By Holden Bale, global head of experience and commerce at Merkle
When most people think about digital experiences and commerce, they think of consumer categories: retail, travel, consumer goods, and hospitality. Whether an immersive try-on experience from Warby Parker, browsing travel destinations or checking flights, playing a seasonal holiday game from Starbucks, or feeling an unreasonable amount of analysis paralysis looking for the perfect robot vacuum on Amazon (yes, really – if it’s happened to me, it can happen to you), all anyone seems to ever talk about are consumer examples.
The most surprising part is when you dig into the data, you find B2B digital commerce is almost three trillion dollars larger than B2C digital commerce worldwide and across all categories. Furthermore, the growth curve for B2B digital commerce, in terms of penetration of eCommerce as a total share of wallet, is predicted to dramatically outpace B2C by the end of the decade.
This insight is what turned a small project into a 6-month, deep-dive global program analyzing the impact of everything from AI and government regulation to shifting consumer expectations on the future of the digital economy. The seismic shifts identified in our report – B2B Futures: The View from 2030 – astounded us, not only because of the degree of change possible but the pace predicted.
Of course, there were things we knew: that B2B has become increasingly competitive, and increasingly digitalized. Everything feels like a game of inches.
The dramatic increase in challenger brands, lengthening of average B2B deal cycles, and increasing attrition for incumbents was something Merkle B2B and B2B International, our B2B research arm, identified as part of the annual Superpowers Index’s surveying of 3,600+ B2B executives and buyers.
But what we found forecasting through 2030 unveiled four seismic shifts we believe will radically disrupt digital B2B. In a nutshell, the world is going to look very different – very soon.
Machine-to-Machine Commerce
Our first of four shifts, the emergence of machine-to-machine commerce, is one of the most striking. The idea that AI – buyer AI talking to brand AI – could transact autonomously may be unsettling. We see clear evidence and mounting likelihood of a world where machines will autonomously connect, make choices, and make purchases – with no human involvement. We expect one-third of all B2B digital commerce to be driven by this form of activity – that’s over eight trillion dollars.
Marketplace Model Dominance
Another shift we’ve identified is a dramatic move to marketplaces. Based on our analysis, roughly 60% of all B2C consumer commerce runs through a marketplace (over $3 trillion). A marketplace is simply a business model where a platform connects multiple sellers and buyers, and the commercial model of the business takes a percentage of transaction sales. Comparatively, we estimate less than 15% of B2B digital commerce runs through a marketplace.
By the end of the decade, we predict marketplaces will capture up to 50% of all B2B digital commerce. The reasons are varied, ranging from the move of scaled businesses, like Toyota, implementing their own marketplace models to the increasing comfort of small and medium B2B businesses selling on platforms like Amazon Business or Alibaba. We’ve also witnessed the emergence of highly specialized vertically-oriented marketplaces for complex categories such as chemicals, which are digitizing and intermediating the traditional chemicals sales process.
Other Shifts and Looking Forward
The other shifts we identified vary in their potential to be disruptive: from the emergence of traceability of goods and services becoming a primary factor in purchasing decisions to a complete transformation in the production of goods that’s driven by AI, 3D printing, and synthetic biology.
For digital business leaders and brands, responding to the kind of change we predict can seem daunting. We believe a strategy to win is not a one-sized-fits-all prescription but is unique to the context of each brand’s business. To get started, we challenge you to answer the below questions – these are the questions we ask when beginning a transformation journey with a client. This exercise may lead to uncomfortable truths, but those truths serve as a beginning for charting how to find success in the next epoch of B2B.
Your Experience:
· Do you have a clear experience strategy for your consumers, employees, and partners? Can everyone in your organization articulate the primary goals and associated KPIs of that strategy?
· What are the focuses of your personalization – to aid discovery and evaluation, support the purchase lifecycle (including CPQ), and increase conversion, or to increase lifetime value and reduce attrition?
· What is your channel strategy, inclusive of “1P” (direct to buyer), “2P” (indirect, through wholesale or distributor partners, or licensing), and “3P” (distributed, including marketplaces and search commerce)?
Your Capabilities:
· Do you have a clear capability strategy for your organization that is inclusive of your people (human capital and needed skills), your partners (where, why, and how you seek to partner vs. build internal skills), and your technology?
· Can your leadership articulate how your capability strategy ties back to your business strategy (your experience and channel strategies)?
· Do you have a living, enterprise roadmap that gives you complete visibility to all your initiatives, and their interdependencies, accessible to all your management teams?
· Can you draw a straight line from any work in progress in your organization back to your business strategy?
Your Operating Model:
· Do you track agility as a board-level KPI, and do you factor provable improvements in agility as part of investment cases for capability investments?
· Do you believe how you fund and deliver your initiatives enables, or inhibits, innovation? What would have to change to enable a more responsive and adaptable organization?
· Do you believe you have a culture of “intentional” innovation, where you manage a portfolio of innovation activities across multiple time horizons?