An Outline on Two Actors on the B2B Electronic Markets


The Premise:

In the old world, a time before the internet, businesses in search for supplies would often rely upon an established local supplier for its purchases. Different methods would be employed to carry this out. A predominate one being a representative of the supplier periodically visiting the facilities of the different business and taking the orders, quoting prices, concluding sales and after waiting for the orders to be processed and delivered, only then is the job done.

The Twist:

With the advent of the Internet, the world has changed. E-commerce has become a viable alternative to the traditional model of direct sales, and organizations can now access a more cost-effective, self-served, online environment (Walker, 2014). The business searching for suppliers can now go online and access dozens of competitors from an online portal. It provides more options and extensive information on all desired assets, reducing information uncertainty and search costs.

The Myth:

This results in the so-called ‘Disintermediation phenomenon’, where firms bypass traditional middleman, like the wholesaler or the distributors, to interact directly with producers through e-markers. The providers of the online platforms, or market enablers, allow the exchange to take place, ensure the quality of market actors, and capture value through brokerage fees (Wise, 1999).

The Skeptic:

On the other hand, the growth in B2B e-commerce does not necessarily mean the end of the wholesaler. Some products are complex and differentiated that customers still want to experience them in detail, via physical interaction. At the same time, once a local supplier achieves operational efficiency, proximity becomes an asset and an easier means of delivering value to customers. The intermediation is less valuable for generic goods, but there is still vast room for specialized dealers who can focus on acquiring and retaining higher-margin and higher-volume key account customers (Brynjolfsson, 2013).

The Two Actors

The connection and relative position of two actors in this space was explored: Alibaba.com and Handshake. For the analysis only the B2B online web portal “Alibaba.com” was considered. Whereas, Handshake Corp. with use of its Web and Mobile app makes writing sales orders and presenting a catalog easy for representatives and sales teams on the road, at trade shows or in showrooms.

The Challenge

The business model for Alibaba.com and Handshake was evaluated using the Business Model Canvas as proposed by Osterwalder et al. (2010). The business model canvas consists of nine building blocks

 BMC

 

The Verdict:

Alibaba.com and Handshake appear to deliver different services to their clients despite being a B2B company. The key activities of both companies do not differ vastly, as they fulfill similar requirements to their end user. Due to their virtual presence, their cost structure is to a certain degree similar. The costs saved from warehousing and logistics is better used in their upkeep of data centers and investing in customer service.

In contrast, Alibaba.com has no dedicated mobile app to address mobility issues that Handshake resolves with its Omni-channel approach. Their revenue structure is significantly different with a common subscription versus commission per transaction.

The Future:

By 2020 it is predicted that there will be 520 million average active buyers for Alibaba’s Chinese marketplaces coupled with increased in average spending per user (Forbes, 2014). Handshake has just entered the B2B market for a few years and is already establishing a strong market for high future potential growth.

– On Behalf of Team 20 RSM01BIM

The Scrolls:

Brynjolfsson, E. et al (2013). Competing in the Age of Omnichannel Retailing. [Online] 21 May 2013. Available from: http://sloanreview.mit.edu/article/competing-in-the-age-of-omnichannel-retailing/ [Accessed: 23 September 2014]

Forbes (2014) Initiating Coverage Of Alibaba At Price Estimate Of $80 Per Share [Online] Available from: http://www.forbes.com/sites/greatspeculations/2014/09/19/initiating-coverage-of-alibaba-at-price-estimate-of-80-per-share/ [Accessed: 27 September 2014]

Osterwalder et al. (2010). The Business Model Ontology: A Proposition in A Design Science Approach Business Model Generation. [Online] 30 January 2010. Available from:  http://www.stanford.edu/group/mse278/cgi-bin/wordpress/wp-content/uploads/2010/01/TheBusiness-Model-Ontology.pdf [Accessed: 27 September 2014].

Walker, B (2014). Why E-Commerce Still Isn’t Clicking with B2B Executives, 5 June 2014. [Online] Available from: http://www.forbes.com/sites/brianwalker/2014/05/06/why-e-commerce-still-isnt-clicking-with-b2b-executives/ [Accessed: 22 September 2014]

Wise, R et al (2014)Beyond the exchange–the future of B2B. Harvard Business Review, 1999 [Online] Available from http://europepmc.org/abstract/MED/11184979 [Accessed: 22 September 2014]

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