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Chapter 5
B2B E-Commerce
Learning Objectives
1. Describe the B2B field.
2. Describe the major types of B2B models.
3. Discuss the characteristics and models of the
sell-side marketplace, including auctions.
4. Describe the sell-side intermediaries.
5. Describe the characteristics of the buy-side
marketplace and e-procurement.
6. Explain how reverse auctions work in B2B.
7. Describe B2B aggregation and group
purchasing models.
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Learning Objectives
8. Describe other procurement methods.
9. Define exchanges and describe their major
types.
10.Describe B2B portals.
11.Describe third-party exchanges.
12.Describe how B2B can benefit from social
networking and Web 2.0.
13.Describe Internet marketing in B2B, including
organizational buyer behavior.
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Concepts, Characteristics, and Models of B2B ECommerce
• business-to-business e-commerce (B2B EC)
Transactions between businesses conducted
electronically over the Internet, extranets, intranets, or
private networks; also known as eB2B (electronic
B2B) or just B2B.
• Market size : (12 trillion by 2012)
• Leading items: chemicals, computer electronics,
food, office products, motor vehicles, …etc
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Concepts, Characteristics, and Models of B2B ECommerce
• THE BASIC TYPES OF B2B E-MARKETPLACES
AND SERVICES
– One-to-Many and Many-to-One: Private EMarketplaces
• company-centric EC
E-commerce that focuses on a single company’s buying
needs (many-to-one or buy-side) or selling needs (one-tomany or sell-side).
• (IS and participants) are controlled by individual sellside or buy-side
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Concepts, Characteristics, and Models of B2B ECommerce
– Many-to-Many: Exchanges (public e-marketplace)
• exchanges (trading communities or trading
exchanges)
Many-to-many e-marketplaces, usually owned and run by
a third party or a consortium, in which many buyers and
many sellers meet electronically to trade with each other.
• public e-marketplaces
Third-party exchanges open to all interested parties
(sellers and buyers).
– Supply Chain Improvers and Collaborative Commerce
• Hub manager
• Not just buying and selling.
• Collaborative Commerce: Communication, design, planning,
and information sharing among business partners
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Concepts, Characteristics, and Models of B2B ECommerce
• B2B CHARACTERISTICS (qualities)
– Parties to the Transaction: Sellers, Buyers,
and Intermediaries
• Can be conducted directly between a customer
and a manufacturer or by an
• online intermediary
An online third party that brokers a transaction
online between a buyer and a seller; may be virtual
or click-and-mortar. Distributors or wholesalers
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Concepts, Characteristics, and Models of B2B ECommerce
– Types of Transactions
• spot buying
The purchase of goods and services as they are
needed, usually at prevailing market prices.
• strategic (systematic) sourcing
Purchases involving long-term contracts that
usually are based on private negotiations between
sellers and buyers.
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Concepts, Characteristics, and Models of B2B ECommerce
• Types of Materials Traded
– direct materials
Materials used in the production of a product
(e.g., steel in a car or paper in a book).
– indirect materials
Materials used to support production (e.g.,
office supplies or lightbulbs). They are used in
activities that support production maintenance, repair, and operation (MRO)
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Concepts, Characteristics, and Models of B2B ECommerce
– The Direction of the Trades
• vertical marketplaces
Markets that deal with one industry or industry segment
(ex: steel, chemicals, cars, electronics, hospital supplies).
• horizontal marketplaces
Markets that concentrate on a service, material, or a
product that is used in all types of industries (e.g., office
supplies, PCs, travel services).
• SUPPLY CHAIN RELATIONSHIPS IN B2B
The use of business-to-business electronic commerce is
generally a part of existing supply chains that are used to make
them more efficient.
Used in acquisition of material, processing, packaging,
moving
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Thu 10-4 Concepts, Characteristics, and Models of
B2B E-Commerce
• SERVICE INDUSTRIES ONLINE IN B2B
– Travel and hospitality services
– Real estate
– Financial services – EFT payment
– Online financing – online business loans
– Other online services – consulting, law firms,
health organizations
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Concepts, Characteristics, and Models of B2B ECommerce
• THE BENEFITS OF B2B to Buyers (B), Sellers (S),
or Both (J)
• Limitations include channel conflicts and no face-toface interaction
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One-to-Many: Sell-Side E-Marketplaces
• sell-side e-marketplace
A Web-based marketplace in which one company
sells to many business buyers from e-catalogs or
auctions, frequently over an extranet.
The major types of B2B sell-side transactions
include selling from electronic catalogs, selling
through forward auctions and one-to-one selling
(Negotiation)
– B2B Sellers: click and mortar: Distributors or wholesalers OR
pure online
– Customer Service: GE used SW agent to respond to million
calls. Cost per call dropped to $0.2 instead of $5
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One-to-Many: Sell-Side E-Marketplaces
• SELLING FROM CATALOGS – The most common sell-side method
–Ex: MS sells over $60 billion SW to distributors over
extranet.
–Benefits: Lower order processing costs, a faster
ordering cycle, fewer errors, lower search costs for
buyers/sellers, lower logistics costs, and
customization options.
–Limitations: how to attract buyers, channel
conflicts
Selling via Distributors and Other Intermediaries
• Manufacturers use intermediaries to distribute
their products to a large number of smaller
buyers.
• The intermediaries buy products from many
manufacturers and aggregate them into one
catalog from which they sell to customers or to
retailers (Ex: Sam’s club of wallmart)
• E-distributors sell in horizontal or vertical
markets.
• Now, many of these distributors also are selling
online via Webstores.
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Selling via E-auction
• Companies use forward auction (on their Web
site) to liquidate unneeded capital assets
• Benefits of USING AUCTIONS ON THE SELL SIDE
– Revenue generation
– Cost savings
– Increased “stickiness” - loyalty
– Member acquisition and retention– registered users
• AUCTIONING FROM THE COMPANY’S OWN
SITE
– Used by large companies like GM
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Selling via E-auction
• USING INTERMEDIARIES IN AUCTIONS
– Example: Liquidation.com
• The benefits of using an intermediary - lack of new required resources - HW,
bandwidth. IT personnel
- fast time to market
- outsourcing of billing/collections.
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One-from-Many: Buy-Side E-Marketplaces and EProcurement
• buy-side e-marketplace
A corporate-based acquisition site that
uses reverse auctions, negotiations, group
purchasing, or any other e-procurement
method.
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One-from-Many: Buy-Side E-Marketplaces and EProcurement
• E-procurement
The electronic acquisition of goods and services for
organizations.
• PROCUREMENT TYPES
– Use Internet technology in:
• E-Sourcing – identify supplier to a specific
product
• E-Tendering – send requests to suppliers and
receive response
• E-Reverse auctioning
• E-Informing – gather and distribute purchasing
info
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Sun 13-4 One-from-Many: Buy-Side EMarketplaces and E-Procurement
• INEFFICIENCIES IN TRADITIONAL
PROCUREMENT MANAGEMENT
– procurement management
The planning, organizing, and coordinating of
all the activities related to purchasing goods
and services needed to accomplish the
organization’s mission.
– maverick buying
Unplanned purchases of items needed
quickly, often at non-prenegotiated higher
prices.
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One-from-Many: Buy-Side E-Marketplaces and EProcurement
• E-procurement benefits
Increased productivity,
lower purchase prices,
improved information flow,
minimized maverick purchasing,
improved payment processes,
faster purchasing,
reduced processing costs, and
finding new suppliers/vendors.
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Buy-Side E-Marketplaces: Reverse Auctions
• Reverse auction: Companies place their
RFQ information online and allow bidders
to access that information and place bids.
• request for quote (RFQ)
The “invitation” to participate in a tendering
(bidding) system.
• CONDUCTING REVERSE AUCTIONS
– E-Tendering by Governments
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