The business-to-business (B2B) industry has been getting a lot of attention this year. Amazon (NASDAQ: AMZN) continues to invest in its e-commerce platform, including its Amazon Business and B2B marketplace; software providers Adobe (NASDAQ: ADBE) and salesforce.com (NYSE: CRM) continue to ramp up their abilities to help businesses with their digital sales capabilities; and small business champion Shopify (NYSE: SHOP) scooped up a B2B peer and launched investments into an order fulfillment network.
Not to be left out is Alibaba (NYSE: BABA), the Chinese tech titan that's already a preeminent player on the global B2B scene. The company recently announced that U.S. businesses can now open up shop and sell their wares on its globe-trotting platform. The reaction to a Chinese-run marketplace will no doubt be mixed, but this battle that's heating up is not a zero-sum game.
A refresher on B2B
For most of us, e-commerce is all about shopping online for household and personal goods, from staples like groceries to the latest tech-powered appliances and gadgets. The industry has exploded in the last decade, and is estimated to be worth hundreds of billions, if not trillions, of dollars every year across the globe.
The value of goods exchanged between businesses is much larger, though. The global B2B industry is estimated to be in the tens of trillions every year, made up of manufacturers, raw material suppliers, product distributors, and the like buying and selling from each other as they all work to produce final products or services. B2B has been a bit behind the digital curve, but as I wrote earlier this year, the system is beginning to move on from its old ways en masse.
As before, I caught up with digital commerce strategist Avionos and its CEO Scott Webb for more this topic. According to Webb:
Business transactions are much slower to respond [to technological changes], but when they do, they tend to go in more of a herd mentality. A lot of organizations will hold back on new investments in new business models until it's really proven, but as soon as its proven, it's a race because the cost of being a laggard is high.
Image source: Getty Images.
Alibaba's big little move
And that's where we are today with the B2B digital commerce movement. Webb and his team at Avionos are focused on helping brands develop their own online selling strategies -- a third of business purchasers begin their search on Amazon or Alphabet's (NASDAQ: GOOGL)(NASDAQ: GOOG) Google, according to Avionos' annual B2B buyers report. But developing an in-house marketing and selling strategy to compete with the heavyweights can be costly for many smaller suppliers.
That's where Alibaba comes in. Amazon already offers B2B services and charges a fee for each listing, and various other technologists are getting in on the game, too. But Alibaba is going a slightly different route: It's letting U.S. businesses list on its marketplace for a $2,000 up-front fee. This is not an opportunity for U.S. sellers to start selling into China -- at least not yet -- but it does give companies the ability to conveniently sell to each other within the U.S. and throughout the rest of the world. According to the Avionos report, 74% of buyers say they would pay more for the same product if the seller has an online experience and superior digital tools. Thus, for a small B2B supplier, tapping into Alibaba's large marketplace and integrated customer data services could be the shot in the arm necessary to get in on the multi-trillion dollar industry.
The e-commerce ecosystem wars and the battle for online attention
What does Alibaba get by allowing American sellers to start competing with its Chinese suppliers already in the system? That remains to be seen. However, this is hardly a winner-takes-all situation. Though there will be winners and losers as e-commerce continues to upset the apple cart, Webb said that the B2B e-commerce pie is getting bigger by double-digits every year as businesses race to update their selling and customer service models. For a multi-trillion dollar industry, these are huge numbers we're talking about. There is plenty of room for Alibaba to make its move along with Amazon and friends.
The takeaway for investors? B2B and the digital transformation that technology firms are enabling -- from software services like Salesforce, Adobe, and Shopify to marketplaces like Alibaba and Amazon -- is a massive movement that is still in the early innings of disrupting the status quo. For the next few years, the trend favors them all until growth starts to slow and toes start to get stepped on. In the meantime, though, Alibaba and other e-commerce stock investors should enjoy booming business results as the business world goes digital.
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Nicholas Rossolillo and his clients own shares of Alibaba Group Holding Ltd., Alphabet (C shares), Salesforce.com, and Shopify. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, Salesforce.com, and Shopify. The Motley Fool has the following options: long January 2021 $100 calls on Salesforce.com. The Motley Fool recommends Adobe Systems. The Motley Fool has a disclosure policy.
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