The Internet’s impact on the U.S. business-to-business (B2B) marketplace will trigger more than $6 trillion (US$) in trade by 2005, according to a new report by Jupiter Communications.
B2B e-commerce will represent 42 percent of the total U.S. business-to-business non-service spending, the research firm said.
Jupiter recommends that businesses implement Internet strategies throughout their procurement and sales process, and invest in multiple selling models to protect their share of the market.
While this year’s B2B trade will account for only three percent — or $336 billion — of the total non-service market, Jupiter predicts that online volume will grow twenty-fold in the next five years to 60 percent. The dramatic volume increase will give birth to some new trends in the B2B arena.
“Currently, direct channel — a model of one seller to many buyers — dominates 92 percent of the Internet B2B market,” the report says. “However, in 2005, 35 percent of the Internet B2B trade volume will be conducted via a net market, a matching up of many buyers and sellers.”
Jupiter also points out that while the combination of market size and offline inefficiencies make moving B2B trade to the Internet very attractive, the migration will disrupt current channels and alter how companies and industries conduct business in the near future.
Early adopters have already made their investments, but it will be mainstream companies embracing the Internet that results in mass penetration and an evolved market, according to Jupiter analyst Melissa Shore.
“Over the next several years, businesses will face an array of new opportunities to improve and expand their sales and procurement processes,” Shore said. “They must invest now, even though the payoff will take some time. It will require several years to see a substantial migration from today’s manual, paper-based solutions to tomorrow’s Internet purchasing counter.”
Inhibitors to Growth
Despite the optimistic figures, not everyone agrees with Jupiter’s B2B prognostication. Some industry observers predict that B2B virtual marketplaces could vanish within two years due to a number of other factors, including failures and consolidations.
For instance, executives gathered last month at the Association of Strategic Alliance Professionals Summit (ASAP) cited U.S. government antitrust investigations and talent poaching as two primary reasons why they believe the predicted growth in B2B markets online will never come to fruition.