As technology allows retailers to reach a global audience, consumers demand greater access to products regardless of where they come from. That demand, which has given rise to the era of e-commerce, is also felt by business-to-business buyers and suppliers.
Global consulting firm Frost & Sullivan declared B2B e-commerce to be the number-one emerging industry today in analysis released last October, due to the segment’s ability to disrupt its current state, assure future business, innovate and other factors.
Other predictions for the space are equally as optimistic. Separate research released by Frost & Sullivan at the end of 2014 showed that the global B2B e-commerce industry could be worth $6.7 trillion by 2020, accounting for nearly one-third of all B2B sales in the world.
In the US alone, the study found, B2B e-commerce will likely yield $1.9 trillion worth of sales in 2020, eclipsed only by China, which is expected to see $2.1 trillion.
Frost & Sullivan Visionary Research Group senior research analyst Archana Vidyasekar offered several factors behind the growth of B2B e-commerce. Not only are buyers seeking out easier ways to procure goods online, but the market is also shifting away towards online procurement instead of electronic data interchange.
The Rise of SaaS
According to Vidyasekar, “the main drivers for migration to B2B is the pressure from industry leaders to move to online platforms.” While the study credits e-commerce giants like Alibaba and AmazonSupply.com for contributing to the B2B digital commerce push, the software development industry has responded significantly to this increased demand.
New findings from Forrester Research Inc. released earlier this month suggest that the B2B SaaS will closely follow B2B e-commerce’s rise in the next decade and beyond.
According to the data, e-commerce software spending by all businesses doubled from 2010 to 2014, and will nearly double again by 2019. “This growth,” the report concludes, “is coming on the back of more than five years of rampant commerce technology replatforming as online retailers have upgraded their commerce technologies to support increased revenues and to drive innovation.”
About 13 percent of manufacturing and wholesale firms that use in-house e-commerce technology will likely migrate towards commercial software offerings but, as Forrester found, “SaaS is eating traditional licensing’s lunch.” While SaaS accounted for 44 percent of companies’ e-commerce spending in 2013, by 2019 that figure will spike to 66 percent.
The B2B is largely fueling this SaaS growth, the study noted. Traditional B2C retailers already have online stores and digital commerce infrastructure in place, but wholesalers are just starting to get in on the action. In fact, retailers actually accounted for less of the e-commerce software spending seen in 2014 from 2013, while manufacturers and wholesalers increased their portion of SaaS spending from 20 to 30 percent.
Potential Caveats
The research shows B2B spending on online commerce software will closely parallel the predicted climb in B2B e-commerce. But findings suggest certain roadblocks the industry can hit in adopting SaaS products into their operations.
Forrester notes that its findings for increased B2B SaaS spending are focused only on large companies, which are expected to spend more than $2 billion on e-commerce SaaS in 2019, up from the current $1.2 billion spent on e-commerce software today.
While the research says SMEs account for about $240 million in e-commerce software spending each year, it highlights how resource-exhaustive investing in SaaS can be. Researchers estimate that the average SaaS e-commerce project costs $1 million, and that 15 percent of projects reach a price tag of more than $1 million, just for the software. But with small- and medium-sized companies making up much of the supplier side of B2B operations, it may prove too costly for them to offer online retail services that their buyers demand.
What’s more, results from a survey revealed this month from OpenView Venture Partners found that companies purchasing e-commerce software do not necessarily use the product – at least not right away. “There is likely some lag time between the period that a business signs up for a product and when users adopt the application,” the analysis found.
Where SaaS Can Go From Here
OpenView’s research focused on the trend of B2B SaaS firms offering mobile services for businesses, a sector with the potential to take B2B e-commerce software services even further. According to the survey, about 40 percent of respondents said their mobile app services are either their sole offering or are primary over their web app offering. Those figures rise, OpenView said, when focusing on younger B2B SaaS firms. Frost and Sullivan, too, took note of how mobile can play into rising B2B e-commerce – its findings on the growth of B2B e-commerce by 2020 include mobile purchases, and the study concludes that procurement officers are increasingly buying products for their companies through mobile devices.
OpenView’s analysis acknowledged that mobile integration into B2B SaaS products remains in its early stages, but, according to OpenView Director of Market Insights Tien Anh, “mobile apps are the next big wave in B2B SaaS.”
The numbers support his claim. According to OpenView, 32 percent of the firms surveyed that offer mobile with their SaaS services experienced more than 200 percent revenue growth in the last year, suggesting the demand for mobile in SaaS is rising.
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