Monday, May 24, 2010

E-Business is BIG Business

Bought something from Amazon? Put a bid in on an eBay auction? Paid your bills online? These are all examples of e-commerce known as B2C, or business-to-consumer, Internet transactions. In the case of eBay, the transaction is going from consumer-to-consumer, or C2C. Most people who use the Internet have probably had some experience with e-commerce, but a much larger set of transactions are occurring across the Internet known as B2B, or business-to-business.  These types of transactions are larger in volume and in dollar amount. According to Statistic Canada, 75% of Internet transactions can be classified as B2B.

When organizations link their buying and selling systems, they are automating transactions between them and therefore shipments of raw materials can arrive at the manufacturer's plant just in time to be used in the production cycle. For example, if a tire manufacturer ships tires before they are needed by the car producers, the tires would have to be doubled handled and warehoused until the assembly line is ready for them. On the other hand, if the tire manufacturer and the car producer had a B2B link, facilitated by the Internet, the car producer's system could alert the tire manufacturer's system when the tires would be needed and therefore they could be shipped just in time to be placed on the cars at the right time during the assemble process.

Here is a list of the main differences between B2B and B2C:

  • Product driven
  • Maximize the value of the transaction
  • Large target market
  • Single step buying process, shorter sales cycle
  • Brand identity created through repetition and imagery
  • Merchandising and point of purchase activities
  • Emotional buying decision based on status, desire, or price

  • Relationship driven
  • Maximize the value of the relationship
  • Small, focused target market
  • Multi-step buying process, longer sales cycle
  • Brand identity created on personal relationship
  • Educational and awareness building activities
  • Rational buying decision based on business value

(Source: Vista Consulting)

The typical consumer uses e-commerce, which is a small subset of a much larger use of  Internet technologies used to run organizations, known as e-business. E-business and B2B systems can be complicated because they must be able to bridge the technologies in different organizations. To give you an idea of the scope of B2B and the possible complexity, IBM just purchased AT&T's T-N Sterling Commerce unit for $1.4 billion. So, next time you buy something on line, you can now appreciate the fact that you are a very small cog in the huge e-business Internet wheel.

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