B2B Commerce Boom Expected

Business-to-business e-commerce is set to grow dramatically in both the US and Europe in the coming years, according to a pair of reports.

A report by The Yankee Group has found that B2B e-commerce in the US is expected to grow at a compound annual growth rate of 41 percent over the next five years. In Europe, Visa International has found that B2B e-commerce will grow at a rate of about 30 times the growth of the GDP of most European countries.

B2B E-Commerce in the US

The Yankee Group report defined business-to-business e-commerce as the entire commerce cycle, from awareness to product research, comparison, selection, supplier sourcing, transactions, fulfillment, and post-sales support. The report forecasts that buyers will drive the growth of B2B e-commerce as companies of every size will adopt B2B e-commerce procurement because it is convenient and saves money.

According to The Yankee Group, B2B transaction volume will grow from $138 billion in 1999 to more than $541 billion in 2003. Four types of companies stand to gain the most from this B2B growth, the report said. They are:

• Trenchant buyers, who leverage B2B procurement
• Vigilant sellers, who capture more of the customer’s total purchases by providing convenient, buyer-centric e-commerce offerings
• Cybermediaries, who bring together previous unknown buyers and sellers
• Internet solution providers, who provide enabling technologies

“Business-to-business electronic commerce has been treated in the media and Internet marketplace like the ugly stepchild to the more glamorous business-to-consumer electronic commerce,” said Harry Tse, director of Internet Computing Strategies at The Yankee Group. “But B2B e-commerce procurement activity, with its material bottom-line benefits, is spawning rapid adoption by buyers across many industries.”

B2B E-Commerce in Europe

In Europe, Visa International found that Germany, the UK, and France will account for more than 80 percent of the B2B purchase volume in the year 2003. The European B2B market is estimated to increase to $176 billion by 2003, up from $7.15 billion in 1998.

The services and manufacturing sectors will be the largest users of B2B e-commerce in Europe, according to Visa, followed by government, education, financial services, and retail trade. Medium companies (50-249 employees) and very large companies (500+ employees) will have the highest volumes, while small businesses will see the fastest growth.

In Europe, Visa reports that 39 percent of the B2B purchases will be from firms providing maintenance, repair, and operational services, such as office supplies, computer equipment, and temporary staffing solutions. Some 12 percent will be travel-related purchases, such as business flights, hotels, and rental cars.

By 2003, Visa predicts that 27 percent of the e-commerce activity will be carried over extranets, private networks that link a business to a supplier or network.