With the rapidly increasing use of the internet as an information medium and the large-scale relocation of business activities to online, E-Commerce sales worldwide have risen at a swift pace. According to a study by Frost & Sullivan (2016), the market volume for B2B E-Commerce is set to reach 6,700 billion USD by 2020. The same study predicts that the market volume for B2C E-Commerce will reach 3,200 billion USD in the same period, making it around half as big as its B2B counterpart. There can be no doubt that the internet is the sales channel with the current highest growth dynamic and that it will retain this status for the foreseeable future, both for the B2C and B2B fields.
The growth of the online channel has come at the considerable cost of the existing offline channels. On average, the current share of the online channel in B2C sales and B2B sales lies at around 12-15% and 2-3% respectively. Depending on the sector in question, however, online trade often accounts for a much more substantial portion of sales – and the trend is an upwards one!
The attractive online B2B market potential and the increasing shift from offline to online will attract increasing numbers of market participants. In particular, big B2C players like Amazon Business & eBay – who are experienced at the practice of market entry – are accelerating the growth of B2B online business and intensifying competition for existing providers.
Figure 1: Share of B2C E-Commerce in total sales for selected industries in Germany in 2015 (Source: Statista, GfK 2015, FOSTEC)
In line with this channel shift from offline to online on the sales side, which is emerging in all markets worldwide, companies should steel their online activities against future challenges – not least because there is a further aspect to this “BIG SHIFT” than the mere move from offline to online channels: the associated shift in market shares. Not only are market shares changing hands from competitor A to competitor B but, even more significantly, market shares previously held by big “brick and mortar players” are being lost to “new, agile online players”. The creation of a systematic e-commerce strategy is recommended in order to enable companies to withstand and, where possible, to profit from this market development. The goal should be to secure the most sustainable competitive advantage possible in the dynamic market environment.
Figure 2: Illustrative representation of the offline to online channel shift
There is frequently also a need for action in relation to aggressively-priced selling by retail partners on marketplaces, which typically occurs in an unregulated manner and – particularly for small and medium-sized suppliers – is associated with significant risks. Accordingly, proprietary online stores are now an often discussed potential solution for controlled online distribution. This development is of relevance to a broad variety of companies.
The development of E-Commerce strategies for manufacturing companies represents a particular challenge, since it is vital that such strategies do not jeopardise the brand and that channel conflicts with brick-and-mortar retail are avoided.
With all this in mind, E-Commerce strategy field consists primarily of the following seven advisory areas:
- E-Commerce Distribution Strategy, that is, the development of an overall strategy for systematic distribution across all relevant e-commerce channels, such as online marketplaces, third party e-retailers and direct sales.
- Online Marketplace Strategy, that is, the development of a dedicated strategy for distribution via B2C and/or B2B online marketplaces such as Amazon, Amazon Business, eBay, etc.
- Third Party eRetailer Strategy, that is, the development a tailored strategy for distribution via third party e-retailers (online pure players for a particular sector).
- Direct Sales & Affiliates, that is, the development of a tailored strategy for distribution via a firm’s own online shop and selected affiliates.
- E-Commerce Readiness, that is, the creation of a comparative competitive analysis using specific evaluation criteria to measure the e-commerce maturity of a company’s strategy, organisation, customers, competitors and technology.
- E-Commerce Organisation, that is, the development of a dedicated organisational unit for carrying out e-commerce activities in accordance with defined strategic requirements.
- Direct-to-Consumer Strategy, that is, the developing a systematic strategy to establish a direct link between the manufacturer and the end customer with e-commerce as the main sales channel.
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Markus Fost, MBA, is an expert in e-commerce, online business models and digital transformation, with broad experience in the fields of strategy, organisation, corporate finance and operational restructuring.Learn more