Business-to-business (B2B) commerce. Is it a market worth $7.3 trillion and 6.9% of the global economy by 2004? Or is it a media extravaganza promising an unattainable pot of gold? There's definitely gold there, but you have to strip away the hype to see what B2B's potential benefits are, and how your small business can get a piece of the pie.

What Is B2B?
Don't let the lingo throw you. Businesses have always sold products and services to other businesses. What's caused such excitement recently is new technology's ability to streamline the way these B2B transactions are done. It's pretty much that simple.

When analysts use the term "B2B," they are referring to either one or both of the following two major types of business relationships:

  1. Businesses that sell products and services to other businesses through the use of online purchasing systems
  2. Businesses that, via online means, facilitate the action of businesses selling to each other

The first type of relationship involves one company perusing another company's products, placing orders, and receiving invoices, all via the Internet. Many small businesses that purchase through online office supply companies, such as Staples or OfficeDepot, are already familiar with online purchasing systems. These systems maintain order histories to make reordering faster. They can also send you product promotions or prompt you to reorder based on your usage pattern.

The second type of relationship, currently taking the form of online marketplaces or exchanges, involves one company establishing a marketplace within an industry where many companies trade goods and services with one another.

These exchanges are examples of B2Bs supporting B2Bs. An example of this model is, an exchange that handles excess inventory of finished consumer products. A toy maker with too many yo-yos sitting on its shelf can list the excess yo-yos on Rebound and receive inquires from interested buyers from all over the world. When a deal is made, Rebound takes a commission.

The Benefits of B2B Online Purchasing and Exchanges
The benefits of B2B online purchasing systems and exchanges are manifold.

Online purchasing systems let a buyer purchase goods and services from a seller via the Web. This transaction saves both the buyer and the seller time and money, because it:

  • Reduces administrative paperwork
  • Requires fewer sales representatives
  • Diminishes transactional costs of doing business

Online exchanges also bring all the benefits of online purchasing systems to buyers and sellers. In addition, these exchanges:

  • Expand the market for selling goods.
  • Slash time and costs by making markets more accessible to more companies.
  • Create competitive pricing through the presence of more immediate market pressures.

Your Piece of the Pie
Does any of this get your entrepreneurial juices flowing? If so, here are a few of the many ways to dip your toe in the B2B waters:

  • Create an online marketplace specific to your industry. Charge sellers a fee to list their product and then take a commission if a deal is made.
  • Take advantage of existing exchanges to expand your product's market presence. For example, if you're a supplier to brick-and-mortar retailers, set up an online shop within an online marketplace, such as the one currently being created by 11 leading worldwide retail companies.
  • Build a site that will bring together companies within a particular industry, and charge a fee for participation. Provide an online space where they can congregate to discuss relevant issues or let each other know about supply needs or excess inventory.

B2B's Big -- but So Are the Possible Pitfalls
When you look beneath the rampant propaganda, the picture business experts are painting becomes clearer: B2B is big. B2B could work for you if done right.

But as with any business arena, B2B has its potential issues. Investors with high expectations, predatory software developers, and antitrust concerns could haunt B2B in the future. Look for a article on these potential B2B issues in the coming weeks.

To find out more about the emerging B2B market, read the following articles:

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Published on: May 22, 2000