Speech at OPI European Forum
June 6th, 2019
B2B Sales Channel Disruption
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B2B eCommerce is on a constant growth trajectory with minor local differences in growth rates
Source: Statista; Roland Berger
Global B2B eCommerce GMV1) in USD bn
1) GMV = Gross Merchandise Value2) CAGR = Compound Annual Growth Rate / average growth rate per year3) Software as a Service4) Gross Merchandise Value
Global B2B eCommerce4) [USD bn] B2B eCommerce GMV1) [USD bn]
20162013 2014 2015 2017 2018
5,8266,499
6,906
8,129
9,185
10,606+12.7%2)
255 260 264 268 272 311
2013 20162014 2015 2017 20183)
+4.1%2)
20162013 20152014 2017 20183)
4,674 5,123 5,5006,595 7,437
8,495+12.7%2)
Asia Pacific Europe
North America Rest of the World
291 325 345 406 464 530
201620142013 2015 2017 20183)
+12.7%2)
606 701 797 860
2015 20183)2013 20172014 2016
1,111 1,270
+15.9%2)
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This also applies for office products – Even in Germany a compound annual growth of 33 can be observed in the e-commerce segment
e-Commerce wholesale revenue share in "PBS" in Germany
Source: Statista; Statistisches Bundesam; Roland Bergert
2005 20112006 20102007
4.8%
2008 2009
7.4%
2012 2013 2014
12.6%
2015
2.8%
2016
0.7%
2.7%
6.2%5.3%
8.2%
11.6%
15.1%
16.6%
+33.4%
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This development is not driven by the "Amazons" of this world – It's driven by the customer needs
Customer need examples
1
"I need a time to concentrate on my
spend and don't want to waste a time on office
supplies"
Corporate buyer
AB C
2
"I need a churn-free buying experience for
office supplies, like buying on Amazon"
SME purchaser
Source: Roland Berger
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Marketplaces do have a good fit to the customer needs – Other channels will have problems to sustain their business
The "new" channel mix
Producers
A
B
C
Customers
Direct sale1
Wholesale / system house2
Store3
Market place / platform4
Source: Roland Berger
Fit
High-level evaluation
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B2B e-commerce business models – Overview
In a direct model, the buyer and the supplier interact directly - In a marketplace, more buyers and sellers are affiliated via a marketplace
Source: Statista; Roland Berger
Marketplace modelDirect model
BuyerSupplier B2B
platform
Supplier
Logistics
Payment
Order
Supplier A
Supplier B
Supplier C
Market-place
Buyer A
Buyer B
Buyer C
Order
Payment
Logistics
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There are several differences between the two models that drive the adoption of buyers in large and small organizations
B2B e-commerce business models - characteristics
Procurement platformse-Procurement tools
> Orchestrate networks to create value for end buyers
> Leverage economies of scale to reduce supply costs
Procurement department
> Meet buyers' needs, creating a self-regulated supplier ecosystem
> Reduce supply costs through standardization and economies of scale
Procurement strategy
> No> YesContract mgmt.
> Natural and fair competitiveness betweensuppliers
> Volumes and contract negotiation led by procurement
Pricing
> Sell to end buyers> Sell to procurementSuppliers
> Authorized by procurement but selected by end buyers when buying on the platform
> Suppliers selected by procurement and imposed on end buyers
Supplier selection process
> Each supplier is responsible for its own catalog and inventory on the platform
> Procurement team distributes supplier catalogs and inventory internally
Supplier catalog publication
> Constantly updated by suppliers in order to stay competitive on the platform
> Discounts based on annual committed volumesPrice
> Need to provide rich product information to increase conversion rate on product pages
> No need for suppliers to provide rich product information
Product information
> Scalable, suppliers have self-service tools for onboarding
> Complex, requiring involvement of procurement team
Onboarding
> Possible to choose between different products and suppliers
> Choice dictated by procurementBuyers
> Similar to B2C e-commerce, strong acceptance by buyers
> Old-fashioned, weak acceptance by buyersBuying experience
Source: Roland Berger
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The most relevant marketplaces are Amazon and Alibaba – In Europe also Mercateo is of relevance
Comparison of leading companies
Company Region B2B B2C C2C GMV1 [USD bn] Revenue [USD bn]
1) Gross Merchandise Value2) Converted from CNY to USD; exchange rate: CNY-USD 0.15916 as of 03/31/2018 (Oanda)3) Converted from JPY to USD; exchange rate: JPY-USD 0.00906 as of 03/31/2018 (Oanda)4) Converted from EUR to USD; exchange rate: EUR-USD 1.19789 as of 12/31/2017 (Oanda)5) Converted from INR to USD; exchange rate: INR-USD 0.01471 as of 03/31/2016 (Oanda)
Source: Company information; Statista, Roland Berger
Global
Global
Global
Europe
China
India
155.0 (2017)
767.2 (2018)2
31.1 (2018)3
–
–
4.5 (2015)
178.0 (2017)
39.9 (2018)
10.0 (2018)3
0.304 (2017)4
0.158 (2016)
0.044 (2016)5
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ERP-integration of marketplaces
But not only the marketplace providers play a role – ERP system providers also start their own marketplaces integrated in the software
Source: Jaggaer, Coupa, SAP Ariba; Roland Berger
> ERP providers offer a "built-in" marketplace that comes with the installation
> As all larger firms need an ERP system anyway, they could act as both a gatekeeper and an enabler at the same time
> Most ERP systems also offer a possibility to add additional catalogs via "punch out" function
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It's important not to "miss the boat" in the emerging categories – A mix of different strategies applies for the segments
Channel matrix & TO DO's
1
2
4
3Selectively invest & prepare for growth
1
Strategies
Be on board & invest in early phase
2
Invest in defend market share
3
Extract maximum value4
Channel share
Cha
nnel
gro
wth
Platforms
Traditional multi-channel
Direct sale
System house
Brick & mortar
ERP platforms
Source: Roland Berger
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We propose a systematic approach for selecting the right channel and to execute the channel strategy – Two way door principle applies
Possible approach
Screen market Evaluate & decide Execute
> Screen channel landscape
– Target audience
– Network effects
– Prices
– Strategic fit
> Create short-list
> Evaluate according criteria
> Build business case
> Decide for implementation
> Pilot with selected market-places / assortments
> Test & learn
> Roll-out
Decision is a two-way door, so you can stop again
Source: Roland Berger
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Market places do have some specifics when it comes to the marketing mix – capabilities to be built up
Marketing mix specifics
Product
> Normal retail packaging possibly not suitable
> Packaging not so important – no selling function
Place
> Selection of right market place
> Competing models (seller vs retailer)
Price
> Price mechanism very competitive
> Algorithm pricing
Promotion
> Retail promotions cannot be copied easily
> High price focus
> Chance for bargain (a bit still)
Source: Roland Berger
Selection
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There needs to be an invest in people and technology, but the system can then scale significantly
Scaling principle
E-Com Manager
> Tech know-how
> Online selling know-how(SEO, SEA, …)
> Product information owher
Marketplace 1
Marketplace 2
Marketplace 3
Comments
> "Selling" can be automated
> Sales manager is a "system admin" that assures smooth functioning of the selling system
> Traditional skills are only partly required
Source: Roland Berger
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Please also refer to our paper "Platformization of Procurement" to understand your customers better
Source: Roland Berger
Online this week on www.rolandberger.com
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There might also be another solutions – The Office Products industry could forward integrate into it's own platform…
…to be discussed in the roundtables in the afternoon
Manufacturer
1
Manufacturer
3
Manufacturer
2
Buyer
1
Buyer
2
Buyer
3
European Office Products Platform
Source: Roland Berger