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Unit 2.3

B2B Business Models in E-commerce

IT 204: E-Commerce

Learning Objectives

By the end of this chapter, you will be able to:

  • ✅ Define Business-to-Business (B2B) e-commerce and its unique characteristics.
  • ✅ Identify and describe the four major B2B business models.
  • ✅ Differentiate between open Net marketplaces and closed Private Industrial Networks.
  • ✅ Analyze the specific opportunities and challenges for B2B e-commerce in Nepal.

What is B2B E-commerce?

Business-to-Business (B2B) e-commerce refers to electronic transactions between businesses, such as manufacturers, wholesalers, and retailers.

Key Characteristics 🔍

  • High-value, low-volume transactions
  • Long-term, contractual relationships
  • Complex, multi-stakeholder decisions
  • Negotiated pricing & credit terms

Scale & Importance 📊

  • Globally, B2B is 5-6 times larger than B2C by value.
  • Crucial for supply chain efficiency.
  • Drives digital transformation in enterprises.

B2B vs. B2C: A Tale of Two Markets

B2B (Business-to-Business)

  • 🎯 Focus: Building relationships
  • 💰 Value: High (thousands to millions)
  • ⏳ Sales Cycle: Long (weeks to months)
  • 🤔 Decision: Complex, committee-based
  • 💸 Pricing: Negotiated, volume discounts

B2C (Business-to-Consumer)

  • 🎯 Focus: Driving transactions
  • 💰 Value: Low (tens to hundreds)
  • ⏳ Sales Cycle: Short (minutes to days)
  • 🤔 Decision: Simple, individual
  • 💸 Pricing: Fixed, promotional

The Four Major B2B Business Models

B2B e-commerce isn't one-size-fits-all. It operates through several distinct models:

1. E-distributor

One supplier sells to many buyers. (e.g., Online Wholesaler)

2. E-procurement

Digital marketplaces for procurement. (e.g., SAP Ariba)

3. Exchange (E-hub)

Many suppliers meet many buyers. (e.g., Commodity Market)

4. Industry Consortium

Industry-owned vertical markets. (e.g., Covisint for Auto)

Model 1: E-distributor

Definition: Companies that supply products and services directly to businesses through their own websites. The online version of a traditional wholesaler.

  • Model: One-to-many (one supplier, many business buyers).
  • Function: Offers a wide catalog of products from various manufacturers.
  • Value: Convenience, competitive pricing, and simplified procurement.

Examples:

  • Global: Grainger (industrial supplies), CDW (IT products)
  • Nepal: Aayo (connects FMCG manufacturers with retailers)

Model 2: E-procurement

Definition: Platforms that automate the procurement process, allowing businesses to find suppliers, compare prices, and manage purchasing workflows.

  • Model: Many-to-many (connects multiple buyers and sellers).
  • Function: Automates requisitions, approvals, and supplier management.
  • Value: Cost savings, process efficiency, and spend visibility.

Nepal Context:

The Government of Nepal is a major driver through the Public Procurement Monitoring Office (PPMO) and its portal, bolpatra.gov.np, for public tenders.

Model 3: Exchange (E-hub)

Definition: Independent digital marketplaces where hundreds of suppliers meet numerous purchasers, often for spot purchasing with dynamic pricing.

  • Model: Many-to-many, independently owned.
  • Focus: Standardized, commodity-like products (e.g., chemicals, agricultural goods).
  • Pricing: Dynamic (auctions, bid/ask models).

⚡ Key Challenge: Achieving "critical mass" — an exchange is useless without enough buyers AND sellers to create a liquid market.

Model 4: Industry Consortium

Definition: Industry-owned vertical markets created by major players in a specific industry to streamline their supply chains collaboratively.

  • Model: Owned by key industry players (even competitors!).
  • Focus: Deep supply chain integration for a specific vertical.
  • Value: Standardization, efficiency, and collective bargaining power.

Examples:

  • Aerospace: Exostar
  • Healthcare: GHX (Global Healthcare Exchange)
  • Retail: 1WorldSync

Net Marketplaces vs. Private Industrial Networks

B2B e-commerce happens in two main environments:

🌐 Net Marketplace

  • Access: Open to all
  • Focus: Transactional, price-driven
  • Goods: Indirect (MRO), commodities
  • Relationship: Short-term, spot buying
  • Examples: Exchanges, E-distributors

🔒 Private Industrial Network (PIN)

  • Access: Invitation-only
  • Focus: Collaborative, relationship-driven
  • Goods: Direct materials, strategic parts
  • Relationship: Long-term, strategic
  • Example: Walmart's Retail Link for suppliers

B2B E-commerce in Nepal

📈 Opportunities

  • Agriculture: Connect farmers directly to businesses.
  • Manufacturing: Optimize supply chains for raw materials.
  • Retail: Streamline FMCG distribution (like Aayo).
  • Construction: Centralize procurement of materials.
  • Exports: Link handicraft/garment producers to global buyers.

🚧 Challenges

  • Digital Literacy: Resistance to change from traditional methods.
  • Infrastructure: Unreliable internet and power.
  • Payments: Heavy reliance on credit and cash.
  • Logistics: Poor road networks and warehousing.
  • Trust: Verifying business credentials online.

Key Takeaways

  • B2B e-commerce is a massive market focused on relationships, efficiency, and high-value transactions.
  • The four main models—E-distributor, E-procurement, Exchange, and Industry Consortium—serve different market needs.
  • B2B networks are either open Net Marketplaces (for price-focused spot buys) or closed Private Networks (for strategic collaboration).
  • In Nepal, B2B e-commerce has huge potential but must overcome challenges in infrastructure, digital literacy, and trust to succeed.

Thank You

Any questions?

Next Topic: Unit 2.4 - B2C Business Models

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