The underlying motivation for SAP’s $8.3 billion buyout late last year of Concur, the venerable online expense management system, just became a lot clearer. Brace for an explosion in online selling between businesses, motivated largely by operational efficiencies.
This year, $780 billion of all business-to-business (B2B) tractions—think trade between retailers and wholesalers, or professional services such as travel management—will flow through digital channels, according to a new forecast by Forrester Research. That’s about 9.3% of the anticipated total.
Five years from now, the share will be more than 12%, or $1.1 trillion annually.
Two industries will experience far higher penetration than that average by 2020: drugs and “druggist sundries,” and electrical and electronic goods will see 20% of all B2B sales go digital, Forrester predicts. Other sectors won’t hit that mark, but the electronic portion will grow fast—including automotive parts, machinery, and grocery goods.
“B2B buyers are now expecting [business-to-consumer]-like customer experiences online, and they’re growing increasingly impatient with B2B sellers that don’t provide it,” Forrester writes in its report. “They are also actively shifting their transaction volume from single channel offline environments to ‘omnichannel’ and online-only environments.” (Omnichannel is the industry jargon in technology circles used to describe sales models that include online and real-world activities.)
In many cases, the initial catalyst for digital initiatives is expense reduction. But Forrester’s research suggests they can also deepen relationships. “In fact, 60% of B2B companies report that their B2B buyers spend more overall when these customers interact with multiple channels,” the research firm reports.
Industrial supplier Grainger, which leads its sector on Fortune’s 2015 Most Admired Companies ranking, exemplifies this shift.
E-commerce accounted for almost all of its revenue growth in 2014 (94.3%), or $500 million of the $530 million that it managed to expand. B2B e-commerce accounted for 16.1% of overall revenue, or $3.6 billion.
This didn’t happen overnight: the company has invested in e-commerce systems since before 2000. In May 2013, Grainger disclosed plans to hire at least 300 specialists in Chicago. Later that year, it released its first iPad app.
“Every detail of the iPad app was designed with efficiency in mind, allowing our customers to quickly find what they need, order it and get back to the task at hand,” said Geoffrey Robertson, vice president of e-commerce strategy and planning at Grainger, when the mobile software was launched. “In addition, the app is part of our bigger enhanced eCommerce initiative, which provides our customers with a consistent multi-channel experience from desktop through mobile device.”
When SAP bought Concur in late 2014, the transaction was positioned as a strategic complement to Ariba, the commerce platform it bought for $4.3 billion back in 2012.
“If you look at any company today in any industry, they form these industry clusters. And these global networks are highly fragmented,” SAP CEO Bill McDermott told Fortune last fall. “It’s not like it used to be in the old days where I’m in New York, and all my partners are across the street, and we’re building stuff together. They’re accessing my materials and these services and these OEM relationships and third-party relationships from all over the world. That can only be conducted in a very agile business network where it’s totally digital, commerce is conducted in a global economy, and it happens at the speed of thought.”
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