By now, it’s old news to many that procurement officials are increasingly demanding the same online shopping experiences encountered when doing their own personal online shopping. What is surprising, however, is just how far behind many suppliers are when it comes to meeting those demands.
A decade ago, suppliers’ reluctance to upgrade their infrastructure may have been understandable. A 2003 study conducted by the University of Illinois at Urbana-Champaign found that up to 70 percent of suppliers’ products could be purchased via e-procurement systems within buyer companies, but on average, less than a quarter of procurement officials actually used those digital procurement systems. “Thus, while there is a critical mass of suppliers participating in e-procurement, there is still resistance from the buyers in using e-procurement,” the researchers found.
My, how times have changed. In a recent interview with My Purchasing Center, IBM Commerce Solutions Product Marketing Leader Pete Wharton explains that while e-commerce may have appeared to be a “pet project” to the B2B world years ago, today, it’s an advancement that can’t be ignored by suppliers. “Now, many companies are trying to retrofit the concept into their B2B experience,” Wharton said. “Those B2B companies that understand the chance they passed on 15 years ago are truly committed to a digital transformation that supports all of the channels and they want to ensure they all work seamlessly and they get it right the first time.”
While the University of Illinois study may suggest that suppliers were discouraged from offering technological services for procurement officials in the beginning, today, it simply does not make sense that such a large market could still be so far behind technologically. Forrester Research found that in 2013 alone, B2B e-commerce sales in the US amounted to $560 billion worth of sales – more than twice the value of sales seen in the B2C realm.
Even with those numbers, industry experts like Wharton argue that there remains a “vast technology gap” that has been hampering the digitization of the procurement process. “Even today,” IBM told reporters, “many would be stunned to learn just how many companies are still using paper-based methods like fax machines to buy and sell.”
While that gap exists on both ends of the buyer-supplier relationship, there is evidence to support the idea that suppliers share a greater responsibility for that technological inadequacy. Evidence is mounting that procurement officers are increasingly going online to purchase products for their companies, and that when suppliers don’t meet their digital demands, those buyers will turn to B2C outlets like Amazon.
It must be noted that suppliers are not ignoring their buyers’ demands for digital resources outright.
According to the CEO of e-invoicing and B2B solutions provider Basware, Esa Tihilä, suppliers have finally acknowledged the demand and the potential for improved business by going digital. Combined with the infrastructure available today – cloud-based servers, online networks and software – and a strengthening focus on cash flow management, suppliers are feeling the “urgency to create a connected global economy.”
But suppliers are largely coming up short in their digital offerings.
Acquity Group’s 2014 State of B2B Procurement Study revealed disappointing statistics about how suppliers’ efforts to meet the demand for online procurement. Research found that of surveyed procurement officers, 35 percent said they have at least once abandoned their online shopping cart because the web page didn’t load properly, 26 abandoned their cart because the online checkout process took too long, and 22 percent abandoned their cart because of a confusing checkout process.
Plus, the survey found, while 83 percent of buyers reported visiting a supplier website to research products, only 37 percent of those buyers found that website adequately helpful.
“Aside from price, the high rate of cart abandonment is primarily attributed to customer experience problems,” Acquity Group concluded. “The number one reason cited by buyers for purchasing from a third-party site like Amazon Supply was an easier ordering process.
It’s a slow and sometimes painstaking task, but unless suppliers want to continue to lose significant business to third party sites like Amazon, they must catch up to the digital revolution and accept a “new normal” in the way B2B does business.
The use of social media, for example, will play a significant role for suppliers, according to Basware’s Tihilä, who said procurement professionals should get used to the concept of communicating with accounts payable staff on their mobile devices; financial executives will demand the use of tools like social media and the cloud, he said.
Suppliers will also need to focus more heavily on security features as they go digital. According to Acquity’s research, 49 percent of buyers would more likely make a purchase online if a supplier offered a more secure shopping experience. A whopping 75 percent of millennial buyers said the same. While B2B suppliers “can’t always compete on price, they can compete on customer experience,” the study concluded.
The research may not be promising for the B2B world of procurement, but industry experts agree: it’s time for a rejuvenated focus on innovation.
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