B2B Buying Online: Are B2C Marketplaces Ready?

Tail spend - the procurement nightmare.

While we carol Procurement 4.0 and its value-centric agenda, some aspects of our job still remain in Dark Ages.

What is the worth nightmare of a procurement professional? I tell you mine - the tail spend.

As per the famous Pareto principle, 80% of your expenditure remains with 20% of your vendors. The rest, 80% of the supply base, generates the so-called tail spend - low-value high-quantity transactional mess.  

Your typical spend analysis might look like this: your company sends 4% of its expenditures to 74% of its suppliers. 

The real tail spend example
Tail spend starts with the best intention to satisfy the business needs quickly and returns a handful of residual problems:
  • non-contracted or generally non-compliant spend;
  • a high volume of transactions;
  • a high labor cost to the company, as each transaction requires reconciliation, processing, acceptance of goods, etc.

Buying channels are at the heart of Source-to-Pay (S2P.) 

This post isn't meant to repeat CIPS et al. on optimizing the tail spend. Two blanket solutions are known to everyone: 
  • supply base reduction,
  • electronic and self-service buying channels.
The first has its flipside, as it harms the competitive environment and discourages SMEs from working with large conglomerates.

Diverse buying channels improve the flexibility of the purchasing process, support SMEs with light governance, enable spend analysis and control, and many more.

Overall, your S2P (source-to-pay) process resides on many buying channels, differentiating the modern agile procurement from "death by RFP"extinct species.

80% of B2B buying will move online by 2025.

We witnessed the rise of electronic retail from the mass market. Not that many B2B marketplaces are there which have worked with business customers since their inception. 

B2C leaders' tactics are to diversify their revenue by entering the B2B realm. Perhaps, they heard that 80% of B2B sales transactions should occur via digital channels by 2025. 

The potential is enormous, but in many cases, B2B-tailored offerings came suboptimal, if not absent.

B2B buying behavior and process requirements

Most importantly, B2C marketplaces don't consider the custom B2B buying behavior.

Firstly, B2B buying is based on objective criteria (e.g., cost reduction,) unlike spontaneous B2C decisions.

Secondly, the buying is collective, as many people have been involved in it since the inception of demand.

Thirdly, the procure-to-pay cycle is long and complex. Therefore, the marketing efforts of a buyer don't receive an immediate response from a seller.

Lastly, B2B buyers are increasingly reluctant to procure individual commodities. They're looking for an "as-a-service" offering, including delivery, training, spares, support, etc.

The procurement process requirements are also specific:
  • muti-tier volume-based pricing and associated discounts;
  • sales analytics rather than an automated sales pitch;
  • the vital need for an account manager to facilitate business relations and advocate for the customer's performance requirements;
  • complex checkout to enable the spend governance;
  • ERP and/or e-procurement suite integration. 
Yet, many B2C-converted marketplaces expect business customers to behave like mass markets and accept shopping basket requisitions instead of the complex delivery, the call center service instead of account managers, streamlined credit-card checkouts, and best-effort technical support.

B2B buying online requires B2C experience.

B2B buying not only means leveraging high volumes. It also means better customer loyalty, profound product knowledge, and predictable and manageable behavior.    

While B2C offerings don't suit corporate buyers, they expect the B2C customer experience - a digital journey with lots of flexibility and constant innovation. Indeed, they deserve special treatment for bringing the B2B spending online.

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More information on this and other exciting topics can be found in "The Technology Procurement Handbook." It represents 23 years of experience, billions of dollars worth of successful sourcing projects, and 1000s of hours spent on research, analysis, and content creation for the most demanding professional readers.


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