B2C
B2B Governance and the 1:1 Formula by Nilesh Gopali
“Business to business marketplaces have become the hottest topic in e-business, driving a future surge in revenues that could reach around $200 trillion within 10 years. – B2B business is booming by Mark Vernon, ComputerWeekly.com”
It would be stating the obvious that the B2B market – particularly in India – is growing so rapidly that its influence and dominance of economies cannot be questioned.
The effective management or governance of this growth is therefore critical.
Within the context of effective governance, I was recently reminded of an October 21st, 2014 Forbes article, in which Daniel Newman introduced the idea of a 1:1 B2B marketing model. In talking about the 1:1 model, Newman made the statement that instead of “over-scrutinizing large vanity numbers,” organizations would be much better off if they spent more time “focusing on single meaningful connections.”
Meaningful connections, as illustrated in the image above, are essential in the relationship driven B2B world, more so than they are in the highly volatile, transactional B2C world.
However, are 1:1 meaningful connections or relationships even possible in the one-to-many B2B world?
Not only are they possible, I would contend that they are essential to success.
What Is A Meaningful Connection?
Effective governance at its truest core is built upon relationships. Relationships are maintained through trust. This is the definition of a meaningful connection.
In the transaction-oriented B2C world, relationships are tenuous. eCommerce platforms are a means to an end in that they are more of a fulfilment mechanism after the buying decision has been made.
With the B2B world, eCommerce platforms are an extension of the relationship between buyer and seller or sellers. In other words, they enhance the capabilities of both existing as well as new buyer-supplier relationships, to achieve mutually beneficial outcomes.
These outcomes are achieved through the introduction of several key technical elements.
To start, a secure eCommerce platform which can be trusted by organizations of all sizes. I am not just talking about transaction security relating to financial considerations. What I am talking about is a trusted platform in which the process behind the technology itself provides opportunities for increased engagement and collaboration between buyer and sellers.
This means that the ability of B2B eCommerce platforms to analyse spend and benchmark prices against global markets or, the utilization of algorithms to identify best prices across large datasets and multiple contracts, is used in a collaborative manner.
When I say collaborative, I am moving beyond the adversarial use of pricing data to drive down supplier prices. Instead, and with regard to global markets, using pricing intelligence in this fashion ensures that the Indian supply base remains competitive both domestically as well as on an international basis. This is particularly important for initiatives such as the Make In India program.
Beyond the collaborative benefits, standardization in critical areas like product and service coding is also important. Whether using the UNSPSC, NSV and other similar codes, proper classification enables effective product grouping, reporting and comparison.
Collectively, the above elements – which encompass a B2B eCommerce platform, ensures accessibility for all suppliers, while streamlining manageability for the buyer. As a result, a 1:1 relationship capability is now possible within a one- to-many B2B platform.
In other words, the effective governance of the supply network is realized through an increasing engagement capability, that is based upon a fair and reasonable opportunity for a single vendor to do business with a large buyer. In turn, the buyer now has reliable access to an ever expanding pool of qualified suppliers, in which individual supplier capabilities can be identified and leveraged to achieve the best outcome for both parties. This is the epitome of a meaningful 1:1 connection.
In the end, effective governance is really based upon a sound Supplier relationship management (SRM) discipline. This discipline includes the ability for the buyer to strategically plan for, and managing, all interactions with third party organizations that supply goods and/or services to an organization in order to maximize the value of those interactions.
B2B eCommerce platforms provide the means to that end, and in the process harness the full promise of the B2B economy.
The Future of Indian eCommerce
EDITOR’S NOTE: The following is part 4 in a 4 part series by cloudBuy’s Nilesh Gopali that has been published in the Brokers Forum of India magazine. You can access part 1 in the series through the following link (July through October issues); http://www.brokersforumofindia.com/NewsLetters.aspx
“ What is interesting though in India is that the entire evolution of e-commerce happened over 15 years. In advanced markets like the U.S., it took over 50-60 years . . .” – Latif Nathani
In an interview [1] earlier this year, Latif Nathani, Managing Director, eBay India, talked about the rapid growth of the Indian eCommerce market. Compared to what he referred to as being advanced markets such as the United States, the comparison was nothing short of amazing.
Nathani’s enthusiasm relative to eCommerce growth was however tempered by challenges relating to amongst other things infrastructure support, and the unique elements of the Indian economic landscape.
In this the fourth and final part in my series that began with the first article Connecting the dots between eCommerce innovation and a robust economy [2], I will examine more closely both the promise and challenges of the emerging Inidian eCommerce world.
Assessing The Possibilities: Defining The eCommerce Revolution
When you consider the potential of the Indian eCommerce marketplace there are good reasons for optimism.
To begin, and as reported in the above referenced Nathani article, the country now has more than 200 million Internet users, of which 89 million are regularly visiting online shopping sites.
This has led to a proliferation of eCommerce companies that are well funded and strategically positioned to capitalize on the promise of the new economy both nationally and internationally. For example, and according to Nathani, “every eleven seconds someone in the world is buying a product from an Indian eBay seller”, while within India itself “16 products are sold every minute”.
Beyond the Indian borders, the potential for the general online market to dominate in other countries such as the United States is even more pronounced, as demonstrated by a Business Insider Study [3].
In markets such as Media, Sporting and Hobby Goods, online sales have increased by 40%. This upward trend is expected to surpass the 65% mark by 2020. Other industries such as Electronics and Appliances and Furniture and Home Furnishings, while not as robust, are also on a similarly positive trajectory.
Conversely offline sales for even the giants such as Wal-Mart, JC Penny, Best Buy and the Gap are experiencing a steady decline into negative growth. This has resulted in these as well as other chains closing physical stores at an alarming rate. As a point of reference, Staples is expected to close 225 stores by the end of 2015.
Even premium brands such as Abercrombie & Fitch are not immune to the effects of the emerging eCommerce economy, as the chain is scheduled to close 180 of its locations in 2015.
“We’re in the midst of a profound structural shift from physical to digital retail . . . it’s happening faster than I could have imagined” – Jeff Jordan, partner at Andreessen Horowitz (January 2014)
In the U.S. $1 out of every $20 is now spent online. This means that eCommerce in that country, is viewed as being the driving force in “nearly all retail growth”. With the proliferation of mobile and wearable technology – about which I talked at some length in part 1 of this series – it is clear that this paradigm shift in shopping will continue worldwide.
The Indian market has the potential to experience similar results in terms of the shift to doing business in the virtual realms. However, before a true transformation can occur, there are a number of indigenous barriers that must be removed for the eCommerce potential to be fully realized.
Converting Possibilities: Capitalizing On The eCommerce Revolution
Despite the positive trending relating to eCommerce adoption globally, within India there are a number of barriers that must be overcome for the country to truly become part of the revolution. This includes the disparity between those visiting online shopping sites and those actually buying goods and services online.
Referring once again to the Nathani article, of the 89 million who visit shops online, only 14 to 15 million make a purchase. This is a significant statistic in that it points to a number of serious problems.
To start, and unlike the US, the infrastructure to support electronic trade – including the use of credit cards – is not nearly as developed in this country.
The reason is quite simple . . . credit cards have been a major economic staple in the US for many years. Its utilization outside of the physical bricks and mortar model has been greatly facilitated through several transformation points including catalogue and TV shopping.
In India, such facilitation has not taken place. This has created an economic vacuum centered around an immature logistics and fulfilment process, and a lack of trust in terms of electronic payment vehicles. This is one of the reasons why eBay has introduced their “Power ship” and “Paisa Pay” programs. Tailored specifically to the Indian market, the hope is that such initiatives will begin to lay the foundations of reliability and trust resulting in the Indian consumer making the move from virtual window shopping to paying customer.
In certain situations, regulatory obstacles represent another potential barrier that has to be removed before the eCommerce model can be fully embraced. This includes a requirement in some states that buyers complete and submit a form to the seller before a purchased product can be shipped.
Of course the biggest challenge that must be faced and addressed before eCommerce in India can fully evolve, is the successful migration from the present day cash-based transaction model, to modern electronic payment systems.
In this regard, the expressed “inclusive” vision of the Reserve Bank is both necessary and welcome.
Earlier this year, the Reserve Bank of India’s Chief General Manager, Department of Payment and Settlement Systems, Vijay Chugh’s [4] made the following statement regarding “an urgent need for all stakeholders to collaborate to enable access to an efficient payment system for the unbanked and under-banked population”. Being able to provide this capability at an “affordable cost” is critical for not only eCommerce success, but the growth of the Indian economy as a whole.
Despite these challenges there is little doubt that India is truly on the cusp of a major retail paradigm shift.
The Emerging B2B World: When Familiarity Breeds Opportunity
In the April 29th, 2013 CXOtoday.com article B2B marketplace to accelerate in India [5] by Sohini Bagchi, the dominance of the B2C market in India is viewed as a springboard for the emergence and maturation of the B2B world.
As Sohini adeptly points out, the same issues faced by the B2C world were the same “factors haunting specifically the B2B segment where trust also plays a prominent role”. As a result, it is reasonable to conclude that understanding and addressing the B2C challenges, will inevitably translate into B2B success. The experts seem to agree with this assessment.
According to Sohini, industry pundits believe that “B2B e-commerce can certainly be successful in India because of the vital role B2C has been playing the past few years”. This is especially true in the Indian market where business buyers as Sohini calls them “may be resistant towards using e-commerce”, because of the aforementioned issues relating to “trust and skepticism”. The fact that B2C e-commerce is gaining traction in India bodes well for the future of B2B e-commerce in the country.
In short, as B2C users begin to feel more comfortable in terms of buying goods and services on the web, the more likely this level of trust and certainty will facilitate the transition to a B2B e-commerce platform.
This undeniable link between B2C experience and B2B success was highlighted in a January 8th, 2014 In The Cloud post [6] by Ronald Duncan.
Duncan the Chairman for cloudBuy – which has recently established an Indian-based office – indicated that many of the adoption barriers in the B2B world had been removed as a result of “the growing and continuing dominance of the B2C world”.
Of course the connection between the B2C and B2B world can be a two-edged sword, especially in terms of user experience.
This latter point was driven home by Duncan when he made reference to the increasing number of business users asking the question “why can’t we have the same experience sitting at the office as we do at home”? Within this context of familiarity, B2B e-commerce providers would be well advised to assimilate B2C functionality into their platforms.
Viresh Oberoi [7], who is the Founder, CEO and MD for mjunction Services shares similar sentiment to those of Duncan.
In an interview Oberoi stressed that a competitive edge can be gained by B2B providers through the use of “flexible business development models”.
Focused on delivering “greater results”, Oberoi’s organization listens carefully to its customers in terms of identifying specific pain points, and redesigning their processes based on this feedback. This enables the company to “deliver greater results” in the critical areas of transparency, efficiency and low inception costs, which according to the mjunction founder is where many B2B platforms falter.
Of course the parallel between B2C and B2B extends beyond user experience.
From a financial perspective, industry experts project that as B2C adoption grows, so too will the B2B e-commerce market.
On The (Leading) Edge Of Change: Realizing The Total Indian eCommerce Vision
In an April 2014 article [8], Global VC firm Accel Partners provided the following insights relating to the future of eCommerce in India:
- By 2016, the current number of shoppers in India will double to 40 million, and their spending will more than quadruple to US $8.5 billion.
- Fashion eCommerce doubled last year, and will see 400 percent growth by 2016, rivaling the electronics and mobile category. This is likely driven by women’s growing influence, which will grow by five times in the next three years.
- Tier 2 cities’ eCommerce adoption is growing far faster that Tier 1 cities, but some states lagging behind still need better infrastructure in place.
- Online retail is still just a sliver of total retail sales. It only accounted for two percent of mobile shipments and one percent of fashion sales.
- 3rd party ewallets will become a significant alternative to cash-on-delivery in coming years.
- Only nine percent of Indians with an Internet connection shop online, compared to over 30 percent in other BRICS countries. India’s eCommerce market is still 60 times smaller than China’s.
- 88 percent of the growth in Indian eCommerce will come from 200 million Indians coming online in the next three years, especially young people.
While each of the points referenced in the Accel Partners findings are in and of themselves notable, what stands out the most is their collective impact in terms of the potential or “headroom” for growth in both the B2C and B2B world.
The fact is that all of the pieces for a successful eCommerce market are falling into place. Through the collaborative recognition of where we are today, and what we need to do to get to where we ultimately want to go, India is on the right track.
In this context, eCommerce’s future in India is not a question of if or how much, but when. For Indian business and the health of the overall economy this means that the future is now.
Reference Links:
[1] Indian e-commerce market is nowhere near maturity – eBay India MD, The Hindu (April 21, 2014) – http://www.thehindu.com/business/Industry/indian-ecommerce-market-is-nowhere-near-maturity-ebay-india-md/article5929148.ece
[2] cloudBuy’s Nilesh Gopali writes about eCommerce innovation and the Indian economy, Brokers Forum of India (April 5, 2015) – https://cloudbuyblog.wordpress.com/2014/07/04/244/
[3] E-COMMERCE AND THE FUTURE OF RETAIL: 2014, Business Insider (August 22, 2014) – http://www.businessinsider.com/the-future-of-retail-2014-slide-deck-sai-2014-3?op=1
[4] IFC, Partners Focus on E-payment Systems for Inclusive Finance for India’s Low-income Households, IFC Press Release (April 22, 2014) – http://ifcext.ifc.org/ifcext/pressroom/IFCPressRoom.nsf/0/5056288A4E095CA185257CC20030AD29?opendocument
[5] B2B marketplace to accelerate in India, CXOtoday.com (April 29, 2013) – http://www.cxotoday.com/story/b2b-marketplace-to-accelerate-in-india/
6] Risk awareness versus risk aversion in the emerging B2B Marketplace, In The Cloud (January 8, 2014) – https://cloudbuyblog.wordpress.com/2014/01/08/risk-awareness-versus-risk-aversion-in-the-emerging-b2b-marketplace-by-ronald-duncan/
[7] B2B marketplace to accelerate in India, CXOtoday.com (April 29, 2013) – http://www.cxotoday.com/story/b2b-marketplace-to-accelerate-in-india/
[8] A peek into the future of India’s fast-growing ecommerce market, Tech In Asia (April 4, 2014) – http://www.techinasia.com/peek-future-indias-fastgrowing-ecommerce-market-slideshow/
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Moving Brick-and-Mortar to the Cloud? by Nilesh Gopali
A March 17th, 2014 Supply & Demand Chain Executive article by Mihir Dalal and Suneera Tandon titled “e-Commerce Boom Hurts Brick-and-Mortar Retailers” talked about the fact that with a large supply chain and logistics network where in most cases there isn’t a requirement for a middleman, the growth in consumers capitalizing on generous discounts through online shopping sites is hurting offline resellers.
While the article focused on India, today’s news that a “brutal holiday price war with Amazon and Walmart” has resulted in Toys ‘R’ Us suffering a $1 billion loss speaks, at least in part, to the global impact that the cloud is having on the way we do business.
Whether we are talking about B2C or B2B, one thing is certain; people are rapidly making the transition to doing business in the cloud for a variety of reasons including accessibility, convenience and cost.
Even when consumers do take the time to shop in a physical store the trending, according to the Dalal and Tandon article, indicates that buyers are more likely to order the product over the Internet, due to the heavily discounted prices offered through online vendors. In essence, the store location as we know it is increasingly being used for checking product out as opposed to being the source for it.
The question is how will brick-and-mortar operations respond?
In his January 8th blog post cloudBuy Chairman Ronald Duncan wrote that “when it comes to a B2B free and open market most businesses have up until very recently, chosen to walk away.” According to Ronald, this is now starting to change as the emergence of reliable cloud-based source to settlement platforms has led to the aforementioned establishment of more effective supply chain and logistics networks.
While there are without a doubt several other factors that contributed to the need for the strategic revamp to which Toys ‘R’ Us CEO Antonio Urcelay referenced in a New York Post article, one can only assume that the company will look to improve its B2B supply chain capabilities internally, as well as look to building a more robust B2C experience for its target consumer market in an effort to return to profitability.
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Risk awareness versus risk aversion in the emerging B2B Marketplace by Ronald Duncan
In a recent radio interview I was asked how my career as a World Cup and Olympic downhill skier influenced me in terms of my entrepreneurial zeal. Specifically, did my willingness to take such tremendous risks to compete in what is one of the world’s most exciting yet dangerous sports better equip me to handle the risks and challenges of the business world?
Likening the career of a downhill racer to that of a fast jet pilot, I responded that most of us are really quite safe in our approach – after all I reasoned, you are either safe or dead!
Of course the best way to be safe is to have an equal measure of talent, passion and training or preparation. In essence you do not avoid the risks so much as you are keenly aware of the risks and are therefore better able to manage them. Or to put it another way, no skier ever won a Gold Medal by looking down a steep slope and walking away.
Unfortunately, when it comes to a B2B free and open market most businesses have up until very recently, chosen to walk away. When I say walk away, what I mean is that organizations have attempted to avoid supposed risks by limiting the number of suppliers with whom they work. The end result – or lack thereof – speaks for itself in the form of increased costs, cycle inefficiencies and burgeoning consulting budgets related to fixing fictitious problems such as maverick spend.
The challenge in recognizing this truth is that in the past there was no contextual reference point to clearly demonstrate the problem of what I call limited engagement, let alone how said problem could be addressed. This all changed as a result of the growing and continuing dominance of the B2C world [1]. Specifically, people started to ask the question “why can’t we have the same experience sitting at the office as we do at home?” Consumer experience it is safe to say has forever changed the business world’s approach to B2B engagement.
This recent development has opened the door to organizations such as cloudBuy, who 15 years ago built a platform based on the premise that being able to bring all suppliers up to speed in terms of real-time B2B capabilities was the wave of the future. And the future is now.
The end result is that the warfare that has been waged against off-contract buying is all but eliminated in today’s B2B world, centered on the fact that with the now recognized robust source to settlement platforms, all players are truly on a level playing field relative to service capabilities.
While this expanded field can be daunting – especially for those organizations that are looking maybe for the first time ever to expand their supply base rather than rationalize it ̶ the fact is that while there are always risks in life, being fully prepared and equipped with the right tools means that you can focus on pushing out of the gate with confidence towards that Gold Medal. In the procurement world this means a best value outcome with each and every purchasing decision.
With upcoming posts, I will delve into the subject of maverick spend, the VISA connection, improving contract management, as well as stock, pricing and goods synchronization.
[1] According to the data from a BDO study it was another stellar Christmas for online sales, with non-store sales leaping 31.1%, rising to growth of 55.7% in the week before Christmas.
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In The Cloud 