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Dr. R.H. Rusli
CITI Institute

Business-to-Business Leads in Revenue Growth

Editorial Department

Web sites that market products to other businesses online comprised the second largest industrial group with 40 percent of publicly listed domains on the English-language Web, and this trend is continue up in particulary in the digital era. More importantly the online business-to-business (B-to-B) industrial sector is leading the way in revenue growth in the year 2000.

On average, B-to-B sites project rapid revenue growth in the coming year, and it is expect to quadruple their site revenues to reach $150 billion in 2002 and beyond, this trend is similar according to the report "Real Numbers Behind B-to-B Online 2000 ($ 134 billion in year 2001)." In 2000, B-to-B sites are expected to garner quarter of global Web-generated revenue, or $50 billion of projected total Web-generated revenues during the year of $140 billion.

The average current B-to-B Web site expects to double 1999 revenues, reaching $550,000 in 2000. For 2001, the average B-to-B Web site expects to triple that of 2000 to $1.25 million and double again to $2.6 million in 2002. This shows that e-commerce activity is strong among B-to-B Web sites even though many state their primary motivator for being online is client relations instead of e-commerce.

Average E-Commerce Revenue Among B-to-B Sites

Year -Revenue
1999 $270,000
2000 $550,000
2001 $1,250,000
2002 $2,600,000

Source: CITI Research

CITI study also found that web sites that intend to generate sales directly at the internet are most likely to generate profits. More than four in ten (45 percent) sites that sell products online are profitable today compared to only 25 percent of those that do sell offline (for examples; Dell Computer, Compact and Intel). Professional services in B2B are in the middle of the two (34 percent).

Seventy eight percent of B-to-B marketers are integrated companies that sell both online and offline. Contrary to the world of business-to-consumer, only less than one-third of B-to-B Web sites is actually designed to accept orders online. For the majority online trading, the goal of the Web presence is to stimulate and support a relationship that is also largely conducted offline. While it may run contrary to expectations, the Web is often used as a tool for stimulating personal sales staff contacts. Unlike B-to-C, where off-the-shelf products are heavily packaged and pre-priced, the world of B-to-B is highly negotiated, and personal customer service is still highly valued.

Contrary to expectations, the research shows that being online is helping to improve reseller and distributor relations, as well as attracting new business for traditional companies. This is great news for marketers with complex selling channels. The recent emergence of online vertical marketplaces capable of dynamic pricing, auction-style settings, or managing traditional requests for quotations and proposals may have an impact several years down the road, but impacts to date are minor. No matter what, old-fashioned person-to-person relationships will dominate B-to-B activity moving forward.

Almost 80 percent of businesses that have both online and offline sales channels, Web activity is rapidly becoming the mainstay for revenue generation. Most companies project that, on average, the Web accounts for one dollar in four of total business revenue in 2000, rising to more than a third in 2001 and reaching half by 2002.

Over half of all online B-to-B marketers have experienced growth in total business since the advent of the Internet, with an average increase of 30 percent. B-to-B online firms that have been online the longest are the most likely to have experienced an increase in their business. On the other hand, 45 percent of B-to-B e-marketers have experienced a decline in overall business since the arrival of the Internet. Many of these are latecomers who are now playing "catch up" to regain business lost to earlier adopting Internet competitors.

Substantial real-world businesses are only beginning to get their stride online. Lessons drawn from the world of consumer sales clearly show that long-term staying power and persistence can outweigh flashy first-to-market hotshots in the long run. The main goal of digital businesses is to create satisfied customers, and the essential nature of the B-to-B relationship means that a company must not only market efficiently online to get ahead, but it must be able to perform well in the real world to ensure that clients become loyal.

B-to-B players are also going increasingly global and, 60 percent of B-to-B companies are globalizing their Web sites (GE, Citibank, Cemex and Compacq Computer). This is up from 40 percent in the previous year's study. By 2004, we predicts the percentage of B-to-B companies that globalize will level off at nearly 80 percent.

Digitalization pays off by converting browsers into buyers, according to our research analyst and yet Digitalized and non-digitalized companies have roughly the same percentage of foreign visitors. Digitalization makes it easier for those visitors to look at the products before decided to buy, and that has an enormous effect on top-line revenue."

Copyright © 2000 CITI Institute. All rights reserved.

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