Educating the market on B2B eCommerce
I must admit that we’ve never been successful in convincing manufacturers to invest in their very first B2B eCommerce project. In our early days, we would spend inordinate amounts of time trying to get some companies to see the light.
Cost savings. Increased Revenue. Better customer service. Blah. Blah. Blah.
It mostly ended in the same place…”We don’t need no stinkin’ website“…or some thinly disguised variation thereof. (I published that post almost exactly 5 years ago to the day. Wow!) None of those conversations turned into business for us at the time***. Eventually I came to the realization that as much as I’d like to educate the industry about how great B2B eCommerce is and help those “on the fence” companies get into the game…I really can’t afford to do that. That simply can’t be my job.
It turns out that my job is to make heroes out of those CIOs of SAP Manufacturers who have already decided that they need an SAP integrated B2B eCommerce website and are overwhelmed by the complexity and cost of implementing and supporting a workable solution.
I simply help them get it done.
With that said, if the B2B eCommerce market is really going to grow to Forrester Research’s predictions of world domination, someone has got to educate the market and help them build the case to get on the web! That’s why I was delighted to see SAP hybris step up to the plate last week and issue a white paper entitled “A Guide to Creating an ROI Model to Assess the Effectiveness of E-commerce Platform”. You can see their YouTube announcement here and download a copy of the white paper here. And yes, I have an unbelievable amount of marketing budget envy!
Overall, it’s definitely worth getting a copy.
Of course I wouldn’t be doing my job if I didn’t offer a few comments about it :-).
First of all, I was quite impressed with how close their eCommerce cost savings projections matched our actual experiences.
For illustration purposes, they assumed a $100M manufacturer converting 50% of their business to the web (that conversion rate seems a bit high). They would process 74K orders with an average order value of $667 (those are indeed typical numbers for a manufacturer with a dealer channel). The hybris model predicts that that organization will realize a $2.1M labor savings in servicing those orders…keying them into the system and responding to customers about errors, delivery status etc.
By comparison, based on our November transaction data, one of our clients has an annualized eCommerce turnover of $86M (about 30% of their overall turnover) that is produced by 96K orders at an average value of $896 each. A little larger than the hybris model, but pretty close.
In that same November time period, our b2b2dot0 service was able to defray $169K in Customer Service costs for an annualized savings of ~$2.0M. Our Google Analytics Goal Data (in the accompanying graph) sums up all of the customer services costs in real time (order entry, status checking, document reprints etc.). Which brings up a whole other point…does anyone ever go back an audit their cost justification numbers? We do. In real time.
Compared to our data, the hybris cost savings projections are a bit optimistic (maybe they need to be in order to support their higher price :-)), but they aren’t too far from the truth.
A few other notable observations to be made about the hybris ROI white paper:
“In most B2B firms, order costs may range from $50 to $150 per order without an e-commerce system. This can drop to $25 or less with a best of breed platform integrated with back office systems.” 85% of our clients pay less than $2.62 per order for their eCommerce orders.
“A 100 page product catalog mailed to thousands of customers can cost hundreds of thousands of dollars per year to produce and distribute”. That might be true, but for many Industrial Manufacturers that’s going to be an unbelievable difficult habit to break.
“Implementing a leading e-commerce platform can render a variety of legacy systems obsolete-including systems like order entry and fulfillment”. Seriously? Hey SAP! Are you prepared for a name change to “SAP a hybris company”? :-)
“E-Commerce platforms increase revenues for B2B sellers by helping them take quicker advantage of new product launches”. See my comment about breaking the paper catalog addiction.
“…it’s important to remember that speed-to-market with an ecommerce platform can act as a multiplier of these benefits.” Amen!
Well done hybris.
*** We are about to start a project with one client who has been mulling over the ROI of replacing their SAP Internet Sales application since our first conversation in 2008. Turns out that a new CEO provided the clarity they needed. :-)
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