Online B2B trade in Europe will amount to 33% of total sales by 2005 depending on the industry, according to a new Report by Forrester Research (Nasdaq: FORR). But firms must make an initial investment of €11 million to support sell-side commerce — with labor costs consuming more than 50% of the ongoing budget.
“European firms risk getting mired in B2B Web sites that don’t deliver on allowing customers to perform a simple transaction,” said Forrester Senior Analyst Charles Homs. “As online sales take off and dominate today’s much-hyped eMarketplaces, European firms will be forced to overhaul and invest in sell-side commerce sites. Today’s approach to B2B Web sites is focused on features, not functionality. With too many internal islands of applications to access for online trade, European firms are failing to deliver because features galore don’t generate business, poor access to apps results in an inability to transact, and crippling maintenance nightmares deliver stale information.”
With total online trade in Europe representing €2.1 trillion in 2005, Forrester advises that firms must stop quibbling over adding more features to today’s already dysfunctional trade sites. Today, eMarketplaces are all the rage but firms place too much emphasis on these consortia that are mired in anticompetitive concerns, indecisiveness, and connectivity issues, and will miss out on B2B commerce site opportunities. eMarketplaces focus on auctions but auctions and reverse auctions will only handle a miserable 2.7% of total European online trade volume by 2005: Firms investing in this area will get little or no return. Also, extranets as separate online initiatives ensure tight security around confidential trading transactions, but the closed nature of these systems prevents firms from partnering in real time and collaborating online.
Focusing on B2B commerce sites will allow firms to benefit from improved sales at lower costs and higher-quality services. Therefore, B2B commerce sites must mature to include collaboration and ensure accessibility of business processes to their customers from product inception to after-sales service. Firms must improve overall profitability as business process re-engineering efforts make eBusiness investments pay off. Finally, companies must drive brand enhancement online. Whether companies diversify, consolidate into conglomerates, or maintain fixed or loose partner relations, the trade site must form the common denominator to the outside world, with one uniform message geared around attracting online customers.
“For the European 100 to tap online trade opportunities, an initial investment in excess of €11 million is required,” Homs added. “The cost of integrating the plethora of applications will eat up half the IT investment in the first year. But once the technical infrastructure and apps are functioning, the work force necessary to maintain online sales sites will soar — for instance, just keeping the site up-to-date will account for 51% of the ongoing budget. Also, B2B commerce sites require marketing programs just like any other part of the business that is chartered with attracting customers. After the initial launch, costs will catapult to 15% of ongoing spending to keep the trade site up. But the return on investment will be worth it: For instance, a top European 100 transportation company can generate a whopping €6.5 billion by 2005 through online sell-side trade or 33% of its total trade. To achieve this return, firms must concentrate on supporting users and continuously realigning objectives.”
For the Report, “ROI Of Europe’s eCommerce Sites,” Forrester interviewed 42 European executives responsible for their firms’ B2B sites.