designed towards that. Some channels, whether resellers or internal sales teams, often have minimum order size requirements.

Capturing smaller customers and their orders requires coordinating ordering, payment processing, invoicing and supply chain with your existing infrastructure. When done correctly, untapped niches can result in significant new revenue streams as well as invaluable one-on-one relationships with business buyers.

Evolving the Ecosystem
Many retailers also struggle to adapt their internal sales channels because they've become dependent on the existing ecosystem. At a certain point it becomes somewhat of a bottleneck, however, restraining businesses from fully realizing the opportunities for sales and preventing channel evolution.

Business buyers are rapidly evolving in terms of where, when and how they want to make their purchases. Your e-commerce ecosystem needs to evolve with them in order to meet those changing expectations. In an increasingly competitive market landscape, you need to ensure that you're not only capturing those purchases, but also maximizing the revenue potential from each sale.

Optimizing B-to-B e-commerce can be challenging. It requires buy-in from many parts of the organization as well as outside partners with whom you have long-standing relationships. Some proven methods that can help bring about the organizational shift needed to achieve a successful B-to-B online commerce strategy include the following:

• Understand where your business has been and where your customers are going. How have you handled customers within various buyer segments? What do analytics tell you about where your customers and their buying patterns are going? How can your business use a direct B-to-B buyer approach to address unmet needs?
• Identify where power resides within your business. What are the biggest sales channels? Who "owns" each revenue stream? Every company needs to have the proper balance of where their revenue comes from, both internal and external sales channels. Spend the critical time needed to determine what your ideal balance is now and in the future.
• Find an "internal champion" and a "channel champion." See which leaders are open to learning about how B-to-B e-commerce can drive success for your business. Find someone willing to advance the idea in the C-suite. Is there a key reseller, distributor or strategic channel partner willing to work together to create a win-win situation?

While there are significant challenges in successfully implementing such a B-to-B strategy, they're likely organizational and can be overcome by creating a realistic and tangible vision for your business. By starting with a clear focus on addressing channel conflict issues and then taking the steps to go directly to the business buyer, your organization will be better armed to address channel complexities and ultimately generate more online revenue.

Michael Chuma is director, global product management, B-to-B at Digital River. Michael can be reached at mchuma@digitalriver.com.